ALTHOUGH INFREQUENTLY used in recent years, Nominee Companies have existed in Portuguese statute law since the 19th century and have been embraced in subsequent legislative reforms over the past 150 years. Therefore, they are fully compliant and are not subject to any of the punitive laws that have made Offshore Property Companies a pariah: no deemed income assessment, no five per cent rates bill.
Reduced CGT rates
Capital Gains Tax on the sale of a Nominee Company is only to 10 per cent, as compared to 25 per cent for non-resident companies. Non-resident individuals also pay 25 per cent, while residents typically pay close to a net of 20 per cent if they are ineligible for rollover relief.
Potential Transfer Tax exemption
The sales of the shares may also be exempt from IMT (Imposto Municipal Sobre Transmissões, or Property Transfer Tax). Under Portuguese law, when there is not a greater than 75 per cent concentration of shares upon transfer, no Property Transfer Tax is due on the underlying assets. If eligible, the buyers may potentially save tens of thousands of euros, thus making Nominee Company acquisition more desirable than direct property purchase.
Ease of transfer
When the company is eventually sold, only a simple deed of sale is required. The property remains securely within the company and there is nothing to trigger bureaucratic problems and extra expense often associated with property transfers.
No taxation on re-domiciliation
When an offshore or a non-resident company moves to Portugal, there is no Capital Gains Tax or Property Transfer Tax upon re-domiciliation. This is because it is the company headquarters that moves, not the property, thereby avoiding any transfer of company assets.
Uplifted basis for CGT
Following company registration in Portugal, a balance of accounts needs to be recorded to mark the starting point as a Portuguese resident entity. This balance sheet must be based on current rather than historical values. Thus, the company’s assets reflect the market value of the property. The liabilities show the shareholders’ loans into the company – not the invoicing of how the monies were spent – as well as any outstanding loans or mortgage. As such, there is usually a significant uplift in the basis for eventual CGT assessment and many historical problems can be rendered irrelevant. A colossal problem can be transformed into a very manageable inconvenience.
Residential properties and SIPPs
With the liberalisation of UK pension rules for holding residential properties in a Self Invested Pension Plan (SIPP), which are scheduled to come into effect in April of 2006, Portuguese Nominee Companies lock in a host of advantages. Even if a property was acquired today in a Nominee Company, it could easily be transferred in the SIPP at low cost after next April. The full spectrum of Domiciliary Services offered by euroFINESCO s.a. is ideally suited for the non-resident investor. The modest annual running costs also include any compulsory company compliance requirements.
• Dennis Swing Greene is an International Fiscal Consultant for euroFINESCO.Private consultations can be scheduled at our offices in Guia (Albufeira) and Lisbon (Chiado). In the Algarve, call 289 561 333 or in Lisbon, 213 424 210, or e-mail: [email protected], or on the internet at www.eurofinesco.com
