Real estate tax planning rpba 14.11.2018

Ricardo da Palma Borges
ricardo@rpba.pt
www.rpba.pt
Real Estate Tax Planning
in Portugal
The offshore company holding Portuguese real estate case-study

Tax wisdom (opening)
People who complain about the real estate taxation systems generally fall into
simple categories:
▪ Buyers and sellers;
▪ Lessors and lessees;
▪ Men and women;
▪ Etc.
2

3
Portuguese relevant taxes after the
estate tax reform of 2003
Property Transfer Tax (PTT)
 Previously Imposto Municipal de Sisa;
 Currently Imposto Municipal sobre as Transmissões Onerosas de Imóveis;
Property Ownership Tax (POT)
 Previously Contribuição Autárquica;
 Currently Imposto Municipal sobre Imóveis;
Gift and Inheritance Tax (GIT)
 Previously Imposto sobre as Sucessões e Doações;
 Currently Stamp Tax (individuals) or Corporate Income Tax (corporate entities);
Stamp Tax (ST)  Imposto do Selo;
Capital Gains Tax (CGT)  Part of Personal Income Tax (PIT) or Corporate Income Tax (CIT).

The purpose of this presentation
▪ The use of a case-study with an offshore company holding Portuguese real estate for
housing / leisure purposes, not generating any income.
▪ To illustrate Portuguese real estate tax planning issues.
▪ Especially the way in which taxation affects the situation of a blacklisted offshore
company (OFC) holding Portuguese real estate.
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Interesting features of the Portuguese tax system (PIT) –
capital gains
▪ Exclusion from taxation of shares or quotas in Joint Stock Companies / Private Limited Companies acquired previously to 1 January
1989 (regardless of the holding of real estate by the company)
▪ Portuguese companies or also foreign equivalent companies?
▪ Ubi lex non distinguit nec nos distinguere debemos:
– Silence of the PIT Code;
– EU and tax treaty principle of non-discrimination.
▪ Tax treaties entered into by Portugal generally follow the OECD Model Tax Convention, whose article 13, paragraph 5, attributes an
exclusive taxation right on capital gains in shareholdings to the State of residence of the alienator, preventing the State of source from
levying its own taxes.
▪ Therefore, some foreign wealthy individuals have moved to Portugal and acquired residency herein before disposing of their
investment empires acquired prior to 1989 tax-free.
▪ PIT capital gains on the sale of a taxpayer's personal and permanent residence are not taxable, insofar as the sale proceeds are
reinvested in another personal residence in the Portuguese, European Union or European Economic Space territory.
5

non-habitual resident (NHR) regime
▪ A favorable PIT regime for non-habitual tax residents (NHR) has been introduced in 2008,
under which those acquiring a Portuguese tax residence without having one in the
previous 5 years are granted, for a 10-year period:
– The exemption method to avoid double taxation regarding foreign source income;
– An autonomous (rather than progressive) taxation of dependent and independent
work income from high value-added activities of a scientific, artistic or technical
nature (as defined by a Ministerial Order).
6

non-habitual resident (NHR) regime (cont.)
7
▪ Under the regime, foreign income is exempt, provided that it is taxed abroad (in the case of dependent
work income) or that it may be taxed abroad under a double tax treaty entered into by Portugal or
according to the OECD Model Tax Convention and taking into account the reservations to the Model and the
observations to its Commentary submitted by Portugal, in the cases where no double tax treaty exists and
provided that the Source State is not a blacklisted jurisdiction for Portuguese tax purposes (for all other
categories of income, except (i) independent work income, which must additionally derive from the
mentioned high value-added activities in order to qualify for the exemption, and (ii) pensions, where in the
absence of Portuguese contributions, the foreign source payment of the income may be enough to qualify
for the exemption).
▪ Dependent and independent work income from high value-added activities is taxed at a 20% autonomous
rate (regardless of its domestic or foreign source, which means that the rate may apply to foreign income
not qualifying for the above-mentioned exemptions).

non-habitual resident (NHR) regime (cont.)
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For more information on this regime please read our presentation: https://www.slideshare.net/RPBA/the-
portuguese-nonhabitual-tax-resident-regime-02082018
You can also visit our microsite www.nonhabitualtaxresident.com or scan the below QR code with your smartphone:
Should you require in-depth information on this subject please check our Information Note available at
http://www.slideshare.net/RPBA/the-non-habitual-tax-resident-regime-rpba30102014

Interesting features of the Portuguese tax system (GIT)
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▪ From 1 January 2004 “Close Family” (spouses, civil law partners – since 2009 -, children, grandchildren, parents
and grandparents) is exempt from GIT.
▪ Non-exempt situations of disposal of most Portuguese assets with individuals as beneficiaries are taxed through a
10% ST [with the notable exceptions of (i) shares in companies whose head-office, effective management or
permanent establishment is in the Portuguese territory, and (ii) credit and other patrimonial rights over
individuals or companies resident, with head-office, effective management or a permanent establishment herein,
in both cases, (i) and (ii), when the individual beneficiaries are non-Portuguese residents; these two situations are
not liable to GIT].
▪ Situations involving disposal of non-Portuguese assets with individuals as beneficiaries are not liable to GIT.
▪ Donations to corporate entities are income for CIT purposes.

Interesting features of the Portuguese tax system –
Tax Incentives for Urban Rehabilitation
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▪ PIT benefits for Portuguese tax residents:
a. The owner of the real estate is able to deduct 30% of the expenses incurred – up to 500,00€ – in order to rehabilitate the property. Such
costs must be proven and depend from prior certification. Consider i. or ii. below.
b. Rental income derived from rehabilitated real estate is taxed via an autonomous rate of 5%. Consider i. or ii. below.
c. Capital gains fully derived from the disposal of rehabilitated real estate are taxed via an autonomous rate of 5%. Consider i. below.
▪ VAT benefits:
d. Works of urban rehabilitation, defined under the Legal Regime of Urban Rehabilitation, benefit from a reduced VAT rate of 6%, instead of
the general rate of 23%.
▪ Further requirements and notes:
i. The real estate must be located in “urban rehabilitation areas” – special regions designated under the Legal Regime of Urban
Rehabilitation.
ii. The real estate must be rented and subject to the phased update of rent according to the NRAU regime. The benefits are granted on the
condition that (a) either the rehabilitation work increases the preservation state of the real estate at least two levels above the pre-
rehabilitation state, (b) or that it achieves the minimum level of preservation state “good”, as long as the construction work done in the
previous two years amounts to 25% of the real estate tax value (Valor Patrimonial Tributário or VPT) and it is meant to be leased as a
permanent residence. These “works of urban rehabilitation”, defined under the Legal Regime of Urban Rehabilitation, must be verified by
the local municipality before and after the rehabilitation.

