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 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