Normally, the Municipal Property Tax (IMI) is calculated based on the actual taxable property value (VPT) of the property; however, the law allows for some exceptions. This is the case for landlords with old and often very low rents, to the point of being lower than the tax payable on the rented property. It is known that this is the case for many landlords with properties in Funchal and the other municipalities of Madeira.
Landlords in this situation have until March 20, 2020, to request a discount on their IMI (Municipal Property Tax) from the tax authorities. To be eligible for this reduction, property owners must submit a declaration – electronically – limiting the tax amount and preventing it from exceeding the amount they receive from tenants for rent.
In practice, instead of the tax being calculated based on the actual taxable property value (VPT) of the property, the calculation is done using a "virtual" VPT which corresponds to multiplying the annual rental income by 15. This ensures that the tax payable will never exceed what the owner receives from renting the property.
Although the original legal wording prevented landlords who had not filed an income tax return in 2012, or who failed to do so in subsequent years, from benefiting from this measure, an amendment to the IMI Code eliminated that limitation.