Interesting features of the Portuguese tax system –
Tax Incentives for Urban Rehabilitation (cont.)
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▪ PTT benefits:
a. Rehabilitated real estate is exempt from PTT in the first transaction after the rehabilitation, if the property is meant exclusively to be leased
as a permanent residence. Also if the property is meant for permanent residence when the real estate is located in “urban rehabilitation
areas”. Consider i., ii., and iv. below.
b. Purchases of urban property meant to be rehabilitated are exempt from PTT, as long as such works of rehabilitation commence within 3
years from the date of acquisition. Consider i., ii., and iv. below.
▪ POT benefits:
c. Rehabilitated urban property is exempt from POT for a 3-year period, renewable for an additional period of 5 years. Consider i., ii., iii., and
iv. below.
▪ Further requirements and notes:
i. The real estate must be located in “urban rehabilitation areas” – special regions designated under the Legal Regime of Urban Rehabilitation
–, or must have been built more than 30 years ago.
ii. The benefits are granted on the conditions that the rehabilitation work, under the Legal Regime of Urban Rehabilitation, increases the
preservation state of the real estate at least two levels above the pre-rehabilitation state, that it achieves the minimum level of
preservation state “good”, and that it complies with requirements of energy efficiency end thermal quality;
iii. The renewal of the POT exemption is dependent on a deliberation by the Municipal Assembly.
iv. The benefit is granted after the completion of the rehabilitation work.

Relevant entities
▪ Joint Stock Company / Corporation or Portuguese Sociedade Anónima (S.A.).
▪ Private Limited Company or Portuguese Sociedade por Quotas (Lda.).
▪ Real Estate Investment Fund or Portuguese Fundo de Investimento Imobiliário (FII).
▪ Limited Liability Company (LLC).
▪ Limited Liability Partnership (LLP).
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Real Estate Investment Fund (FII) – Taxation and benefits
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▪ Assets of investment fund: (i) urban real estate property or similar rights; (ii) rural or mixed real estate and exploitation
rights on immovable property; (iii) real estate companies (with conditions); (iv) participating units in other FIIs (with
conditions); and (v) derivatives which aim to hedge the underlying risks of the FII assets.
– Assets with liens that excessively complicate their disposal cannot integrate the property of the FII, namely assets given as
colateral.
▪ Closed-end funds:
(i) real estate and like-assets cannot be lower than 2/3 of total assets;
(ii) construction projects cannot be more than 50% of total assets (60% for reconstruction);
(iii) any immovable cannot represent more than 25% of total assets;
(iv) the value of leased properties cannot be more than 25% of total assets;
(v) indebtedness cannot be more than 33% of total assets;
(vi) participation in real estate companies cannot exceed more than 25% of total assets.
▪ Advantageous CIT regime, in which capital gains, rental income and capital income are not accounted for the
determination of the taxable income, apart from the case in which this income relates to an blacklisted OFC; 21% CIT
rate on taxable income; no withholding taxes on the income received by the FII; PTT exemption (although in practice tax
has to be paid upfront and recovered through litigation).
▪ No Municipal or State Surcharge.
▪ ST is due on the net global value of the FII at a 0,0125% rate, on a quarterly basis.

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▪ Real Estate Inventory or Compra de Imóveis para Revenda (CIR) tax status is available for individuals, Portuguese companies or branches
of foreign companies which, in principle, are:
• inscribed as such in the tax office;
• declare the “purchase for resale” in the public deed of acquisition;
• have the “purchase for resale” as an entrepreneurial activity (set in the social object in case of a company);
• register the real estate as inventory (not as a fixed asset) in their accounts.
▪ CIR defers / exempts the real estate from POT during 3 years in case of purchase for resale.
• possibility of cumulating a POT deferral / exemption during 4 years for plot construction if enterprise has such an activity (set in the
social object in case of a company) and a subsequent POT deferral / exemption of 3 years on the sale of the built real estate.
▪ CIR provides a PTT upfront exemption on the purchase (if a previous “purchase for resale” has been made in the previous year), or a
refund of PTT paid upon resale (otherwise).
▪ Tax rates: 21% on lease, resale or development in the case of a company or branch, plus up to 1,5% of Municipal Surcharge (total 22,5%)
and 3%, 5% or 9% of State Surcharge (on taxable income in excess of € 1.500,000, € 7.500,000 and € 35.000,00, respectively); 0%-48%
(the higher bracket being applicable to income above € 80.640) in the case of a resident individual (plus an additional solidarity rate of
2,5% on income in excess of € 80.000 and of 5% on income in excess of € 250.000).
▪ Low management and maintenance costs; high flexibility.
Other entities – Taxation and benefits

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▪ X beneficially owns real estate in Portugal which is registered in the name of a
blacklisted OFC.
▪ Irrelevance of nominee or actual share/quotaholders or directors, trusts or other, if
the formal owner of the real estate, as registered in Portugal, is an blacklisted OFC.
The case-study situation

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▪ Since 2001 the enjoyment of an (non-leased) immovable whose acquisition value is
equal or higher than € 250.000 and was purchased by an blacklisted OFC may
deem the individual to have an annual PIT taxable income of 20% of the acquisition
value - i.e., € 50.000 and above - if he declares no income or less than 30% of that
yearly value.
▪ Operational and financial leasing rents paid to an blacklisted OFC are not tax
deductible for Portuguese resident individuals.
Problems (PIT)

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▪ PTT collected from 2012 to 2018 on Portuguese real estate whose acquirer (not an
individual) is an blacklisted OFC is 10% on its tax value, instead of standard rates
between 0 and 6,5%.
Other problems (PTT)

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▪ Asset development land or inventory building for resale inscribed in an blacklisted
OFC account after 2002 no longer qualifies for deferral / exemption of POT
(currently 4 years - 5 before 2004 - and 3 years, respectively).
▪ Properties leased by an blacklisted OFC after 2002 under the controlled rents
system no longer qualify for objective exemptions from POT (the system was
abolished as of 1 January 2007).
▪ Properties which have been newly built, rebuilt, improved or bought after 2002 by
an blacklisted OFC no longer qualify for objective exemptions from POT.
More problems (POT)

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▪ POT collected for 2003 on non-exempt Portuguese real estate whose taxpayer
(owner unless there is another enjoyer, namely under usufruct) is an blacklisted
OFC was 2% on its tax value, instead of standard rates between 0 and 0,8%.
▪ POT collected for 2004, 2005 and 2006 on non-exempt Portuguese real estate held
by an blacklisted OFC was 5% per year on its tax value, instead of standard rates
between 0 and 0,8%.
▪ The tax value of real estate held by an blacklisted OFC was updated as per inflation
on 31 December 2003, but without the standard transitory and progressive caps.
Still more problems (POT)

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▪ POT collected for 2007, 2008, 2009 and 2010 on non-exempt Portuguese real
estate held by an blacklisted OFC was 1% per year on its tax value or 2% in case of a
empty urban property, instead of standard rates between 0 and 0,8%.
▪ POT collected for 2011 on non-exempt Portuguese real estate held by an
blacklisted OFC was 5%, instead of standard rates between 0 and 0,8%.
▪ POT collected from 2012 onwards on all Portuguese real estate held by an
blacklisted OFC is of 7,5%, instead of standard rates between 0 and 0,8%.
Still more problems (POT) (cont.)

