Text by AFC
Portugal is indeed a very attractive country to invest in. Foreign companies are now starting to consider continuing their activities in Portugal, especially those that own real estate properties in Portugal.
Migrating a company to Portugal means transferring its legal seat and place of effective management to Portugal. Being deemed as a resident for tax purposes in Portugal, the taxable capital gains derived from the sale of the real estate held by the company would be assessed according to the Corporate Income Tax (CIT) rules and charged at a 21% rate. The company may also be subject to state and municipal surtaxes.
The taxable capital gains (if any) will correspond to the value resulting from the difference between the proceeds from the disposal and the acquisition cost of the immovable property. By moving the company’s residence to Portugal, the acquisition cost of the assets held by the company at the time of the migration may correspond, for tax purposes, to their net book value (reflected in the company’s accounts) or market value (for migration from within the EU).
In this regard, the company may potentially benefit from a step up on the acquisition cost of the Portuguese real estate depending on the book value accounted before the migration. The value established as the “acquisition cost” cannot exceed the property’s market value.
It is important to underline that, regarding the IMI and the Real Estate Transfer Tax, the State Budget for 2021 has extended the application scope of the aggravated rates of 7,5% and 10%, respectively. Besides the cases in which the property holding company was domiciled in a blacklisted jurisdiction, the aggravated rates now also apply to companies that are dominated or controlled, directly or indirectly, by an entity registered in the said jurisdictions.
Notwithstanding the above, Portugal is not only trying to attract foreign corporations but also certain categories of citizens to become tax residents in Portugal and thus to bring to the country, amongst other benefits, their know-how on areas where Portugal has a shortage of professionals. The Portuguese Government has created a special tax regime commonly known as the NHR regime, granting all those who qualified with several tax benefits on their Portuguese and foreign income for a 10 year period.
For tax purposes, becoming an NHR in Portugal means becoming a full tax resident in Portugal and liable to taxes on your worldwide income. Your previous country of residency should therefore be informed that you have moved to Portugal.
To qualify for the NHR regime, an individual must meet the following conditions:
- To qualify as a tax resident under the Portuguese legislation;
- Not have been qualified or taxed as a Portuguese resident in the 5 years prior to taking up residence in Portugal.
The recognition of this status is not automatic and requires activation by attending some formalities. The benefits of this regime depend on the type and source of income received by the individuals.