At the heart of the Property Tax Reform is the new ‘VPT’ Evaluation System (Valor Patrimonial Tributário). Comprised of five basic components, this calculation is based on factors relating to characteristics of the property. In other words, evaluation is seen in function of ‘market value’ rather than ‘potential rental income’, as in the previous system.
Factor 1 – Constructed area and implantation
The area is a function of cost. Although predicted to be around 600 euros per square metre, an 11th hour decision reduced this value to just 480 euros. Surprisingly, the Finanças simulator has yet to be updated to this last-minute change. Area coefficients are determined as follows:
Type of area Coefficient
Covered habitation area 1.00
Outbuildings 0.30
Garden and patio areas (up to 2x implantation) 0.25
Surrounding land 0.005
To calculate this primary factor, add the areas, previously multiplied by the
respective coefficients, then multiply by the cost per square metre. Next, this
base will be altered by the remaining coefficients.
Factor 2 – Type of usage
The area factor is adjusted by type of usage, having been assigned coefficients as follows:
Type of Usage Coefficient
Commercial 1.20
Services 1.10
Residential 1.00
Subsidised housing 0.70
Industrial and warehouse 0.60
Covered parking 0.40
Degraded housing 0.45
Open air parking 0.08
Factor 3 – Age
Next, the base is adjusted in accordance with the year of construction or last re-evaluation of the property. The age coefficient is determined as follows:
Age in years Coefficient
Less than 3 1
3 to 5 0.98
6 to 10 0.95
11 to 15 0.9
16 to 20 0.85
21 to 30 0.8
31 to 40 0.75
41 to 50 0.65
51 to 60 0.55
60 to 80 0.45
More than 80 0.35
Next: ‘VPT’ – The location factor
• Dennis Swing Greene is an international fiscal consultant for Finesco International Financial, with offices in the Algarve and in Lisbon. Appointments may be scheduled in Guia on 289 561 333 or in Lisbon on 213 210 131.