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▪ An blacklisted OFC that owns non-leased urban property or property that is not
used for business purposes in Portugal is deemed since 2002 to have obtained
minimum presumptive rent income in an amount corresponding to 1/15 of the
immovable’s tax value, which will also be taxed for CIT purposes (at a 25% rate in
2004, at a 15% rate from 2005 until 2011, at a 16,5% rate in 2012 and at a 25% rate
from 2013 onwards).
▪ In order to reverse the legal presumption, the targeted blacklisted OFC must
demonstrate that the urban property is not enjoyed by an entity domiciled in the
Portuguese territory and that it is empty.
▪ If the blacklisted OFC is not able to reverse the legal presumption, it will have to
appoint a Portuguese resident individual or company as tax representative to deal
with the CIT on the presumptive rent income.
Still even more problems (CIT)

22
▪ A blacklisted OFC should have reported to the Portuguese Tax Authorities, up to
the end of March 2002, that it held Portuguese real estate.
▪ Although the Portuguese Tax Authorities may act even without this notice, due to
the lack of update and inefficiency, there may be still uncollected CIT on the
minimum presumptive rent income, POT deferrals and exemptions that have not
been denied, punitive POT rates that have not been applied. In this case, the
blacklisted OFC has on-going liabilities (back taxes, interest, penalties).
Never ending problems (potential future liabilities)

23
▪ Starting from 1 January 2012, the statute of limitations for tax assessments in cases
involving blacklisted OFC was increased to 12 years (up from 4 or 8 years in normal cases)
and for collection of tax debts to 15 years (8 years in the remaining cases).
▪ This increase is applicable to non-expired on-going periods, but it takes into account all
time elapsed since the initial moment.
▪ Blacklisted OFC and other entities whose legal regime does not allow the identification of
their beneficial owners are not allowed to bid in auctions of seized property made by the
tax authorities since 2001.
Never ending problems (potential future liabilities) (cont.)

24
▪ A ST on urban property with a tax value equal to or exceeding € 1.000,000 was introduced
in 29 October 2012.
▪ This tax was due at a 1% rate on urban property assigned to housing (i.e., the tax did not
apply to industrial or commercial property, etc.).
▪ However, this ST was applicable at a 7,5% rate on any urban property held by an
blacklisted OFC, regardless of its destination/use.
▪ This ST was repealed by the State Budget Law for 2017.
The saga continues (ST)

25
▪ The State Budget Law for 2017 replaced the ST by an Additional to the Property Ownership Tax (Additional
POT).
▪ This new Additional POT applies to owners, usufructuaries or superficiaries of urban property for housing
purposes or building land located in Portugal, on January 1st of the relevant year.
▪ Single owners with residential real estate or land for construction in Portugal above € 600,000 of taxable
value are liable to Additional POT at a 0,7% rate on the surplus of the € 600,000. If the sum of the taxable
values exceeds € 1.000,000, the surplus is subject to a marginal rate of 1%.
▪ Owners which are married or in a civil partnership and choose the joint taxation regime – for purposes of
the Additional POT – are only liable to Additional POT if the sum of the taxable value of their real estate is
above € 1.200,000. The Additional POT applies a 0,7% rate on the surplus of the € 1.200,000. If the sum of
the taxable values exceeds € 2.000,000 the surplus is subject to a marginal rate of 1%.
▪ If the taxpayers obtain income attributable to immovable property subject to the Additional POT, the latter
may be deducted from the PIT due in respect of rental income (Schedule F) or business income obtained
from rental or hosting activities (Schedule B).
The saga continues (Additional POT)

26
▪ If a company holds real estate the Additional POT rate will be applied on the full tax value of the real estate
at a rate of 0,4% – not only on the surplus of a threshold.
▪ If the owner is a company and the real estate is simply used by its shareholder/director or any member of
the corporate bodies of such company (including their respective spouses, ascendants or descendants), the
tax rate will be of 0,7% on its full tax value. If the sum of their tax values exceeds € 1.000,000 the surplus is
subject to a marginal rate of 1%. In our opinion, if the real estate is leased by the company to the
shareholder or director the tax rate will be of 0,4%.
▪ Taxpayers may choose for CIT purposes: (i) to deduct Additional POT as an expense; or (ii) to deduct the
Additional POT from the tax due, limited to the fraction corresponding to the income generated by that real
estate, in the context of rental or hosting activities, and up to that tax due.
▪ The real estate held by an blacklisted OFC is liable to an Additional POT rate of 7,5% on the sum of the tax
values of the real estate, without possibility of deducting the charge for CIT purposes.
The saga continues (Additional POT) (cont.)

27
▪ Do nothing (especially if you are in Gibraltar – see slide 33).
▪ Suffer the punitive POT and Additional POT, the deemed PIT taxable income, and
CIT on the presumptive rent income, in case the tax value of the immovable is low
(although it was updated since 2004). Or
▪ Accept that due to the lack of update and inefficiency of the Portuguese Tax
Authorities there are liabilities (POT, Additional POT and CIT back taxes, interest,
penalties).
Most obvious solution

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▪ Transfer the real estate from the blacklisted OFC into private and individual names
or to another entity (e.g. a Portuguese company, eventually with CIR status, or an
FII).
▪ Redomicile the blacklisted OFC holding the Portuguese real estate to another (non-
blacklisted) jurisdiction:
– Abroad; or
– On-shore (Portugal)
Other solutions

29
▪ The problem with this solution is that it:
– Triggers CIT (25% CGT), PTT (up to 6,5%) and ST (0,8%), levied on the higher of declared or tax value, but
subject to correction towards market value, as well as legal, notary and registry fees;
– May not exempt the real estate from POT, depending on the tax value of the immovable:
• CIR status enables, for inventory real estate, a POT deferral / exemption during 3 years and a PTT exemption on the purchase,
or a refund of PTT paid upon resale;
• FII acquisition enables (in some cases) PTT exemptions.
– Eliminates almost all tax planning solutions for the future, with the exception of:
i. full capital gain reinvestment relief if the real estate is the individual taxpayer’s personal and permanent residence in
Portugal and all the sale proceeds are reinvested in an immovable for the same purpose in the EU OR EEA (with exchange
information) territory; or
ii. the Portuguese company or branch can consider the immovable to be a fixed tangible asset and makes a qualifying
reinvestment upon sale, in which case the maximum effective rate of CIT would be 12,5%.
Transfer solution – sale of the real estate

