The Portuguese Government has announced Tax Information Exchange Agreements (TIEA) with 15 foreign tax authorities that will see them removed from its tax Black List, Pricewaterhouse Coopers (PWC) has reported. The decision will deliver tax savings for property owning offshore companies located within these jurisdictions: Those on Portugal’s Black List face higher tax rates than those that have already signed TIEAs and therefore are listed on Portugal’s White List. Portugal’s new agreements have been signed with: - Andorra, Antigua and Barbuda, Belize, Bermuda, British Virgin Islands, Dominica, States of Guernsey, Gibraltar, Cayman Islands, Isle of Man, Jersey, Liberia, Santa Lucia, St. Kitts and Nevis, Turks and Caicos Islands. TIEAs are bilateral agreements under which territories agree to the sharing of information about citizens’ income in order to promote international co-operation in tax matters; and to mitigate tax evasion. The agreements follow an international standard set by the Organisation for Economic Co-operation and Development (OECD) for fiscal transparency and exchange of information. The agreements encompass broad tax areas, including the transfer of funds, ownership of companies, foundations, trusts, investment funds and other entities. According to PWC, these new Tax Information Exchange Agreements signed by Portugal will enter into force within 30 days after the Parties have notified each other that the respective internal requirements have been fulfilled. Why is some property owned offshore? Nowadays, Portuguese properties, particularly in the central Algarve, tend to be owned and traded using a corporate structure. Most high end properties are held in this way. Many property owners, who hold a property through a corporate structure, use these structures for the ease, flexibility and speed that they lend to personal assets management, as well as to avoid some of the costs and benefit from certain tax deductions. The Benefits of Corporate Property Ownership: - Transfer of property is a very simple and tax efficient procedure; a transfer of shares conducted in English via a Share Purchase Agreement (ie facilitates asset management). - Both IMT – Property Purchase Tax, which can be up to 6% of the purchase price, as well as notary and land registry fees are avoided. - Company owned properties can be mortgaged quite simply in English speaking jurisdictions. - Transfer on death ensures that heirs can deal with their inheritance in English, and according to British/Irish law. They do not have to deal with the Portuguese legal system where there is forced heirship: spouse and children inherit automatically and individuals cannot choose to whom they wish to leave their estate. - Capital Gains Tax is not payable in Portugal on the profit when the property is sold via a corporate structure. The capital gain on the sale of the shares is subject to the jurisdiction of the seller. - Buyers/owners enjoy anonymity Please note; new items contained within this Quinta Properties blog are for information purposes only and do not replace professional advice. For more information of this story please visit www.pwc.com/pt and http://www.pwc.com/pt/en/pwcinforfisco/flash/outrosimpostos/imagens/PwC_FlashFiscal_ATI_31-03-2011.pdf.