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Posted by portugalpress on March 13, 2018

Is it a golden goose or a poisoned chalice?

Much has been written about the changes in legislation affecting non-resident, “offshore” property holding companies and I would be the first to agree that things ain’t what they used to be!

As the MD of one of the leading companies in Portugal advising on the set up and management of offshore companies, I could easily be accused of bias, but I have always tried to give an objective and impartial view to clients when offering advice and hope to continue in that vein in this brief article.

Firstly, it is fair to point out that there is no bar to holding a property in Portugal by way of a non-resident company if that is the choice of the ultimate owner and there may be many reasons to do so, other than legitimate tax avoidance.

It has been suggested that it is wise to transfer the jurisdiction of an offshore property holding company to Portugal and some articles have promised all manner of wonderful tax and other advantages in doing so, but is it so wise in reality and what tangible advantages does it give you over simply “staying put”?

The comparison chart below shows the situation fairly clearly and may help clarify some of the unanswered questions in the articles that have been written.

It is very important to take sound and impartial advice on the pros and cons before such a move is made, not only due to the cost involved, but to make sure your decision will be the correct one in the long term and I suggest that interested parties would do well to run the idea by an experienced lawyer before taking the plunge.

1. What is the annual cost to maintain the structure?
Portugal - Circa €2,600.
Malta or Delaware - Malta circa €2,600. Delaware circa US$1750.

2. Is the company beneficial ownership revealed?
Portugal - Yes
Malta or Delaware - Yes

3. What are the accounting requirements?
Portugal - Organised accounts are required, included in above annual fees.
Malta or Delaware - Organised accounts are necessary in Malta and are included in above fees.Organised accounts are not required in Delaware nor in Portugal.

4. Does capital gains tax apply on a transfer of shares?
Portugal - Yes, at a rate of 28% applied on half of the gain.
Malta or Delaware - Yes, the sale of shares or the beneficial interest is subject to capital gains tax in Portugal at the rate of 28% on the gain made.

5. Does capital gains tax apply on a sale of the assets held?
Portugal - Yes, at a rate of up to 21%. In addition, capital gains tax would apply to the shareholders on the distribution of the assets to them following termination of the company.
Malta or Delaware - Yes, at a rate of 25% of gain made payable within 30 days.

6. Does increasing the value of the asset on the balance sheet of the company before it moves to Portugal help with a later capital gain?
Portugal - Not applicable.
Malta or Delaware - No, the tax department will always only consider the Escritura value or the tax department value.

7. What annual taxes are payable?
Portugal - Municipal property tax at the normal rate (this includes IMI and additional IMI).
Malta or Delaware - Municipal property tax at the normal rate (this includes IMI and additional IMI).

8. Is IMT applicable on transfer of shares?
Portugal - Yes, except in some cases see footnote.
Malta or Delaware - No

9. Are any other taxes applicable on transfer of shares?
Portugal - Stamp duty (see footnote).
Malta or Delaware - No

10. Are Social Security contributions monthly payments required?
Portugal - Yes, for the director, based on the minimum wage. An exemption can be applied if some requirements are met.
Malta or Delaware - Not applicable.

Footnote: Re: 8 & 9: IMT could only be avoided on the acquisition of shares if made by two unrelated persons 50/50. A single holder, a holder of >75%, married couples or permanent partners would all pay IMT and Stamp Duty at a rate of up to 6.8%.

By Nigel Anteney-Hoare

Nigel Anteney-Hoare is managing director of the Sovereign Group in Portugal.