30
▪ The problem with this solution is that it:
– triggers GIT (at a 10% rate) and ST (0,8%), or CIT (at a 25% rate);
– in the case of donation, the acquisition value for future CGT purposes under the PIT will be the tax value
for GIT purposes (vs. the fair market value, for CIT);
– never exempts the real estate from POT;
– may give rise to a new tax evaluation.
▪ But there is a loophole…
Transfer solution –
donation of the real estate to an individual or company

31
▪ It means that the existing legal personality of the blacklisted OFC will be kept, although its seat and
governing law will change.
▪ Since the existing legal personality is kept no transfer of the blacklisted OFC’s assets is deemed and no
taxable event occurs.
▪ In spite of all the changes (which may even include the blacklisted OFC name) it is still the same “old”
company.
▪ This depends on the acceptance of the continuance of the legal personality of the blacklisted OFC under the
company law of both the existing jurisdiction (where the blacklisted OFC redomiciles from) and the new
jurisdiction (where the blacklisted OFC redomiciles to).
“Redomicile” solution – What does it mean?

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Portuguese blacklisted jurisdictions – Ministerial Order 150/2004
Andorra Guyana Puerto Rico
Anguilla Honduras Qatar
Antigua and Barbuda Hong Kong The Solomon Islands
The Netherlands Antilles Jamaica American Samoa
Aruba Jordan Samoa
Ascension The Queshm Island St. Helena
The Bahamas Kiribati St. Lucia
Bahrain Kuwait St. Kitts-Nevis
Barbados Labuan San Marino
Belize Lebanon St. Pierre and Miguelon
Bermuda Liberia St. Vincent and the Grenadines
Bolivia Liechtenstein The Seychelles
Brunei The Maldives Swaziland
The Channel Islands (Alderney, Guernsey, Jersey, Great
Sark, Herm, Little Sark, Brechou, Jethou and Lihou)
The Isle of Man Svalbard Islands (Spitsbergen archipelago and the
Bjornoya island)The Northern Marianas Islands
The Cayman Islands The Marshall Islands Tokelau
The Cocos and Keeling Islands Mauritius Tonga
The Cook Islands Monaco Trinidad and Tobago
Costa Rica Montserrat Tristão da Cunha Island
Djibouti Nauru Turks and Caicos Islands
Dominica Natal Tuvalu
United Arab Emirates Niue Uruguay
The Falkland Islands Norfolk Island Vanuatu
Fiji Oman The British Virgin Islands
Gambia Palau The U.S. Virgin Islands
Grenada Panama Yemen
Gibraltar Pitcairn Island
“Other Pacific Islands not specifically mentioned”
Guam French Polynesia

33
▪ Gibraltar is not a constituent part of the United Kingdom – it is a British overseas territory.
▪ However, it is a part of the EU pursuant to article 355(3) and of Declaration 55 Annexed to the Treaty on the Functioning
of the EU (which reads as follows: “Declaration by the Kingdom of Spain and the United Kingdom of Great Britain and
Northern Ireland - The Treaties apply to Gibraltar as a European territory for whose external relations a Member State is
responsible. This shall not imply changes in the respective positions of the Member States concerned”).
▪ Therefore, it is highly doubtful whether Gibraltar’s inclusion in the Portuguese blacklist is compliant with EU law (Cyprus
was stricken from the list in 2011 on the basis of its prior accession).
▪ The UK has been condemned in the EU Court of Justice in 2005 for failing to implement in Gibraltar Council Directive nr.
77/799/EEC, of 19 December 1977, concerning mutual assistance by the competent authorities of the Member States,
in regard of indirect taxes (Gibraltar already exchanged it for direct taxes).
▪ However, Portugal has entered into an agreement, which entered into force on 24 April 2011, for exchange of
information in tax matters with Gibraltar, which works independently from the Directive.
▪ Therefore, the absence of exchange of information is not a valid argument for Gibraltar's inclusion in the blacklist.
Portuguese blacklisted jurisdictions –
Gibraltar (but beware of Brexit implications)

34
▪ The State Budget Law for 2014 provided new general criteria for blacklisting jurisdictions. A jurisdiction
should be listed if:
– It does not have a tax on income comparable to the Portuguese IRC or if such tax has a nominal rate lower than 60%
of the Portuguese rate;
– Its determination of taxable income diverges significantly from internationally accepted or applied standards,
namely by the OECD member countries;
– It has special taxation regimes or tax benefits such as exemptions, deductions or credits, more favorable than the
Portuguese ones, that lead to a substantial reduction of taxation;
– Its law or administrative practice does not allow the access and exchange of tax, accounting, corporate, banking or
information of other nature that identifies the shareholders or other relevant people, the holders of income, assets
or rights and the performance of economic transactions.
▪ Any listed jurisdiction may request to the Portuguese Government a revision and removal from the blacklist
grounded on the non-fulfillment of the general criteria mentioned above.
▪ Any delisting will only have effects for the future and the list currently in force remains applicable until the
publication of a new one.
General criteria for blacklisting jurisdictions

35
▪ The State Budget Law for 2017 implemented that are equally considered jurisdictions with more favorable
tax regimes – despite not being blacklisted in the Ministerial Order – all the ones that do not have a tax on
income comparable to the Portuguese CIT or if such tax has a nominal rate lower than 60% of the
Portuguese rate (i.e., 12,6%) provided that:
– The tax law mentions it expressly; and
– Individuals or entities with residence in such a jurisdiction are deemed associated with Portuguese
residents under the transfer pricing rules.
▪ However there is a carve-out for all EU Member-States and for EEA jurisdictions, provided that, in the latter,
administrative cooperation in the field of taxation measures equivalent to those existing in the EU are in
place with that State.
▪ This means that, from 2017 onwards, for some of the rules applicable in Portugal that are intended to
impose heightened taxation at the use of OFC’s, the mentioned “blacklist” – approved by Ministerial Order
– is not enough to determine if a particular country is or is not a blacklisted jurisdiction.
General criteria for blacklisting jurisdictions (cont.)

