Privately Owned Property vs a Corporate Structure

Buying and owning a property in one's own name or via a corporate entity is a question many are faced with when buying a property in our area. There are pros and cons for each which should be taken into consideration. The actual process of both is described in the Buying Process in the Guide and you should take advice from your legal and tax professionals.

Private Ownership
What are the benefits?

The most important benefit is that the purchase is very straightforward in Portugal. We do still recommend you use a local lawyer who can ensure that the property and its paperwork are in order. After that, one does not have to maintain any corporate structure which varies from EUR 1.5k to EUR 4.5k annually, and annual fiscal representation is marginally less expensive.

Company Owned Property
What are the benefits?

Confidentiality – Buyers and sellers benefit from a degree of anonymity. 

Succession planning – Where beneficial owners are husband and wife the beneficial ownership of the shares can be held jointly with rights of survivorship so that if either of them should die the beneficial ownership automatically passes to the surviving spouse. Upon the death of the surviving spouse the transfer of ownership to your heirs is made easier as the legal title to the property remains the same, thus avoiding the necessity to obtain recognition of the validity of a non-Portuguese will in Portugal.

The costs involved – When the property is sold via a sale of the shares in the company, there are advantages for both the buyer and the seller in that the transfer tax, notary and registration fees, and capital gains tax in Portugal are not applicable. However, there are costs in running these companies and the value of the property needs to justify these costs. If a property has a value of under EUR 500k this is perhaps not the best option. Your lawyer will be able to advise
you on this. Please see the table under Running Costs section for the acquisition, running and sale costs.

Privately Owned Property vs a Corporate Structure  Quick stat
2007 - Priv 11% vs Co 89%
2015 - Priv 38% vs Co 62%

Which Jurisdiction?

The two most widely used jurisdictions which have suitable holding company regimes for asset owning structures are USA (Delaware) and Malta, but there are various others such as New Zealand and even the UK. None of these are considered fiscally privileged by the Portuguese government; they have flexible and well-established legal systems, uncomplicated corporate compliance requirements and have re-domiciliation legislation in place. The USA has a sophisticated and flexible corporate legal regime and one state in particular, Delaware, is commonly used for property ownership. For clients looking for an EU jurisdiction Malta's tax regime is suitable for basic property holding structures. Although generally a civil law jurisdiction, Malta's company law is broadly very similar
to the UK and other common law jurisdictions. Both jurisdictions are relatively inexpensive but because the statutory compliance requirements are greater in Malta than Delaware, the administration of a Maltese company is slightly more expensive than Delaware.

Current Jurisdictions of companies

Delaware 84%    Malta 7%    UK 1.5%    NZ o.5%    Rep of Ireland 0.5%    Blacklisted Juristictions 6.5%