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With 2005 half over we can look back on the
tax changes that took place in 2002 and 2003 and see how they have
affected property owners in
Portugal.
The proposed new valuation system is well
under way with valuations under the new scheme being received by owners of
newly completed properties and those that have changed hands through
Notarial Deed. The document the tax department sends out shows the formula
used to arrive at the valuation and we are still seeing fluctuations in
those values when compared with the market value of the property
concerned. The values we are seeing are somewhere in the region of the
promised 60% to 80% of market value.
Speaking of market values, whilst there is
still some movement in the property market particularly from
UK and Irish buyers
we do see prices have steadied and even dropping in some cases where the
owners really do wish to sell. There is also little doubt that the tax
changes have de-stabilised the market and made investors nervous of
Portugal
generally.
Many owners of offshore held properties have
still not made a move to alter their situation to avoid the penalty 5% IMI
tax and some of these could get caught out if a valuation arrived too late
in the calendar year to do anything about it. We recommend all offshore
property owners to review their situation before October this year in case
they need to make a move before the year end. Remember it is he who owns
the property on 31 December that pays the tax for that year. I have seen
cases in the past where a transfer in December has taken place and as no
agreement was made in respect of that years IMI and no retention of funds
made to cover it, the new owner has had to come up with the tax.
The 2005 amended IMT table is as attached;
From Euro Until Euro %
applicable Deduct Euro
Zero 81,600 0 %
0
81,600 112,200 2 %
1.632
112,200 153.000 5 %
4.998
153.000 255.000 7 %
8,058
255.000 510.000,- 8 %
10.608
Above 510.000 flat rate of 6 %
Rustic
Land
– flat rate of 5%
Other urban land or other transmissions –
flat rate of 6.5%
Much talk has taken place concerning
“redomiciling” offshore companies to Portugal and whilst this is an option
there are hidden costs involved in running a Portuguese company that only
make this worthwhile I believe in a few cases. For many the simplest
option now is to move to a “safe” jurisdiction and wait for the valuation
to arrive when an accurate estimate can be provided of the cost and
viability of coming “onshore”.
On a final note the tax department have
decreed that the law concerning blacklisted offshore jurisdictions applies
to individuals as well as companies resident in those jurisdictions. Thus
you have a situation where a Portuguese person resident in say, Jersey
(where there is a huge Portuguese ex pat population) would pay 15% IMT and
5% annual IMI if he chose to purchase a property back in his native land!
What with that and the increase in the VAT
rate to 21% as from 1st July - so much for encouraging inward
investment!
Nigel Anteney-Hoare
FCIS
nhoare@sovereigngroup.com
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