PORTUGAL Law and Practice Contributed by: João Gonçalo Galvão, Carolina Cardoso Alves, Miguel Paquete and Mafalda Oliveira Cordeiro, CS’Associados
An expropriation procedure may be carried out by amicable agreement or in courts, and in either case requires payment of fair compensation. Once the expropriation decision is taken, the process steps are: • firstly, attempt to acquire the property by means of private law; and • secondly, request the competent body to declare the expropriation to be of public utility (with possi - ble public takeover of the property). Private property can also be compulsorily transferred to public entities, on the basis of urgent motives and on public or national interest grounds, with its owner being entitled to suitable compensation. 2.10 Taxes Applicable to a Transaction Asset Deals Real estate transactions in Portugal may be subject to: • real estate transfer tax (RETT) – ranges from 1% to 10%, based on the value, location and use of the property, applied to the higher of the declared or tax value; • stamp duty – fixed at 0.8%, applied similarly; and • VAT – 23% in specific cases, eg, new or renovated properties sold by VAT-registered entities. Buyers pay these taxes, along with notarial and reg - istration fees. Share Deals RETT applies if, cumulatively: • over 50% of company assets are real estate; • they are not used for agriculture/industry/commer - cial activities; and • the buyer gains 75% control or more (or the number of shareholders is reduced to two who are married or in a de facto union). RETT Exemptions or Rate Reductions There are RETT exemptions or rate reductions avail - able for:
• resale/restoration; • historic properties; and • primary residences.
2.11 Legal Restrictions on Foreign Investors Without prejudice to the particular constraints that apply to sanctioned jurisdictions, foreign investment in real estate is by default granted a level of protection similar to domestic investment, with no specific legal or regulatory measures applying. Nevertheless, transactions targeting real estate assets are subject to a number of information requirements whose purpose is to bring additional clarity and trans - parency, particularly as concerns anti-money launder - ing and anti-terrorism funding measures, as well as in regard to obligations concerning identification of the ultimate beneficiaries holding direct or indirect control over legal entities. 3. Real Estate Finance 3.1 Financing Acquisitions of Commercial Real Estate Acquisitions of commercial real estate are often financed through structured syndicated loans secured by real estate assets, normally granted to an SPV with or without recourse to the sponsor. Equity contribu - tions may be required in order to fulfil certain loan- to-value ratio requirements. More complex transac - tions may involve senior and junior debt. Alternative sources of financing, such as real estate investment funds and private equity, may be also considered. 3.2 Typical Security Created by Commercial Investors Security structures normally consist of mortgages over real estate assets complemented by a pledge over shares representative of the share capital of the borrower (if an SPV), a pledge over dedicated bank accounts and a pledge/assignment by way of security over receivables relating to the operation or devel - opment of the asset, including performance bonds from contractors (of which the lenders may be co- beneficiaries).
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