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Buying Property in Portugal - Money, Finance, Mortgages &
Loans Guides and Topics
Buying Property in Portugal
Author: The Chesterfield Group
Portugal has long been a popular choice for people, particularly from the colder
climates of Northern Europe, looking to purchase a holiday home or a retirement
home. Traditionally they have done so using offshore companies, mainly to avoid
estate taxes. Unfortunately Portugal, along with some other countries, has made
this route considerably less attractive by the imposition of swingeing tax
penalties on offshore companies. The magnitude of these penalties can be seen
from the examples below,
Real Estate Transfer Tax
This tax is paid by the purchaser, at progressive rates of up to 6% (5% for
rural property) on property used exclusively for residential purposes, on the
higher of the registered value or the purchase price agreed between the parties.
This is usually the purchase price.
For offshore companies this rate has been increased to 15%.
Municipal Property Tax
This is a tax, at a rate set annually, levied by the local authority and based
on the registered value. The rates are different for urban and rural properties
and the total is typically about 1.6%.
For offshore companies the rate has been increased to 5%
Tax on a Deemed Rental Income
Where a property is owned by an offshore company, it is treated as having
produced a rental income, which is charged to income tax, of one-fifteenth of
the registered value.
There are other taxes, which have to be taken into account and these are,
Income tax
Where a property is rented out, the rent is charged to income tax and on a sale
50% of the chargeable capital gain is subject to Portuguese income tax.
Stamp duty
There is a stamp duty of 0.8% on the transfer of real estate.
Donations tax
Gifts to a spouse, antecedent or descendant are tax- free but other donations
attract a tax of 10%
A Solution
Fortunately there are territories, which are not on the Portuguese black list
and by purchasing a property in Portugal through a properly structured corporate
vehicle incorporated in one of these locations, it is possible to avoid the
penalties on offshore companies. These arrangements may bring with them other
benefits such as,
-
The ability to sell the property in the future without the
buyer having to pay Real Estate Transfer tax
-
Avoidance of Portuguese capital gains tax on re-sale,
.Avoidance of donations tax or inheritance tax
-
Avoidance of the deemed benefit provisions in U.K. law.
-
As taxes and the manner in which they are applied change
frequently specialist advice should always be taken before entering into any
arrangements.
About the author: The Chesterfield Group provides a full
range of trustee, and corporate advisory, formation and management services and
invites enquiries. More particulars can be found on our web-site www.chesterfield-management.com
LOANS SECURED ON YOUR
HOME
THINK CAREFULLY BEFORE SECURING
OTHER DEBTS AGAINST YOUR HOME. YOUR HOME IS AT RISK IF YOU DO NOT KEEP
UP REPAYMENTS ON A MORTGAGE OR OTHER LOAN SECURED ON IT.
NEED MORE INFORMATION?
NOTE: RESULTS WILL
OPEN IN A NEW WINDOW
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