Privately owned vs Company owned property
Buying and owning a property in one’s own name or via a corporate entity is a question many are faced with when buying a property in our area. There are pros and cons for each which should be taken into consideration. The actual process of both is described in the Buying Process in this Guide on page 28 and you should take advice from your legal and tax professionals.
Benefits of company membership
The most important benefit is that the purchase is very straightforward in Portugal. We do still recommend you use a local lawyer who can ensure that the property and its paperwork are in order.
Apart from that, one does not have to maintain any corporate structure which varies from EUR 1,500 to EUR 4,500 annually, and annual fiscal representation is marginally less expensive.
You can also avoid the payment of the AIMI if the rateable value of the properties is for each owner/co-owner below EUR 600,000.
Benefits of company membership
Where beneficial owners are husband and wife, the beneficial ownership of the shares can be held jointly with rights of survivorship so that if either of them should die, the beneficial ownership automatically passes to the surviving spouse. Upon the death of the surviving spouse, the transfer of ownership to the heirs is made easier, as the legal title to the property remains the same, thus avoiding the necessity of obtaining recognition of the validity of a non- Portuguese will in Portugal.
Buyers and sellers benefit from a degree of anonymity although this benefit is now substantially reduced due to the new legislation implemented in Portugal in 2017 which, among other measures, approved the Regime of the Effective Beneficiary’s Central Register, in an effort to support the prevention of the use of the financial system for the purpose of money laundering or financing of terrorism. This law came into force on 20th November 2017, and has yet to be regulated.
The costs involved
When the property is sold via a sale of the shares in the company, there are advantages as the transfer tax, notary and registration fees are not applicable. However, there are also extra costs in running these companies and the value of the property needs to justify these costs. If a property has a value of under EUR 500k this is perhaps not the best option. Your lawyer will be able to advise you on this. Please also refer to the Property Taxation table on page 31 for further information.
The two most widely used jurisdictions which have suitable holding company regimes for asset owning structures are USA (Delaware) and Malta. Neither of these are considered fiscally privileged by the Portuguese government; they have flexible and well established legal systems, uncomplicated corporate compliance requirements and have re-domiciliation legislation in place.
The USA has a sophisticated and flexible corporate legal regime and one state in particular, Delaware, is commonly used for property ownership For clients looking for an EU jurisdiction, Malta’s tax regime is suitable for basic property holding structures. Although generally a civil law jurisdiction, Malta’s company law is broadly very similar to the UK and other common law jurisdictions.
Both jurisdictions are relatively inexpensive, but because the statutory compliance requirements are greater in Malta than Delaware, the administration of a Maltese company is slightly more expensive than Delaware.
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