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Portuguese property tax reforms in 2004 - SISA 07.01.2004
Despite optimism amongst well informed sources that there would be some form of deferral of the worst effects of the new law affecting tax on property in Portugal in general and
offshore held property in particular, publication of the 2004 Budget on 31.12.2004 brought no relief whatsoever.
It seems almost unbelievable that the Finance Ministry will now go ahead and impose a 5% Municipal Tax rate on offshore held property in respect of the year 2003 payable in 2004, based on the upwardly revised
tax department values. For even modest properties this can mean a Municipal Tax bill of many thousands of Euros.
The Finance Departments had been unable to get their act together in 2003 sufficiently to collect the penalising 2% tax imposed on offshore held property in the 2003 Budget and as their workload has increased
dramatically during the latter half of 2003 in attempting to keep pace with the changes introduced by this new law it is unclear as to whether they will be in a position to demand 5% in April this year. However
that is how the law reads so at the present time that is the worst case scenario to be dealt with.
One thing clear however is that for those offshore property owners who did not, or were unable to make, a move before the year end it seems that there is nothing that can be done except pay whatever tax is
levied this year and consider their position prior to 31.12.2004. For many, re-domiciliation of their company to a safe jurisdiction will be the only alternative due to the likelihood of creating a liability to
capital gains tax on reversion of the property to individual ownership.
Perhaps this is a time to stop panicking, hold tight to see if any delaying proposals of the new tax are introduced and take a considered view as to what to do next? Talk in the South both from nationals and
foreigners alike is of a general downturn in the economy particularly in the construction sector and of course anger on the part of those “caught out” that having been condoned for years by the authorities they
only had at most 6 months to review and restructure their offshore held investments.
Perhaps pressure will continue to be applied to the authorities to allow some manner of deferral of the new tax before it falls due in April this year? |
