property holding companies

Regulatory shifts affect property holding companies

In recent years, Portugal has seen amendments in its laws governing property holding companies.

These changes are primarily focused on increasing transparency, preventing tax evasion, and aligning with EU directives. One of the key areas of change has been in the realm of taxation. The Portuguese government has revamped tax structures, introducing new rules for real estate transfer taxes, stamp duty, and income tax, particularly affecting companies holding property for rental or investment purposes.

Moreover, there has been an increased emphasis on anti-money laundering measures. Property holding companies are now required to provide detailed information about their ultimate beneficial owners. Failure to comply can result in substantial penalties, including fines and potential criminal charges.

Changes in real estate laws and regulations:

The Portuguese legal framework regarding real estate has been updated, particularly concerning the registration and transfer of property titles. The principle of priority of registration has been emphasized, meaning that in cases of multiple entries in the land register, the right that was registered first prevails. This change underscores the importance of timely and accurate registration of property rights to secure and prove ownership​​.

Impact on offshore property companies:

New regulations have changed the way capital gains tax (CGT) is assessed for offshore property companies. Previously, many offshore jurisdictions levied Stamp Duty on the registered share value of Limited Liability Companies, often at a rate of 1%. However, under the new rules, CGT is assessed in Portugal based on nearly 100% of the sales price. This shift in tax assessment has considerable implications for offshore property holding structures and stresses the need for compliant and efficient tax planning​​.

Revisions in insolvency law:

The European Commission’s proposal for a directive to harmonise aspects of insolvency law is expected to influence Portuguese insolvency procedures significantly. The directive aims to regulate the recovery of assets, efficiency of procedures, and fair distribution of value among creditors. This could impact property holding companies, especially those facing financial challenges, by altering the landscape of asset recovery and debt management​​.

State Budget changes and tax implications:

The Portugal state budget for 2024 proposes several changes, including an increase in the minimum wage and modifications to the tax regime. Notably, there’s a proposed end to the popular “Non-Habitual Resident” tax scheme from the start of 2024, which previously offered substantial tax benefits for foreign residents. A new tax regime is expected to replace it, providing a 50% exemption on income tax for new residents for five years​​.

Alterations to the Golden Visa programme:

Significant changes have been made to the Golden Visa programme, with the discontinuation of real-estate property or real-estate fund investments as qualifying routes for the programme. These changes are part of the government’s efforts to address the housing market crisis and control foreign investment in property. The program now focuses on alternative investment routes, such as capital transfers and scientific research contributions​​.

Overall, these regulatory changes underscore the importance of having a knowledgeable and capable company manager for property holding companies in Portugal. The manager must navigate these legal and fiscal changes efficiently, ensuring compliance while optimizing investment strategies and tax planning.

Choosing the right company manager

Selecting the right manager is a decision that should be made with careful consideration of their qualifications, experience, and track record. Here are some key aspects to consider:

  • Expertise in Real Estate and Finance: Look for someone with a strong background in real estate investment and financial management.
  • Understanding of Portuguese and EU Laws: The manager should have a thorough understanding of the legal landscape in Portugal and the European Union.
  • Strategic Thinking and Problem-Solving Skills: Choose a manager who demonstrates strategic thinking and the ability to solve complex problems.
  • Reputation and Track Record: Consider their reputation in the industry and their track record in managing property holding companies.

Gibro Group, based in the heart of Portugal’s Algarve, provides specialised company management services, ensuring your corporate structures are expertly managed. What’s more, transferring your current corporate structure to the Gibro Group is smooth and stress-free. Contact the team for a free quote [email protected]

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