PORTUGAL Law and Practice Contributed by: Miguel Durham Agrellos, Paulo da Rocha Pichel, Ricardo Pereira Amaro and Francisco Duque Lima, Durham Agrellos
• tax neutrality regimes apply to restructuring opera - tions; • a special CIT regime is applicable to companies structured under the Madeira International Busi - ness Centre tax framework (5% CIT rate); and • exemptions under special tax regimes are applica - ble to funds or companies that carry out real estate and financial investments. Trusts and Transparent Entities Except for the Madeira trust regime, trusts are not foreseen under Portuguese civil law. Trusts are there - fore usually considered in multi-jurisdiction family and tax planning situations. The taxation of transparent entities raises technical difficulties (mismatches) and may, in some cases, generate disadvantageous tax treatment. Therefore, structures such as tax transparent entities are usually not recommended (although exceptions may apply). Other Relevant Tax-Related Matters Investment through family holding companies, unit- linked insurance policies, private investment funds or similar vehicles are often considered in Portuguese private wealth management. Some general tax principles may be singled out. • Deferral mechanisms – structures implemented should consider deferral mechanisms to avoid unnecessary realisation (investment funds, unit- linked insurance, holding companies). • Offset mechanisms – with the aim to maximise the offset mechanism, structures such as companies, funds or other collective investment undertakings may be considered. • Tax haven avoidance – Portugal regards a wide range of jurisdictions as black-listed, applying aggravated taxes to income obtained on or through these jurisdictions; therefore, re-domiciling or extin - guishing structures with connections to tax havens are matters of significant interest, which is highly relevant for immigrant families whose previous investment structures were planned in accordance with different jurisdictions (particularly UK non- doms and Latin American tax residents).
• Compliance and exchange of financial informa - tion (particularly, the OECD’s Common Reporting Standard (CRS) and the US Foreign Account Tax Compliance Act (FATCA rules)). • Multi-jurisdictional approach – multi-layer protec - tion of taxpayers considering international protec - tion instruments (eg, EU law, double tax treaties, bilateral investment treaties). 1.2 Exemptions Although donations and inheritances are generally subject to a 10% tax rate, significant exclusions or exemptions apply. • In accordance with the territorial scope applicable, only events taking place in Portugal are subject to tax (such exclusion is particularly relevant for trans - national succession tax planning purposes). • Donations and inheritances are, in any case, tax- exempted between: (a) spouses or members of unmarried couples liv - ing under de facto relationships; (b) descendants; and (c) ascendants. • Under certain circumstances special exemptions may apply (eg, life insurance premium payments; payments from investment funds). Even when exclusions or exemptions apply, a step-up in the assets’ value may occur. 1.3 Income Tax Planning In general, there are no step-up planning tools in the Portuguese jurisdiction. 1.4 Taxation of Real Estate Owned by Non- Residents There are no major differences between residents and non-residents with regard to the taxation of real estate, with the exception of non-resident entities domiciled in blacklisted jurisdictions. In such cases, the following aggravated tax rates apply: • real estate property transfer tax (due on the acqui - sition of the real estate property) – 10%; and • real estate municipal property tax (levied annually) – 7.5%.
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