The Bachmann Group - Overseas Property FAQs

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FAQs

What tax benefits might I enjoy by purchasing a property through a UK company?

Purchasing your Portuguese property via a UK company can greatly mitigate your tax liabilities. UK companies are not affected by the new taxation legislation in Portugal which was introduced on 1 January 2002 and which consists of two elements:

an adjustment of the rate of a municipal tax ('Contribuição Autárquica') from rates varying between 0.7% and 1.3% of the declared property value (Valor Patrimonial) to a standard rate for corporately owned property of 2%, and
a tax on the deemed rental income assessed as 1/15 of the Valor Patrimonial at a rate of 25%.

Owning your Portuguese property through a company offers certain Portuguese tax benefits upon sale. In effect when you wish to sell the property, you are selling the beneficial interest in the Company rather than the property itself. Hence SISA (property transfer) tax is avoided which is charged at 10 - 12% of the property value as well as the notary and registration fees.
Should the company receive any rental income, it is received by the Nominee and passed on to the client. Therefore no corporation tax liability will arise to the company in the UK. However, a Portuguese income tax obligation arises in these circumstances.

What happens when I want to sell the property?

The shares of the company are sold to a new Beneficial Owner. This is normally a much shorter and simpler process than transacting property in Portugal and you can offer a potential purchaser the benefits you have enjoyed.
Equally, selling the company also avoids exposure to Portuguese capital gains. It does not however mitigate potential liability relating to gains taxes in your own country of residence.

What if a purchaser wishes to purchase the property itself rather than the shares of the company?

Any sale of the property in this way would crystallise for you a Gain in Portugal. This would be taxed in Portugal.
Any sale of the Property itself would not be in the Purchaser's interest since he would suffer SISA tax at 10-12% of the property price in addition to conveyancing costs in Portugal.

What other benefits will the structure give me?

Forced heirship clauses within Portuguese inheritance law mean that property can only be transferred in line with provisions of the Law. These provisions can be restrictive and can give rise to Portuguese taxes. Tax is charged even where property is passed to a surviving spouse. Corporately owned property effectively takes the asset outside Portugal and gives you a UK situs asset. In this way, corporate ownership gives you the option as to how you wish your estate to be dealt with without the need to concern yourself with Portuguese law.
By utilising a Nominee Agreement between you and the company, the asset of the company (the property) is not on the balance sheet of the company. Therefore the company is able to file abbreviated accounts, saving the expense of auditing.
Within Portugal, the company is the registered owner of the property and recorded as such at the local Land Registry. Therefore anonymity is guaranteed.

Can I still seek lending facilities if I use this structure?

Yes you can still borrow money to finance the purchase (subject to status) and we can put you in contact with a bank which may be able to help.

What should I do next?

Please either call or email our Portuguese property team to discuss your own specific situation. We will be pleased to answer any other questions you might have.