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Using Companies for Property Ownership

In Portugal, the use of offshore companies for the ownership of property is very popular amongst expatriate owners. This page gives you a brief introduction:

This is where a company is used to purchase a property. Generally speaking the company would be based in a tax-favourable jurisdiction such as Delaware USA, or Malta.

The basic principle is fairly straightforward. The property in Portugal is owned by the company. The person(s) owning the shares of the company therefore indirectly owns the property. They can easily transfer the ownership of the property by transferring the shares.

The most popular jurisdictions have low costs and low taxes. These include: Delaware and Oklahoma in the USA, Malta and Cyprus. However, there are also advantages to using a Portuguese Nominee company, and, for non-residents, the UK and Ireland are sometimes chosen.

  • The beneficial owner of the company may be able to avoid (or at least defer) taxes on income and capital gains and ultimately avoid inheritence taxes that would otherwise be payable if the asset was owned directly.
  • Anonymity of ownership
  • To legally protect or "ring-fence" assets from possible claims by others.
  • To simplify the transfer of ownership and save stamp duty which otherwise becomes payable when the property is sold.
The exact rules for companies can differ depending on the jurisdiction where the company is incorporated. However, companies in general are owned by their shareholders and controlled by their directors. You can of course fulfill these positions yourself and become a director/shareholder but this may not be recommended by your advisors. For a fee, you can retain professional company managers to act on your behalf in those roles as "nominee" directors and shareholders. You then do not have an official involvement in the company. You remain however the true "beneficial" owner. The company managers look after the company for you and where necessary, pay any taxes, prepare accounts and annual returns etc on your behalf. When the time comes to sell, you simply advise them of the new owner and they will arrange to transfer your beneficial ownership accordingly.
The best way is to ensure that you choose a well known and reputatable organisation with a long history of Offshore Company Management.
Company management fees vary between jurisdictions. The set up costs can be approx. £500 and thereafter you will have ongoing fees payable on an annual basis usually in the range of £400 p.a. to £1,000 p.a. Disbursements for submission of the annual return, taxes, powers of attorney fees, and any other expenses can increase this. Most jurisdictions now have compulsory accounting for all companies. At least a simple balance sheet must be submitted and the associated costs of providing this service are approx. £150 p.a.

To give a basic idea of the total costs of operating a Delaware company owning a property without any complications the ongoing fees should be around £750 p.a. but this would increase with additional accounting work due to rentals etc.

A major benefit for most property owners is when they come to sell their property. By selling the company shares instead of the property itself gives the purchaser a major saving in stamp duty, SISA tax. This tax can be upto 10% in Portugal. The stamp duty payable therefore when purchasing a property valued at say £500,000 can be as much as £50,000. By transferring the company this huge bill can be legally avoided.

In addition, as already mentioned, there can be substantial benefits from the use of companies in avoiding capital gains and inheritance taxes. These of course are more difficult to quantify and advisors must take into account such things as the age and health of the beneficial owner and the intended time of ownership of the asset.

To set against the above benefits, there are additional annual running costs which must be taken into account (see above).

In conclusion, it is difficult to generalise whether corporate ownership will save money over the entire period of ownership as each case is different. However, there is little doubt that it is the higher valued properties (say over £250,000) which have the greatest potential for savings - especially if they are resold within say 5 years.