36
▪ Avoiding the punitive POT and PTT.
▪ Avoiding the punitive APOT.
▪ Avoiding the PIT on the deemed income.
▪ Avoiding the CIT on the presumptive rent.
▪ Keeping some or all the advantages of the existing blacklisted OFC structure.
Main advantages of redomiciling an blacklisted OFC
to a non-blacklisted jurisdiction

37
▪ Tested solutions: redomiciling Gibraltar companies to Malta and US (as LLCs).
▪ Other possible less-tested solutions: redomiciling Gibraltar or other (e.g. Cayman
Islands) companies to the UK (as LLPs), etc.
▪ To be made by experienced foreign service providers (possibly the management
company which runs the blacklisted OFC).
Redomiciling abroad

38
▪ The US LLC enjoys the political protection of a strong nation with long-standing relations with Portugal, as well as tax
transparent treatment. The Portuguese blacklist targets tax haven jurisdictions and not special vehicles per se (in the
past it targeted some special Luxembourg companies).
▪ The US LLC, even if not resident for tax purposes in the US due to its tax transparent treatment, should still enjoy the tax
treaty legal protection on non-discrimination grounds, as it is incorporated in the US, and is therefore a national of the
US, in spite of limitation on benefits clauses. In other words, it cannot be blacklisted.
▪ The US LLC can elect (although with some extra cost and bureaucracy) to be taxed as a resident corporation in the US,
and not as a disregarded / tax transparent entity (as it normally is), and this would, in any case, enable it to benefit fully
from the tax treaty.
▪ Some US States (Delaware, Wyoming and Oregon) allow domestication, transfer of domicile or conversion to a foreign
(non-US) jurisdiction, say Portugal. This provides an exit in case of Portuguese blacklisting of LLCs. The Oklahoma LLC Act
is silent on the issue. Maybe it is possible to include in the articles of incorporation or in the operating agreements of an
Oklahoma LLC a reference to the possibility of domestication or transfer of domicile from there to a foreign jurisdiction
(to be confirmed and tested in practice).
Reduced likelihood of future Portuguese blacklisting (US LLC)

39
▪ The UK LLP enjoys the political protection of a strong nation with long-standing relations with Portugal, as well as
tax transparent treatment. The Portuguese blacklist targets tax haven jurisdictions and not special vehicles per se
(in the past it targeted some special Luxembourg companies).
▪ The UK LLP, even if not resident for tax purposes in the UK due to its tax transparent treatment, should still enjoy
the tax treaty legal protection on non-discrimination grounds, as it is incorporated in the UK, and is therefore a
national of the UK. In other words, it cannot be blacklisted.
▪ The UK LLP should enjoy EU legal protection on non-discrimination grounds.
▪ However, it is difficult to redomicile a UK LLP, as a change of domicile abroad is not allowed under corporate law.
Reduced likelihood of future Portuguese blacklisting (UK LLP)

40
▪ The Maltese company should enjoy tax treaty legal protection on non-discrimination grounds, as it is
incorporated in Malta, and therefore a national of Malta. In other words, it cannot be blacklisted.
▪ The Maltese company should further enjoy EU legal protection on non-discrimination grounds.
▪ The tax treaty with Malta fully entered into force on 1 January 2003 and it is highly unlikely that it is
terminated.
Reduced likelihood of future Portuguese blacklisting (Malta)

41
▪ The LLCs and the LLPs are tax transparent, and therefore there is still the risk (not currently happening) that the
Portuguese Tax Authorities try to look through them to determine who are their partners / members or directors.
▪ If these are resident in blacklisted jurisdictions there is still the risk (not currently happening) that the Portuguese Tax
Authorities consider that the LLC or the LLP is not resident in the US / UK, but in the jurisdiction of its partners /
members or directors, on the basis of effective management.
▪ The Portuguese Tax Authorities can still disregard a particular structure, on a case-by-case basis, under a general anti-
abuse rule, as they can in theory disregard structures that are tax driven. The general anti-abuse rule has been enforced
in some cases (but generally not involving real estate tax planning). It is arguable whether and to what extent domestic
anti-abuse rules can be enforced in EU situations and in tax treaty situations.
▪ The Portuguese blacklist was updated in 2001 after many years. The Portuguese blacklist was republished in 2004
unchanged vis-à-vis 2001 in spite of the Government being aware of massive redomiciliation in 2003 of Portuguese real
estate holding OFC to the US, as LLCs, and to Malta. The blacklist was again revised in 2011 and in 2016, being that the
US, UK and Malta were spared once more.
Reduced likelihood of future Portuguese blacklisting (all)

42
▪ Lawyers fees for redomiciliation of OFC from Gibraltar to US.
▪ Lawyers fees for redomiciliation of OFC from Gibraltar to Malta.
▪ Annual maintenance fees (domiciliation and annual franchise tax) for US.
▪ Annual maintenance fees (domiciliation and annual return fee) for Malta.
▪ 6 weeks.
Costs and timeframe for redomiciling abroad

43
▪ Appointment of a Fiscal Representative and of a Manager of Assets and Rights (a Portuguese company or a
Portuguese resident individual), by non-residents owning property in Portugal established outside the EU
and the EEA, in the latter case provided that an agreement for the exchange of information is in place
between Portugal and that state, following the CJEU’s decision in the Commission vs. Portugal case (C-
267/09).
▪ The Fiscal Representative is ultimately responsible, on behalf of the property-owning individual or company,
for the formal filing of the annual tax return (PIT or CIT).
▪ The Manager of Assets and Rights is ultimately responsible for the substantial payment of all taxes due (PIT,
CIT, POT, Additional POT, PTT, ST and CGT).
▪ These fees have to be agreed on a case-by-case basis.
Costs and timeframe for redomiciling abroad (cont.)

44
▪ These vehicles are usually tax transparent, from the perspective of their state of organization.
▪ Therefore, any income, as well as any tax liability, from the perspective of their state of organization, flows
to their members/partners.
▪ If members/partners were resident in Portugal there might be problems as Portuguese PIT and CIT tax the
worldwide income of its tax residents and has Controlled Foreign Company rules.
▪ Therefore, only structures with non-Portuguese resident share/quotaholders or members/partners and
directors are clearly advisable in the case of redomiciling abroad.
Important note on LLCs and LLPs

▪ Portuguese CGT applies since 1 January 2015 to gains in the case of partition, liquidation, revocation or
extinction attributed to beneficiaries who are Portuguese tax residents and who were founders in fiduciary
structures.
▪ For founders / settlors who are non-Portuguese tax residents:
• If the effective management is not in Portugal (e.g. non-Portuguese resident directors and share/quotaholders or
members/partners are used at the level of the foreign company and a foreign trust law and trustees are used) no
PTT is due if the disposal is made by changing the beneficial owner in a fiduciary structures by the former founder /
settlor / beneficiary or by selling the interest in the company, rather than the real estate;
• The Portuguese Sate Budget Law for 2018 has introduced new rules on the Portuguese domestic taxation of CGT
derived by non-Portuguese tax residents with shares or similar interests in non-Portuguese tax resident entities
(whose value derives principally from immovable property located in Portugal). (For more information on this
regime please read our Information Note: https://www.slideshare.net/RPBA/taxation-of-capital-gains-from-the-
alienation-of-shares-or-similar-interests-of-entities-deriving-their-value-principally-from-immovable-property-
located-in-portugal-05042018).
Future disposals with redomiciled abroad company
(sale of company / change of the beneficial ownership in company)
45

