Three proposals were approved to reduce the tax burden on businesses and residents of Lagos. The non-launch of the spill, the reduction of the participation rate in the IRS from 3.5% to 3% and the decrease from 0.35% to 0.34% of the Municipal Property Tax (IMI) rate for urban buildings, these are decisions that come to implement the measures already announced last April, when the “LAGOS APOIA – Program to Support Families and Local Economy” was approved by the municipality to reduce the impact caused by the pandemic of the covid-19.
According to the Financial Regime of Local Authorities and Inter-municipal Entities (RFALEI), the municipality's revenue is the product of the collection of launched spills, which have an annual duration and can go up to the limit of 1.5% on the taxable profit subject and not exempt from corporate income tax.
Based on this legal provision, the municipality of Lagos has been applying, since 2016, a 1% spill to companies with a turnover greater than € 150 thousand, exempting companies with a turnover equal to or less than that amount.
In 2019, the spill generated € 600,268.06 in revenue for the municipality, a sum that has been used to finance municipal projects and works in the portfolio. "It is this important revenue and source of financing that the Lagos council proposes to dispense for the benefit of the county's economic fabric and as a way of supporting the viability and financial health of companies", underlines the municipality.
The same regime provides that the municipalities are entitled, each year, to a variable participation, up to 5%, in the Personal Income Tax (IRS) of taxable persons with tax domicile in the respective territorial area, relating to the income of the year immediately previous. This participation depends on a decision on the percentage of IRS intended by the municipality.
In Lagos, the variable percentage for the years 2018 and 2019 was set at 4.5% and in 2020 it increased to 3.5%. The chamber now proposes to reduce this rate to 3% on the 2021 income, a proposal that, if also approved by the Municipal Assembly, will translate into an additional benefit for residents in terms of deduction from the IRS collection. For the municipality, this support for families translates into an estimated loss of revenue of around 116,555.57 €.
The epidemiological situation in the country and in the world also justifies the proposal to reduce the IMI rate to 0.34% for urban buildings assessed under the terms of the CIMI, a rate that will apply to all parishes in the municipality. This reduction makes it possible to estimate a loss of revenue for the municipality in the order of € 364,247.70. The 0.8% for rustic buildings is maintained, as well as the policy of incentives for the rehabilitation of the built heritage in the Urban Rehabilitation Area of the City of Lagos (ARU) – with the increase of three times the IMI rate for buildings vacant for more than a year and for buildings in ruins, with a reduction of 30% for the intervention properties – and, also, the reduction of 20% (maximum value that the law foresees) of the rate to be applied to rented urban buildings for housing, a measure that aims to stimulate the private rental market.
The benefits for households with dependent dependents will continue, varying the reduction in the IMI rate depending on the number of dependents in each family (€ 20.00 for one dependent, € 40.00 for two dependents and 70, 00 € for three or more dependents).
Overall, these measures represent a reduction in revenue for the municipality of more than one million euros, which translates into indirect support for families and the local economy. These proposals will now be submitted for consideration by the Municipal Assembly.