Under new legislation introduced in 2002 several restrictive measures were introduced meaning that it now isn’t quite so advantageous to buy through an offshore company. Property tax is paid at a fixed rate of 2 per cent (normal rates are from 0.7 to 1.3 per cent) and rental tax is also payable on all properties whether the property is rented or not.
There are still advantages, however, and you should consult with a fiscal expert if you are considering this option. Owning a property through an offshore company is often an advantage when you’re selling, as the sale can be effected much more easily, quickly and cheaply, and it may help to increase the asking price (although a prospective buyer may not appreciate or want the advantages). Some of the advantages include:
- Avoidance (in most cases) of SISA (transfer tax), and notarial and registry charges upon resale of a property. SISA, legal, notarial and registry fees can amount to as much as 15 per cent of the value of a property.
- Ease of the sale of the property, which simply involves transferring ownership of the company shares to the buyer. This also avoids the lengthy and protracted procedures which are necessary to register a title in Portugal, resulting in lower legal fees.
- Avoidance of local inheritance taxes on the property, including any potential liability to double taxation.
- Ease of transfer to heirs in the event of the owner’s death and avoidance of local succession laws, which may stipulate to whom the property must pass. A number of people (e.g. in a family) can be part owners, each holding a number of shares, or a couple can own a property as a joint tenancy (which isn’t recognised in Portugal) and on the death of either partner a simple transfer of his or her shares can be effected.
- The shares of an offshore company can be used to secure a loan for the purchase of the property. The shares are charged to the bank in return for a loan equal to a percentage of the value of the property.
- Confidentiality (the buyer can remain anonymous), asset protection and limited liability.
- By holding a property through an offshore company, the company shares can also be held on trust.
There are a few disadvantages in owning a Portuguese property through an offshore company, one of which is the cost of setting up the company and annual fees (although this is potentially less than the possible savings). The cost varies according to who establishes the company and where it’s incorporated, but there’s usually a set-up fee of between €1,050 and €3,240 plus an annual amount (from €800 to €2,450) for administration fees and taxes.
Gibraltar is generally considered to be one of the least expensive and most reliable jurisdictions. Jersey and the Isle of Man are also popular jurisdictions for offshore companies in Portugal. If you own a property through an offshore company, you cannot claim remission from property tax (contribuição autárquica) for the first ten years of ownership as a ‘normal’ owner can. There are a number of companies who can establish an offshore company, including International Company Services (Portugal) Limitada, Av. Denfensores de Chaves 15, 6th Floor, Suites F & G, 1000 Lisbon (Tel. 213-142 030, ).
Bear in mind that the laws regarding the ownership of Portuguese property through offshore companies are currently in a state of change and all advantages may be annulled or further reduced in the future.