46
▪ PTT (up to 6,5%), ST (0,8%) and CGT (25%) is due if the disposal is made by selling
the real estate, and not the interest in the company. A new tax evaluation of the
immovable by the Portuguese Tax Authorities may occur.
(sale of real estate)

▪ The free transfer by gift or death of the beneficial ownership of a fiduciary structure encompassing a foreign
(incorporated) company whose effective management is not in Portugal (e.g. non-Portuguese resident directors and
share/quotaholders or members/partners are used at the level of the company and a foreign trust law and trustees are
used) and which has no permanent establishment herein (namely because the real estate does not constitute one) is
not territorially liable to GIT if the beneficiary is an individual which is not tax resident in Portugal. If the beneficiary is a
Portuguese tax resident individual in principle the free transfer will still not be territorially liable to GIT, but this will
depend on the type of fiduciary structure.
▪ The free transfer by gift or death of a foreign (incorporated) company towards individuals, even if Portuguese tax
residents (if we assume its effective management is not in Portugal and that there is no permanent establishment
herein) is not territorially liable to GIT if the beneficiary is an individual which is not tax resident in Portugal.
▪ The free transfer by gift or death of a foreign (incorporated) company, even if its effective management is not in
Portugal and there is no permanent establishment herein, but whose assets are predominantly composed by rights over
real estate in Portugal, is subject to CIT if the beneficiary is a Portuguese company, a permanent establishment in
Portugal of a non-Portuguese tax resident company or even such last company in the absence of a permanent
establishment (at a 21% rate, plus Municipal and State surcharges if the beneficiary is a Portuguese company or a
permanent establishment; or at a 25% rate when the beneficiary is a non-Portuguese tax resident company without a
permanent establishment herein).
(gift or inheritance of the beneficial ownership in company / of the company)
47

48
▪ The free transfer by gift of Portuguese real estate:
– to an individual is liable to GIT (at a 10% rate) - plus a ST of 0,8%;
– to (i) a Portuguese or (ii) non-Portuguese tax resident company or (iii) to a permanent establishment in
Portugal is liable to CIT [at a 21% rate, plus Municipal and State surcharges in the cases (i) and (iii), and
at a 25% rate in case (ii)];
and may give rise to a new tax evaluation of the immovable by the Portuguese Tax
Authorities.
(gift of real estate)

49
▪ I believe we should all pay our real estate tax bills with a smile.
▪ I have tried – but they wanted cash.
Tax wisdom (intermezzo)

▪ Tested solution.
▪ Not essential but interesting if you can give any other use to the Portuguese company (e.g., for an
entrepreneur, or for leasing the real estate).
▪ Interesting if you have foreign source income, as if the Portuguese company is a Madeira Free Zone one, it
could obtain low-taxation of such income (see: https://www.slideshare.net/RPBA/rpba-madeira-free-zone-
113787575).
▪ To be made by an experienced Portuguese lawyer.
Redomiciling on-shore
50

▪ Passing of a resolution of the OFC in order to approve the redomicile (to be notarised and legalised with
the Hague apostille).
▪ Issuing of a statement by a foreign notary or (maybe) lawyer stating the OFC jurisdiction will allow the
redomiciling to Portugal without loss of legal personality (to be notarised and legalised with the Hague
apostille).
▪ Granting a power of attorney by the OFC to the Portuguese lawyer (to be notarised and legalised with the
Hague apostille).
▪ Translating into Portuguese certain foreign legal documents (by-laws, certificates of incorporation and legal
standing, etc.).
▪ The Portuguese lawyer redomiciles the company under a procedure similar to an incorporation / capital
increase to the Portuguese minimums (€ 1 for a Lda.; € 50.000 for an S.A.).
How it works (simple outline)
51

52
▪ Portuguese lawyers fees.
▪ Translations.
▪ Notary and Registry fees, standard ST and Publications.
▪ Maintenance fees.
▪ Minimum CIT – in principle € 850, but as low as € 656,25 on some conditions (recoverable,
in certain situations).
▪ 2 months.
Costs and timeframe for redomiciling on-shore

53
▪ Previous to 29 April 2010 there used to be a 0,4% Portuguese ST which might apply to the market value of the
assets of a company that redomiciled to Portugal. In practice, the notaries did not levy this tax on the
redomiciliation of Gibraltar companies. This may have been correct, according to EU Law.
▪ It is generally stated that: «Gibraltar entered the EC at the time of the accession of the United Kingdom. It is
among the European territories for whose external relations a Member State is responsible under Article 227(4)
of the EC Treaty. Article 28 of the Act concerning the Conditions of Accession and the Adjustments to the Treaties
(which concerns the accession of the UK, Denmark and Ireland) provides that there shall be certain exceptions
from Community measures with respect to Gibraltar (the Common Agricultural Policy, Value Added Tax and the
Community Common Tariff on Customs do not apply). Subject to these explicit exceptions, all legislation adopted
by the Community since 1973 has been applicable to Gibraltar».
▪ Therefore, Council Directive 69/335/EEC of 17 July 1969 concerning indirect taxes (although the characterisation
of a ST as such is challengeable, as some authors considering it a direct tax) on the raising of capital may be
applicable to Gibraltar.
▪ There is a Gibraltar ST of 0,5% due on incorporation of a Gibraltar company. If this can be said to be the
transposition of the Directive, complying with its guidelines, the 0,4% Portuguese ST did not apply. Nevertheless,
this is something that only a Gibraltar lawyer could guarantee, or at least opine on.
Costs and timeframe for redomiciling on-shore (ST)

54
▪ Even without this confirmation, the levying of the said tax would have been difficult
because:
i. notaries did not know, when making the public deed, what were the assets of a Gibraltar company;
ii. most Gibraltar companies did not have accounting records and it was barely impossible to know their assets
without cooperation of the parties to the deeds;
iii. there was no efficient exchange of information between the various sides of the Tax Authorities (POT, PTT, ST, and
CIT) and they, as well as the notaries, were not necessarily or immediately aware that the redomiciled company
had Portuguese assets;
iv. the notaries, until April 6, 2011, were used to levying a 0,4% Portuguese ST on the nominal capital, or the increase
of capital, on Portuguese redomiciled companies, to obtain the minimum Euro 5.000 of a Portuguese Lda.
company (which should apply and was an anticipated cost of the structure), and probably thought that it would be
a duplication to levy another 0,4% on the real assets of the company;
v. if the issue was raised as a matter of surprise in the course of a public deed, the parties could still try to argue that
the said tax cannot apply under the EU grounds stated before, and certainly the notary would be unprepared, or
less prepared, to argue in favour of the enforcement of the tax.
Costs and timeframe for redomiciling on-shore (ST) (cont.)

