Some of you may have heard for some time rumours that offshore companies, holding properties in Portugal are under attack by the Portuguese tax authorities.
Earlier this year it became evident that in the Portuguese state budget, proposals were made to make offshores less attractive to hold.
The 2002 budget has now been approved and passed into law and will become effective on January 1st. of 2002.
Over the years offshore structures have been used to purchase properties in Portugal and the advantages were obvious:
The system also had some (financial) drawbacks.
It was to be expected that Portugal, following the example of France and Spain was going to introduce a system to penalize such offshore structures. The new measures which will be introduced on January the 1st. 2002 are the following:
They will differ from case to case. The most important factor in the whole story is the ratable value of your house. This value can be found on your Caderneta Predial. Normally older houses are rated much lower than newer ones. In case of any doubt please contact me to get the right figure.
In my opinion it will make a difference if the house is used for permanent living and not rented out and will be less penalizing if rented out and such rental income has been declared by means of tax return for I.R.C.
Although this turn of events looks bleak for some owners it is probably too premature to take immediate action. The law will only come into effect on January 1st. of 2002 and taxes will be paid only in 2003.
Although I have heard already that some owners have been advised to put the property they indirectly own back into their own names, with all financial consequences involved, this seems premature to me.
Also for some time we are waiting for the existing heavy Sisa tax to be abolished. Notary fees also will change as from January 1st. Although it looks cheaper on paper I have been told with several stamp duties on top it will not.
Only time will tell, however that expenses will increase seems without doubt. On the other hand it seems that many people forget that at least for me the most important issue is the fact that in case of the demise of one of the beneficiaries the rights will pass on to the heirs with much le
This article is written and provided with permission by Robert M.L. Snapper, fully licensed real estate agent in Portugal.