PORTUGAL Law and Practice Contributed by: Miguel Durham Agrellos, Paulo da Rocha Pichel, Ricardo Pereira Amaro and Francisco Duque Lima, Durham Agrellos
3. Trusts, Foundations and Similar Entities 3.1 Types of Trusts, Foundations or Similar Entities In general, domestic trusts and foundations are not used in Portugal for planning purposes. However, under international structures, such entities are used in certain cases. 3.2 Recognition of Trusts See 1.1 Tax Regimes . 3.3 Tax Considerations: Fiduciary or Beneficiary Designation Payments made by fiduciary entities to beneficiar - ies who are tax-resident in Portugal are taxed at a 28% rate (or 35% if paid by an entity located in a tax haven). Payments occurring as a result of the termi - nation of fiduciary entities may be taxed at a rate of 28% if payments are made to the settlor. Otherwise, if the beneficiary is not the settlor, payments should be tax exempt. CFC rules may apply if the fiduciary entity is located in a tax haven. 3.4 Exercising Control Over Irrevocable Planning Vehicles See 3.1 Types of Trusts, Foundations or Similar Enti- ties . 4. Family Business Planning 4.1 Asset Protection Asset protection planning in Portugal usually consid - ers: • implementing family business structures with trans - national elements in order to benefit from multi- layer protections (eg, national law, EU law, bilateral investment treaties, etc); • unit-linked insurance policies, especially in jurisdic - tions such as Luxembourg and Ireland; and • choosing the separation-of-property marital regime to avoid communication of debts.
4.2 Succession Planning Generally, business succession planning comprises the following elements. • Incorporation of family holding companies in accordance with the different branches of the fam - ily. • Elaboration of wills of the different family members. • Elaboration of a family business agreement. • Setting up of a family council and family assembly. • Corporate law instruments: (a) establishing rules to nominate the family mem - bers who may integrate the family business and the applicable requirements (age, academ - ic scores, etc); (b) establishing rules to determine the company’s value; (c) establishing (automatic) redemption mecha - nisms if some heirs become shareholders of the company; (d) shareholder agreements establishing limita - tions on the free transfer of assets, as well as establishing pre-emption rights; (e) establishing drag-along and tag-along clauses; and (f) establishing penalty clauses. • Adjustments to the memorandum of association: (a) considering the need for aggravated majorities for certain strategic options; (b) setting out remuneration principles; and (c) restricting the areas of free decision of board members. • Use of life insurance (unit-linked) policies and other similar instruments. • Designation of heirs by third parties (within the admissible legal limits) in order to cover different wills or circumstances (dynamic clauses). Optimal tax results derive from the considered use of the tax exclusion or exemption regimes mentioned in 1.1 Tax Regimes . 4.3 Transfer of Partial Interest When a partial interest in an entity is transferred, dur - ing lifetime or at death, the fair market value of the interest for transfer tax purposes is not adjusted to reflect a discount for lack of marketability and control.
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