Problems Onshore

It is not only offshore centres, which are feeling pressure. The E.U. is attacking Dutch International Financing Activities scheme and Belgian co-ordination centres scheme. In U.S. I.R.S. has forced Mastercard to supply records of transactions of U.S. residents with accounts in Antigua, Barbuda, Bahamas and Cayman Islands. The government has entered into exchange of information agreements with these territories and is negotiating agreements with Panama and British Virgin Islands.

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.