- Funding Programme
- Year
- 2022
Designing a new valuation model for rural properties in Portugal
The Commission provided technical support to the Portuguese Tax and Customs Authority in designing a new valuation model for rural properties. The designed model should help diminish distortions arising from property valuation by reducing the gap between the property’s value for tax purposes and its market value.
Context
The Rural Property Valuation Model currently employed by the Portuguese Tax and Customs Authority is based on an obsolete methodology, which is incomplete and produces the wrong incentives when it comes to land abandonment, usage or productivity. The proposed institutional reform, based on a valuation model that was built upon available data and tested on a set of pilot samples, aims at addressing owner incentives to generate innovative dynamics and push efficient rural land use and management. The underlying objectives of the proposed valuation model for rural properties are avoiding wide-spread “ghost” landownership by activating currently dormant land, while minimising the risk and severity of wildfires in Portugal.
The project is linked to Portugal’s efforts in reforming rural properties and to the Portuguese Recovery and Resilience Plan. The project is also linked to the Union priorities ‘An economy that works for people’ particularly in the context of promoting fair taxation, and to the EU Green Deal, as it helps preserve Europe’s natural environment and the development of rural areas.
Support delivered
At the end of the 10-month project, the beneficiary authority has at its disposal:
- An overview of international practices in valuating rural properties, together with recommendations for a tailor-made and hybrid solution of a valuation model that is suitable for Portugal;
- A defined and tested new valuation model, together with a technical specification report and recommendations on how to maintain and develop the model;
- Newly created or strengthened capacity within the entities expected to use the proposed valuation model, in particular through training sessions and a user manual for operating the model.
The project is funded by the European Union via the Technical Support Instrument and implemented by AARC/Nova SBE in cooperation with DG REFORM.
Results achieved
The technical support will aid the Portuguese Tax and Customs Authority in preparing and operating a new valuation model for rural properties in Portugal. More precisely, the project helped to establish the foundations of the valuation model and examined various factors such as property values, geographical features, income, land and crop patterns. Furthermore, the project’s deliverables defined the technical documentation and data sources, designed and tested an econometric model which incorporates various valuation parameters in terms of e.g. landscape characterisation (such as socio-economic factors, soil, climate, morphology, etc.).
The model’s overall goal was to estimate the land base value, the property’s value based on the economic aptitude. As such, the project enables the Portuguese authorities to take the next steps in reforming rural properties taxation by aligning an estimated land base value with real market value. This is expected to enhance the accuracy, fairness, and transparency of this taxation, contributing to a more efficient and equitable tax system, and to a more efficient rural land use and rural land management.
More about the project
You can read the final reports here: