Corporate ownership

Whether to buy in your own name or through a corporate entity is a question you may face on higher-priced properties — generally €1,000,000 and above, particularly around Quinta do Lago and Vale do Lobo. There are pros and cons to both.

What is corporate ownership?

Corporate — or offshore — ownership is where the owners hold shares in a company which is itself the registered owner of the property. When the property is sold, the shares are sold through a share purchase agreement. The company remains the owner; the buyers become the new shareholders.

Despite rumours to the contrary, anyone holding property through a corporate structure is normally an honest professional using it for the ease, flexibility and speed it lends to personal asset management, as well as to avoid certain costs and benefit from certain deductions.

The benefits

• Selling is faster, easier and cheaper — ownership transfers by share purchase agreement, which can be conducted in English, avoiding the lengthy process of registering a title in Portugal and reducing legal fees.
• Transfer tax, notary and registration fees are not applicable on sale — for white-listed corporations only.
• Capital gains tax is not paid in Portugal on profit from a property sold through corporate ownership; gains are subject to the rules where the corporation is domiciled.
• Inheritance follows the law of the jurisdiction where the corporation is domiciled, rather than Portuguese forced heirship.
• A degree of anonymity — though substantially reduced since 2017 legislation introduced the Effective Beneficiary's Central Register.

White list or black list?

It is essential to understand the difference between companies domiciled in a white-list jurisdiction (for example Malta or Delaware) and a black-list one (for example the Cayman Islands). In short: white-list offshores do not suffer penal taxes, black-list offshores do.

IMI illustrates it neatly. A white-list offshore property in Loulé currently pays 0.4% of rateable value in IMI. The same property held in a black-list jurisdiction pays 15% — a penal rate designed to discourage the arrangement entirely.

The two most widely used white jurisdictions are the USA (Delaware) and Malta. Neither is considered fiscally privileged by the Portuguese government. Both have flexible, well-established legal systems, uncomplicated compliance requirements and re-domiciliation legislation in place. Malta's statutory compliance requirements are greater, so a Maltese company is slightly more expensive to administer than a Delaware one.

The downsides

There is a cost to set the company up and annual fees to maintain it — usually a set-up fee of between €1,050 and €3,240, plus an annual charge of €800 to €2,450 for administration and taxes. Mortgages on offshore-held property are also difficult to obtain.

Just like Marmite, offshore ownership is not for everyone — but some people love it.