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Buying Offshore
This has for some time been a legitimate and convenient way of purchasing property in Portugal, in which the property is an asset owned by a company, whose shares change hands in a sale, rather than the property itself. This does not however negate the need for the usual searches, inspections and checks required on the property involved.
Benefits of buying offshore include:
- Avoidance of Transfer Tax (IMT)and notary and registration costs.
- Avoidance of local inheritance taxes and potential liability of double taxation.
- Ease in selling the property, just transferring ownership of the company’s shares to the buyer, thus avoiding the lengthy process of registering a title in Portugal.
- Ease of obtaining finance for the purchase of property through the shares of the company being charged to the bank for a loan proportionate to the value of the property.
- Anonymity for the buyer, along with asset protection and limited liability.
Although there can be some tax benefits, as mentioned above, it should be remembered that there are considerable initial setting up costs for the company and an ongoing annual maintenance charge.
In 2003, the OECD classified Offshore Centres into Black and White List jurisdictions, the Black List jurisdictions in the main being those countries offering beneficial tax regimes. The aim was to encourage the Black List to fall into line with White List jurisdictions.
At this time, the Portuguese Government introduced new legislation in respect of property taxes in Portugal, including a clause in which any company registered in a Black List offshore centre is obliged to pay a fixed rate of Property Tax on their properties and a rental tax is also payable on all properties, regardless of whether the property is rented or not. There are ways to alleviate this increase, such as “migrating” the company to White List jurisdictions, such as Malta and Delaware (USA).
When a company registered in one of the black-listed jurisdictions acquires a property in Portugal: a punitive tax rate of 15% applies.
There are still many advantages of purchasing property through an Offshore company, Before making any decision, however, advice should be sought from a lawyer or reputable financial consultant in Portugal. |