55
▪ In any case, if there were any mortgages or liens to the assets of the Portuguese redomiciled company these
could be claimed so as to diminish the net value of those assets for purposes of the computation of the said
0,4% Portuguese ST.
▪ If the notaries did not levy this ST, and confirmation of the EU law protection was not obtained, in practice a
liability will remain for the Portuguese company redomiciled previously to 29 April 2010.
▪ However, as the notaries only report to the Portuguese Tax Authorities the transactions and the ST that,
under their opinion, should be levied, in practice both the risk of a late detection and the degree of
responsibility of the taxpayer are largely reduced.
Costs and timeframe for redomiciling on-shore (ST) (cont.)

56
▪ If you want to do away with nominees, namely nominee share/quotaholders or
members/partners, you should do it before redomiciling the company to Portugal.
▪ The change in share/quotaholders or members/partners of a Portuguese company
involves a transfer which may be subject to PTT and CGT, as we will see.
Important note on nominees

57
▪ Initially, it may be possible to make crossed redomiciliation (e.g. redomicile a
Gibraltar Joint Stock Company as a Portuguese Lda.)
▪ Subsequently, it is also possible (with more costs) to transform a Portuguese Lda.
into a Portuguese S.A. and vice-versa (namely prior to the disposal of the structure)
so as to obtain the respective tax and or / corporate advantages.
Important note on Portuguese companies

58
▪ If share/quotaholders (individual Portuguese or foreign residents, or corporate foreign
residents) sell the interest in the Portuguese company:
— The latter is an S.A. or a Lda. and shares or quotas were acquired before 1 January 1989: no CGT is due;
PTT is not due on the sale of the S.A. / may be due on the sale of a Lda. (see below);
— The latter is an S.A. and shares have been acquired before 1 January 2002 (under some interpretations,
although there is a recent tax arbitration court decision stating that this specific exemption is no longer
in force): no CGT and no PTT are due;
— Other situations: 28% PIT CGT (computed on half-income if the company is not listed and is a micro or
small company) on the sale of the interest in the company is due or 25% CIT CGT; PTT (up to 6,5%) may
be due in the case of a Lda. or other company when one of the quotaholders obtains 75% of the capital
or the number of holders is reduced to 2, husband and wife or civil law partners. So, 74% / 26% Lda.
ownership structures are common.
Future disposals with redomiciled on-shore company
(sale of company)

59
▪ In the case of founders / settlors who are non-Portuguese tax residents, if the effective management of the
fiduciary structure is not in Portugal (e.g. non-Portuguese resident share/quotaholders are used at the level
of the Portuguese company and a foreign trust law and trustees are used), no PTT is due if the disposal is
made by changing the beneficial owner by the former founder / settlor / beneficiary;
▪ However, the Portuguese Sate Budget Law for 2018 has introduced new rules on the Portuguese domestic
taxation of CGT derived by non-Portuguese tax residents with shares or similar interests in non-Portuguese
tax resident entities (whose value derives principally from immovable property located in Portugal). (For
more information on this regime please read our Information Note:
https://www.slideshare.net/RPBA/taxation-of-capital-gains-from-the-alienation-of-shares-or-similar-
interests-of-entities-deriving-their-value-principally-from-immovable-property-located-in-portugal-
05042018).
(change of the beneficial ownership in company)

60
▪ If actual share/quotaholders (Portuguese resident or non-resident, individual or corporate) free transfer the
interest in the Portuguese company by gift or death to close family (spouses, children, grandchildren,
parents and grandparents), Portuguese resident or non-resident, an exemption from GIT applies; to other
beneficiary individuals a 10% rate applies.
▪ If share/quotaholders (irrespective of Portuguese resident or non-resident, individual or corporate) free
transfer the interest in the Portuguese company by gift or death:
– to a beneficiary individual not-resident in Portugal - no GIT is due;
– to a beneficiary which is a Portuguese company, a permanent establishment in Portugal of a non-Portuguese tax
resident company or even such last company in the absence of a permanent establishment – CIT is due at a 21%
rate, plus Municipal and State surcharges if the beneficiary is a Portuguese company or a permanent establishment;
or at a 25% rate when the beneficiary is a non-Portuguese tax resident company without a permanent
establishment herein.
(gift or inheritance of company)

61
▪ The free transfer by gift or death of the beneficial ownership of a fiduciary structure
encompassing a Portuguese company (e.g. non-Portuguese resident share/quotaholders
or members/partners are used at the level of the company and a foreign trust law and
trustees are used) may not be territorially liable to GIT, even if the beneficiary is a
Portuguese tax resident individual, but this will depend on the type of fiduciary structure.
(gift or inheritance of the beneficial ownership in company)

62
▪ PTT (up to a 6,5% rate), ST (0,8%) and CGT (21%, which may be reduced to 10,5% in case
of qualifying reinvestment, plus Municipal and State surcharges) are due if the disposal is
made by selling the real estate, and not the interest in the company. A new tax evaluation
of the immovable by the Portuguese Tax Authorities may occur.
(sale of real estate)

63
▪ The free transfer by gift of Portuguese real estate :
– to an individual, is liable to GIT (at a 10% rate) - plus a ST of 0,8%;
– to (i) a Portuguese or (ii) non-Portuguese tax resident company or (ii) to a permanent establishment in
Portugal is liable to CIT [at a 21% rate, plus Municipal and State surcharges in the cases (i) and (iii), and
at a 25% rate in case (ii)];
and may give rise to a new tax evaluation of the immovable by the Portuguese Tax
Authorities.
(gift of real estate)

64
▪ When redomiciling on-shore, the relevant corporate changes are notified to the
Portuguese Tax Office and the National Registry of Collective Persons as a part of the
redomiciliation procedure.
▪ After the redomiciliation abroad is completed, all the relevant corporate changes should
be notified to the Portuguese Tax Office and the National Registry of Collective Persons.
▪ After the redomiciliation abroad or on-shore is completed, all the relevant real estate
changes should be notified to the Portuguese Tax Office and to the Property Registry
Office where the real estate is located.
▪ Otherwise, the Portuguese Authorities will not be aware of the changes and will still treat
the real estate as owned by a blacklisted OFC.
Crucial steps when redomiciling abroad or to Portugal

65
▪ Lawyers’ fees for each notice (corporate changes with the Portuguese Tax Office and the
National Registry of Collective Persons, real estate changes to the Portuguese Tax Office
and to the Property Registry Office). Legal duties also apply.
▪ Additional lawyers’ fees if the OFC is not redomiciling to Portugal, as a specific power of
attorney by the OFC to the Portuguese lawyer (either Hague apostilled or made in a
Portuguese consulate) has to be granted.
▪ 2 weeks.
Costs and timeframe for notifications to the Portuguese
Authorities

