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Offshore Property

Offshore Property


Offshore properties

Owning a property within an offshore company has, historically, been a popular method of owning a property in the Algarve. There are still many positive reasons to own an offshore company, but purchasers must research the pros and cons of offshore company ownership.

Black or White?

It is extremely important to understand the difference between companies domiciled in a white list jurisdiction (e.g. Malta, Delaware) and those in a black list jurisdiction (e.g. Cayman Islands).  In a nutshell, white list offshores do not suffer from penal taxes, whereas black list offshores do.

A simple example of this is IMI, the yearly tax paid to the municipality. A white list offshore property in Loulé will currently pay 0.4% of it´s rateable value in IMI. The same property in a black list jurisdiction will pay 15% of it´s rateable value in IMI! As you can see, it is a penal tax, designed to discourage ownership within black listed jurisdictions.

Key considerations

Some of the key points relating to offshore properties are:

-There is no capital gains or IMT (transfer tax) on the "sale" of a property
-White listed offshore domiciles are ok, black listed are generally not as they pay punitive taxes
-If you are intending the house to be your main residence, you will not have the right to roll over any capital gains tax (roll over relief)
-Mortgages are difficult to obtain

Each offshore should be assessed on its individual basis, and the primary concern is the level of notional residual capital gains, i.e the gain that would be paid if the property was sold out of the company.

Generally many properties over €1 million are held in offshore companies, as the savings in IMT and capital gains each time they are "sold" are substantial.

Just like Marmite

As is the case with Marmite, offshore property ownership is not for everyone, but some people love it!

There is a mixture of information (and mis-information)  available regarding offshore property in Portugal. In some cases, owning an offshore property can give large fiscal benefits, but it is not for everyone. You should always seek expert legal advice before purchasing an offshore property, and ensure that the offshore company is the correct “wrapper” for your personal circumstances.