Even from across the Atlantic, an origin not so common
in the past years, Portugal is seen by Americans as a new dream destination,
and the Algarve stands as one of the favourite regions to live or invest.
Attractive tax benefits like the NHR Status or the tax
exemption from Crypto Currency gains are a bonus on top of the appealing sun,
security and chilled out way of living.
Quinta de Faro
Faro, the capital of Algarve, was not historically a
destination for tourists and expats, but in the past few years has gained a new
vibe. The booming of novelty restaurants and high-end hotels along with the
closeness to the beach and the airport is making Faro the new hot place in
the Algarve.
Quinta de Faro was created with the aim of filling a
gap in the real-estate offer of the city, diversifying it with a luxury
condominium of independent villas, with a stunning view of the Ria Formosa.
Awareness Consulting
Awareness Consulting has been tax advising clients for
more than 10 years. A “suit made to measure” is the goal with each and every
client, promoting a high tax efficiency in the strategies implemented.
With the above in mind, Quinta de Faro created a
partnership with Awareness Consulting to ensure that the buyers at Quinta de
Faro can access a high standard consultancy available to provide help to put in
place the right ownership structure of the assets, considering the singularity
of each client and their goals and future perspectives for the properties.
How to determine the right strategy for tax
optimization.
A conversation with the prospective buyers about their
goals and future expectations along with a small battery of questions allows to
determine the right strategy, tax wise.
Usually the questions are:
- What use is intended for the property? Permanente
living? Long-term rental? Short-term rental? An initial situation of rental and
then in the future the owner become permanent residents? Is the intention to
re-sell in a near future?
- The provenance of the funds? Is a bank mortgage
needed? Are the funds held privately? Are the funds “trapped” in a company? Are
the funds held by a fiduciary structure?
- Do the future heirs live in a country that taxes
heavily on inheritance?
Different solutions for different goals
In result of the different meetings with potential
buyers of the villas in Quinta de Faro, we became aware of the multitude of
solutions
advised. Different needs and goals require different structures.
Some examples of possible
structures are:
- Direct purchase by private individuals
The straightforward solution for those who want to
live in the property and have the funds held privately or require a mortgage.
With this solution there are no structure costs and
allows the avoidance of Capital Gains Tax when the property is sold by rolling
over the proceeds into a new property or pension fund.
The downside of this solution is potential liabilities
concerning inheritance taxes for abroad heirs.
- Purchase by a foreign LLC or entity.
The solution usually implemented by entrepreneurs and
businessman who have the funds available in a company and want to avoid paying
taxes on dividend distribution. A foreign company or entity can easily own a
property in Portugal.
With this solution the funds held by a company (trust fund, pension fund,
etc.) can be used without the need of paying taxes on dividend distribution.
-
Purchase by a Portuguese LLC.
The
solution usually advised to buyers who want to do short-term rentals or sell
the property in a near future.
In
this solution, the shareholder can be the private persons or a foreign company
that will allocate the funds to make the purchase.
A
“spin-off” solution that has been advised for those who want to do short-term
rentals has been also to buy the property
privately or with a foreign LLC, and then, when the moment comes to do the
short-term rental, setup a Portuguese company to manage the short-term rental
activity.
AWARENESS Accounting, Lda
Praça Alexandre Herculano 22 4 B, 8000-160 Faro
+351 964 474 731