PORTUGAL Law and Practice Contributed by: João Gonçalo Galvão, Carolina Cardoso Alves, Miguel Paquete and Mafalda Oliveira Cordeiro, CS’Associados
• Real estate investment funds/companies Profits are exempt from CIT including real estate income, capital gains, interest and dividends. Foreign inves - tors may benefit from a special 10% withholding tax rate on income paid by these entities. On the other hand, these vehicles are subject to heavy regulation. • SIGIs See 5.3 REITs . 5.3 REITs Portuguese REITs, so-called SIGIs, focus on acquiring real estate rights for rental or other economic uses, shares in companies with similar purposes and invest - ing in real estate investment funds with similar income distribution policies or funds or companies for resi - dential lease. SIGIs are required to take the S.A. form, with a specific supervisory structure (audit committee and external auditor). SIGIs are available to foreign investors and can be set up with or without public subscription. Within one year from set-up, their share capital must be traded in a regulated market or multilateral trading system operating in Portugal or within the EU/EEA. At least 20% of the share capital of SIGIs should, as of the end of the third year of trading, be dispersed between investors holding, individually, no more than 2% of voting rights, this increasing to 25% at the end of the fifth year. SIGIs must meet several statutory requirements, including maintaining a minimum debt limit of 60% of total assets and holding real estate-related rights for at least three years. SIGIs’ profits are exempt from CIT, including real estate income, capital gains, interest and dividends. Foreign investors may benefit from a special 10% withholding tax on income paid by SIGIs. 5.4 Minimum Capital Requirement Minimum capital requirements are as follows. • Lda. Minimum share capital of EUR1. • S.A. Minimum share capital of EUR50,000. • Real estate investment funds/companies For funds there is no minimum capital requirement. Real estate investment companies must have a
minimum share capital of EUR50,000 if they are managed by an external manager, or EUR300,000 if they are self-managed. • SIGIs Minimum share capital of EUR5 million, which must be fully subscribed and paid up at the date of their incorporation. 5.5 Applicable Governance Requirements The governance requirements applicable to each type of entity used to invest in real estate are as follows. • Lda. A sole director or board. A chartered account - ant is needed if the company for two consecutive years exceeds two of the following: EUR1.5 million in assets, EUR30 million in turnover or 50 employ - ees. • S.A. Sole director or board (if share capital exceeds EUR200,000) and chartered accountant. Exceed - ing two of the following limits for two consecutive years – EUR20 million in assets, EUR40 million in turnover or 250 employees – triggers the require - ment for a three-member supervisory board. • Real estate investment funds/companies Typically externally managed, under the oversight of the Portuguese Securities Commission (CMVM), with prudential and reporting requirements. If in compa - ny form, the S.A. governance structure must also be adopted. A depositary is required, which acts as gatekeeper for investors, unless: (i) the invest - ment vehicle is addressed solely to professional investors; (ii) the management company does not exceed a EUR500 million AUM threshold; and (iii) the investment period is not shorter than five years (or EUR100 million, if the investment vehicle owns any asset acquired with leverage). • SIGIs Require a board of directors, auditing board and a chartered accountant. US investors must disclose their ownership interests in foreign companies to the Financial Crimes Enforce - ment Network (FinCEN). Also, in Portugal, US inves - tors need to disclose their ownership interests in case they are beneficial owners (holding 25% or more of the entity).
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