PORTUGAL Trends and Developments Contributed by: João Riscado Rapoula and Hugo Leonardo, VdA
Real estate investment companies and funds (SICAFIs and funds) Real estate investment in Portugal remains resilient and continues to attract both domestic and interna - tional interest, supported by established and sophisti - cated investment structures. The market offers proven vehicles such as real estate investment funds and real estate investment companies (SICAFIs), each operat - ing under a clear and stable regulatory framework. Also, collective investment companies and funds – which may invest in different types of assets – enjoy the same tax regime and are becoming a clear trend. These entities benefit from a preferential tax regime designed to support sustainable growth and long-term value creation. While subject to CIT, real estate funds and SICAFIs are exempt from taxation on investment income, capital gains and rental income generated at the entity level, ensuring operational efficiency. A modest Stamp Duty of 0.0125% is applied quar - terly on net asset value. For investors, distributions, redemptions or sales of participation units are taxed at a flat rate of 10%, with income classified as “income from immovable property” in accordance with Por - tuguese law – providing transparency and alignment with international best practices. Portugal’s regulatory approach is fully compatible with international tax treaties, allowing for rational cross- border investment and minimising double taxation for investors from jurisdictions employing the exemption method. Another trusted vehicle gaining traction in the mar - ket is the Venture Capital Fund, particularly following recent clarifications from Portuguese tax authorities. When these funds acquire and lease real estate assets via controlled SPVs, the structure ensures smooth cash flows and efficient distributions. Venture Capital Funds are fully exempt from CIT and Stamp Duty on net asset value, and profit distributions, redemptions and disposals of units also benefit from a simplified regime. Also, when the Fund is not classified as a real estate investment fund, capital gains earned by non-resident unitholders – whether individuals or companies – from
moderate rents for a period of up to 25 years. To be eligible, the project must meet some requirements (at least 70% of the total area must be allocated to residential rental and rents cannot exceed the legally defined limits for moderate rent). In addition, other benefits were approved, namely a reduced VAT rate for construction and rehabilitation works and partial reimbursement of VAT on architec - tural and project services. There is also exemption from property tax on the acquisition of land or proper - ties for rental and from Municipal Property Tax as well as Stamp Duty exemption on property transfers and a 50% rate reduction on related financial operations. Alternative Investment Funds Alternative Investment Funds (OIAs) are experiencing robust growth in Portugal, mirroring wider interna - tional trends. The modern and flexible legal frame - work of the Portuguese regime offers a variety of OIA structures, catering to diverse investor profiles and shifting market demands. This dynamism positions Portugal as a leading hub for innovative, high-impact investment solutions. Taking into account the above, the Portuguese gov - ernment has also decided to further reduce the tax burden for these investment products when their focus is directed towards the housing sector. There - fore, OIAs dedicated to the affordable rental sector benefit from a highly advantageous tax regime. Income distributed to participants or shareholders – whether through units or shareholdings – enjoys a reduced tax rate of just 5%, in proportion to the share generated from accessible rental contracts. This targeted measure is set to strengthen investment in Portugal’s affordable housing market, making it even more enticing for investors seeking new opportunities. The regime has been enhanced to improve tax efficien - cy by increasing the exclusion percentage applicable to other income – whether distributed, redeemed or liquidated – received by participants or shareholders. The exclusion is calculated based on the proportion of eligible assets, rewarding those who invest in priority sectors.
498 CHAMBERS.COM
Powered by FlippingBook