Archive for the ‘Real Estate in Portugal’ Category

Use of a Malta Based Holding Company to Own Real Estate in Portugal

October 7, 2009

At the end of 2003 the Portuguese Government amended the tax rates on immoveable assets held in Portugal. This was directed against properties held by entities defined as being offshore. A Portuguese list exists, which details the jurisdictions classified as being offshore.

The Option of Malta

Many property owners have taken the opportunity to restructure the ownership of their properties to jurisdictions not on the Portuguese list of offshore centres. One such jurisdiction is Malta, which, since joining the European Union in 2004, has emerged as a popular jurisdiction for holding property in Portugal.

Taxes Payable by “Offshore” Jurisdictions

A number of additional taxes are payable if a Portuguese property is acquired through a jurisdiction on the list of offshore centres:

  • A property transfer tax at a flat rate of 8% is payable on properties acquired after 2006. This property transfer tax applies to the acquisition value, or the registered value, whichever is greater.
  • Property municipal taxes are payable at the higher rate of 1%. These taxes are liable on an annual basis.
  • Properties held by companies on the offshore list are subject to a 15% withholding tax on deemed gross rental income. This is based on 1/15th of the property’s tax value, as calculated by the Tax Authorities.

Taxes Payable using a Malta Company to hold Portuguese Property

Malta is not on the Portuguese list of offshore jurisdictions and therefore Malta companies pay the standard property transfer tax and the standard municipal property tax:

  • Property transfer taxes in Portugal vary from 0% to 6.5% depending on the property’s value.
  • Property municipal taxes are based on the property’s value as calculated by the Tax Authorities and range from 0.2% to 0.7% for urban properties. The rate for rural properties is 0.8%. This municipal tax is payable annually.
  • Withholding tax is not payable as there is no deemed rental income charge for a Malta company holding Portuguese property.

 Another potential liability to consider is capital gains tax. If a Malta company sells Portuguese property, the capital gain generated will be taxed at a 25% rate. If, however, shares in the Malta company are sold, there will be no capital gain and therefore no taxation will be generated in Portugal.

Company Migration to Malta

Companies registered in offshore listed jurisdictions are able to migrate to Malta. This assumes that the laws of the country where the company is domiciled permit such a migration.

Example of a Typical Company Structure Migrating to Malta

table

Additional Information

For further information, kindly contact 77 Great Estates on (00356) 2125 2455; (00356) 9944 7444; skype: info.77greatestates or info@77GreatEstates.com.

The Case Study below illustrates the types of tax saving that can be achieved through the use of a Malta company for holding property in Portugal, as opposed to the holding of property by a jurisdiction on the Portuguese list of offshore jurisdictions.

Case Study

The case study below details two scenarios.

  • At the date of purchase the property was valued at €1,000,000, it was held for a 5 year period and then sold for €1,100,000.
  • The first scenario illustrates the property being held by a BVI Company and the second scenario by a Malta Company. In each scenario, the sale of the property is achieved through the sale of shares in the respective company.

table2

TOTAL SAVING

Over a period of five years a tax saving of €95,000 can be achieved through the use of a Malta company as opposed to a BVI company, or a company from another jurisdiction listed as an offshore jurisdiction by the authorities in Portugal.