Algarve property guides – Offshore company
A fairly common practice when property within the Golden Triangle changes hands is the transfer of the Offshore company. This is common place around Quinta do Lago and Vale do Lobo. Where property values are generally in excess of €1,000,000.
What does it mean
Simply put the property is owned by the off shore company and rather than the property itself changing owners, the company shares are transferred instead. This of course eliminates the IMT and stamp duty levied on property transactions. Buying costs are limited to lawyers fees only.
Benefits of an offshore company
The clearest benefit of purchasing your Algarve property under the offshore company vehicle is of course the upfront tax savings. You will save just under 7% of the purchase price, which is fairly significant on properties of higher values.
The tax you pay should you sell the property will also be different to private ownership. Presently non residents pay a flat 28% on any profit following a property sale. This would not apply to off shore owned properties. The tax will be based on your wherever you are a tax resident and will be based on the sale of a company, rather than a property.
Offshore company ownership is also much more discreet and one of the main reasons it is employed on the higher priced properties. No property deed is exchange so ownership is not as easily accessible.
Negatives of an offshore company
There are costs associated with offshore ownership. Namely the managing agent for the company. This will generally be around €2,000 per year to manage the annual filling of accounts and upkeep of the company.
This year, 2017, a new tax has been introduced for additional payment of IMI (property tax) on all offshore properties. This will be on top of the current IMI payments and will be another 0.4% of the fiscal value.
There will generally be an inbuilt capital gains liability with off shore properties. Although this is only applicable if the house is sold outwith the company, it is worth noting.
Most high value properties are owned using an offshore corporate structure. This is perfectly legal and common place with luxury properties.
Many buyer’s can be put off by the thought of not actually owning the property themselves, or of being caught in some kind of “scheme”. But it really is quite simple and straight forward, if one was to purchase using an off shore company structure, the property (or company asset in this case) would own this property in it’s entirety and be the sole asset of the company. There would be no other trading or interest other than the property.
The buying process would then simply involve the transfer of the company shares, of course including the sole asset the property, to you as the new owner. The same due diligence would be carried out, financial records would be checked to ensure all associated taxes have been paid in respect to the company and all the same property checks will be made also.
Ultimately there is no reason not to purchasing offshore and there is always the option to transfer the property to private names at a later date if preferred.
For more information on property purchasing here in the Algarve you can donwload our free Portugal Property Guide here.
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