66
▪ After the redomiciliation is completed, all the relevant corporate and real estate changes
should be notified to contracting parties, namely utility providers (gas, electricity, water,
phone, etc.).
▪ Lawyers fees for each notice.
▪ 2 weeks.
Costs and timeframe for other notifications

67
▪ Study the issue in detail: consider timeframe for implementation, costs, risks, degree of
sophistication.
▪ Determine what you want:
– Transfer the real estate by sale or gift;
– To redomicile on-shore [choose vehicle of redomicilation (Lda. or S.A.), think of cross redomiciliation,
elect the accountant, as well as the head office of the Portuguese company (at the real estate or at a
law office or accounting firm, for instance), and determine if the existing (possibly nominee)
share/quotaholders and / or directors will be kept or not)];
– To redomicile abroad (in this case choose jurisdiction).
▪ Contact service providers (OFC management and/or local lawyer and/or local accountant)
to see if they can help you implement the desired structure.
What to do now

68
▪ That is the second phase. Good Luck!
But wait: there is still more!!!
(post-implementation, when the immediate POT, CIT and PIT concerns have
been dealt with)
Implementation

69
▪ The Portuguese Tax Authorities may challenge non-arm’s length situations where
no rent is charged, even by a non-blacklisted property holding company, either
Portuguese or foreign. In theory they can do it already. In practice they have not.
▪ Due to the Additional POT it is also convenient to have a lease so that income
generated for the lessor and the CIT on the rent can absorb the Additional POT
(i.e., APOT is creditable against the CIT on the rent).
In the future (transfer pricing)

70
▪ Up to the end of December 2006, if the redomiciled company leased the real estate under the controlled
rent system it might obtain a POT exemption for 10 years (under the rules of the estate tax reform).
▪ Leasing may still be advantageous because:
– Negative – the CIT (21%, plus Municipal and State surcharges ) on the profit, and the one-off ST of 10% on the value
of the monthly rent of the lease contract.
– Positive – the fact that the rent expense is a tax deductible cost for the lessee:
• On a 15% basis (up to the limit of € 502) on urban property for permanent residence of the lessee individual, for PIT
purposes;
• On a full basis, allowing 21% tax saving if the lessee is a profitable company (maximum CIT rate).
– Positive - there is a minimum CIT (in principle € 850, but as low as € 656,25 on some conditions (recoverable, in
certain situations) for a Portuguese company or branch. The profit derived from leasing real estate is computed
towards that minimum and enables its absorption or future recovery, and consists of:
i. rent income less all relevant expenses, including financial expenditures, depreciation, furniture, decoration and appliances’
expenses - for the Portuguese domiciled lessor company;
ii. rent income less all expenses effectively incurred and payed in order to obtain or maintain such income, excluding financial
expenditures, depreciation, furniture, decoration and appliances’ expenses - for the non-Portuguese domiciled lessor
company.
In the future (leasing)

71
▪ Portuguese lawyers’ costs for drafting the lease contract.
▪ Portuguese annual fees for appointing a tax representative to file statements and
payments and receive notices (applicable only to non-residents established outside the EU
and the EEA, in the latter case provided that an agreement for the exchange of
information is in place between Portugal and that state).
In the future (leasing - costs)

72
▪ Should not be affected by the redomiciliation per se.
▪ No possible tax planning here.
▪ Since 2012, due to IMF / ECB / EC Memorandum of Agreement with the Portuguese State,
there was a specific evaluation of all urban property in Portugal.
Update of the tax value of real estate,
namely for POT purposes

73
▪ My very, very, personal opinion - what I would do if I were in this situation (although I am not). I would
redomicile:
– to the US, using an LLC in Oregon [less known than Delaware, Wyoming or Oklahoma and therefore with reduced risk of
blacklisting, and allowing domestication or transfer of domicile to a foreign (non-US) jurisdiction, say Portugal], as it is inexpensive,
relatively safe, and should be easy to implement and also to accept by existing management companies fearful of loosing their
clients; however compliance costs may rise due to the need to annually file a Report of Foreign Bank and Financial Accounts -
FBAR (risk prone / cost sensitive / no-fight situation).
– to the UK, using a LLP, which is safe due to the protection of both EU law and the UK-Portugal tax treaty non-discrimination clause
and should be easy to implement and also to accept by existing management companies fearful of loosing their clients (risk prone
/ cost sensitive / no-fight situation).
– to Malta, because it is safer than the US LLC, and should be easy to implement and also to accept by existing management
companies fearful of loosing their clients, although this is more costly and will require constant monitoring in tax and legal
developments (risk adverse / cost tolerant / no-fight situation).
– to Portugal, as, although expensive and more difficult to implement, it is much safer, even if it is necessary to convince the
management companies to do away with nominee share/quotaholders or members and/or directors (risk adverse / cost tolerant /
some-fight situation).
Grand finale

74
▪ We should be proud of paying real estate taxation in Portugal.
▪ The only thing is that we could be just as proud for half the money.
Tax wisdom (closing)

75
Proper legal advice is recommended before any decision is taken on this subject. RPBA has
an in-depth knowledge and expertise on real estate taxation.
Should you require further information on this issue, want to book a consultation or obtain
our professional fees on this subject please e-mail us (Ana Rita Pereira): rita@rpba.pt
Real Estate Tax Planning in Portugal

Recent Tax Recognition
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▪ Legal 500 – Ricardo Recommended Lawyer / RPBA Band 2 (2018) / RPBA Band 3 (2017 / 2016 / 2015 / 2014 / 2013)
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▪ Tax Directors Handbook – Ricardo mentioned / RPBA Tier 3 (2015) 76

▪ In the preparation of this presentation, every effort has been made to offer current, correct and clearly expressed information. However, the said
information is intended to afford general guidelines only. This presentation reflects information current at October 14, 2018.
▪ This presentation is distributed with the understanding that RICARDO da PALMA BORGES & ASSOCIADOS, SOCIEDADE DE ADVOGADOS, S.P., R.L. is
not responsible for the result of any actions taken on the basis of information herein included, nor for any errors or omissions contained herein.
▪ RICARDO da PALMA BORGES & ASSOCIADOS, SOCIEDADE DE ADVOGADOS, S.P., R.L. is not attempting through this work to render legal or tax advice
and the information in this presentation should be used as a research tool only, and not in lieu of individual professional study with respect to client
legal matters.
▪ Portuguese domestic legislation, foreign legislation, EU Directives and tax treaties have anti-abuse provisions, and each actual client structure should
be analysed taking those into account.
▪ RICARDO da PALMA BORGES & ASSOCIADOS, SOCIEDADE DE ADVOGADOS, S.P., R.L. is the copyright owner of this presentation and hereby grants you
a non-exclusive, non-transferable license to use this presentation solely for your internal business, provided that you do not modify its content in any
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ADVOGADOS, S.P., R.L.’s prior written consent.
General warning, disclaimer, copyright and authorised use
77

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