There are other taxes, which have to be taken into account and these are,

Income tax

Where a property is rented out, rent is charged to income tax and on a sale 50% of chargeable capital gain is subject to Portuguese income tax.

Stamp duty

There is a stamp duty of 0.8% on transfer of real estate.

Donations tax

Gifts to a spouse, antecedent or descendant are tax- free but other donations attract a tax of 10%

A Solution

Fortunately there are territories, which are not on Portuguese black list and by purchasing a property in Portugal through a properly structured corporate vehicle incorporated in one of these locations, it is possible to avoid penalties on offshore companies. These arrangements may bring with them other benefits such as,

•The ability to sell property in future without buyer having to pay Real Estate Transfer tax, •Avoidance of Portuguese capital gains tax on re-sale, •Avoidance of donations tax or inheritance tax •Avoidance of deemed benefit provisions in U.K. law.

As taxes and manner in which they are applied change frequently specialist advice should always be taken before entering into any arrangements.

It is this third category of qualification, which is most important, as it means that companies, incorporated on Isle of Man but wholly owned by non-residents, will continue to enjoy tax- free status.

Companies will have to apply for distributing status but exact means by which they will do so has not as yet been decided. The Government has however indicated that companies which have successfully claimed such status may not be required to submit accounts with every tax return providing sufficient information is provided on return to support claim.

There are further rules which apply to companies which are wholly or partly owned by Isle of Man residents and these companies will be obliged to calculate tax payable on that part of profits applicable to local shareholders and to pay it over to Treasury.

The new system will accord with international obligation for Isle of Man not to discriminate between onshore and offshore companies and enable it to escape sanctions, which may be invoked against some of other offshore centres.