Caiado Guerreiro & Associados: Investing, Living and Real Estate in Portugal11/10/2012
Take a Quick Look at the Numerous Advantages
During recent years, Portugal has become a privileged location to live, to invest and to start a business. In order to encourage and stimulate foreign investment in the national territory and to increase the international tax competitiveness of the country, the Portuguese State approved a new tax regime targeting to private individuals who intend to become Resident in Portugal for tax purposes and locally exercise a high value added activity. Subsequently, and in order to better understand these encouragement and stimulation measures, throughout this document Caiado Guerreiro responds to the most frequently asked questions on this topic. Consequently, here you may find some clarifications regarding not only foreign direct investment in Portugal, but also the establishment of non habitual tax residence, as well the questions arising the real state acquisitions in Portugal.
In what particularly consists this NonHabitual Tax Residency Regime?
It is a very competitive non-habitual Tax Residency regime, allowing private individuals who fulfil the legal requirements, to benefit from an extremely reduced tax rate only applicable over income obtained in Investing, Living and Acquiring Real Estate in Portugal: Take a Quick Look at the Numerous Advantages 2 Portugal, arising from high value added activities. This rate is only 20% and excludes the application of general rates of individuals’ income taxation (they are progressive, being the maximum rate of 46.5%). It should also be noted that, in principle, no foreign sourced income would be taxed in Portugal. Indeed, there is no taxation in Portugal on dividends, interests, capital gains or other income earned abroad.
What are the most important advantages of this tax regime, particularly concerning international taxation?
Besides this very competitive Income Tax Rate, individuals considered as nonhabitual tax residents in Portugal are assimilated to tax residents in Portugal, for the effects of the application of the several International Tax Agreements entered into by the Portuguese State to Avoid the Double Taxation. On the other hand, they benefit, as any other Portuguese Tax resident, from the European Treaties and directives, namely the European Directives on dividends, interests and royalties, among others. Therefore, it is an extremely advantageous tax regime, and it will be even better when, as it is expected on the next budget law to 2013, the Portuguese Tax Authorities extend its application to the retired individuals, with specific advantages, especially with regard to same reductions at the Municipal Tax on the Acquisition of Real Estate properties.
How long is it possible to benefit from this scheme?
Individuals considered as non-habitual residents will benefit from this attractive regime during a period of 10 consecutive renewable years.
What are the legal requirements to become a Non-Habitual Resident?
To benefit from this regime, it is necessary that the private individual:
1. Fulfils the legal criteria concerning the tax residency in the Portuguese territory.
2. Presents an application asking for their inscription into the Portuguese Tax Authorities’ system as a NonHabitual Resident in the Portuguese territory.
3. Exercises, in the Portuguese Territory, a high value added activity, for example, a liberal profession, covering namely architects, engineers, artists, actors, auditors, doctors, dentists, college professors, psychologists, as well as activities in the area of Computer Science and data–processing services, information services activities, research and scientific activities; This list of high added value activities includes, namely, business executives, investors, directors and managers of companies, among many other activities.
4. Has not been taxed as a tax resident in Portugal in the five preceding years.
How the Portuguese Tax Administration applies this NonHabitual Residents Tax Regime in a concrete basis?
Because of the last Portuguese Tax Authorities’ “soft law”, all the necessary proceedings for the application of the Non-Habitual Residency Tax Regime were significantly simplified. Therefore, to become Non-Habitual Residents, the individuals shall only submit, when their registration into the Portuguese Tax Authorities system, a declaration signed by their own certifying that they were not tax residents in Portugal, in the last five years. Finally, whenever an experienced tax lawyer, member of the Portuguese Bar Association, conducts the process regarding the inscription of an individual as a Non-Habitual Tax Resident, all the procedure becomes more simple, confidential, debureaucratized and secure.
How will the withholding tax be applied?
Resident entities that pay or provides, to a Non-Habitual Resident, incomes sourced in Portugal shall be entitled to apply a withhold tax at a single rate of 20%, and consequently deliver it to the Tax Authorities.
How to invest in Portugal?
In the context of the Portuguese Economy modernization Program, the Portuguese Public Administration created, ten years ago, the "Empresa na Hora" program (“Instant Company Service”). This program allows the immediate incorporation of a Portuguese Company, being possible the immediate incorporation and registration of all kinds of commercial companies on the Internet or in a single administrative counter (since a Portuguese lawyer carrying a digital certificate makes the request) in less than an hour and in any office of the 4 Portuguese Commercial Register. In fact, to incorporate a company, the beneficial owners can choose any Commercial Register Counter, besides the concrete location of the legal head office of the company to be incorporated or the shareholders’ address.
How to incorporate a company?
1st Step: To apply for a corporate name certificate at the National Registry for Collective Entities. This apply can be done by internet when a Portuguese lawyer, carrying a digital certificate, makes the request. Alternatively, the Stockholders could select a corporate name “off-the-shelf”, i.e. a name from a list of commercial names previously approved, accordingly with the corporate object of the company, as well as the activities that the corporation intends to perform and the type of corporation.
2nd Step: To define the articles of incorporation and the company by-laws that could be also defined on a basis “off-the-shelf”, i.e. the Stockholders could also choose one of the previously approved models of articles of incorporation and by-laws, at the Commercial Register Counter.
3rd Step: Subsequent to the final verification of all the documentation and legal requirements for the incorporation of a company, the Stockholders shall define not only the head Offices of the company, but also the value of the Share Capital, as well as nominate the board of directors and the official accountant of the company. According to the expected annual turn over of the company and the kind of commercial nature of the company, the Stockholders shall nominate a statutory auditor for the company.
4th Step: Once the incorporation has been carried out, the commercial register provides the stockholders with the Company’s Identity Card, including the Commercial Register number and the Tax Payer number of the company.
5th Step: The company’s Share capital shall be deposited on the company’s bank account in a maximum delay of 5 days, since the incorporation.
6th Step: The official accountant of the company, being responsible for the company accounts, shall declare the start date of the company’s activity by internet, at the least in the 15 consecutive days following the incorporation.
How much does it cost to incorporate a Portuguese company?
Administrative fees concerning the incorporation procedures are about € 380.00. Nevertheless, these administrative fees could be reduced to just € 180.00, when the stockholders establish the articles of association and the company by-laws on an “off-theshelf” basis. These fees may be reduced by approximately € 60.00, when the principal activity of the Company is classified as a technological or I & D activity, as well as another related activity.
Which documentation an individual stockholder needs to incorporate a company?
Shareholders or Quota Holders shall provide the Commercial Registry with the certified copies of the follow documents: Identity cards or passports, as well as their Taxpayer Numbers and addresses. In what concerns the directors or mangers of the company, the same documents shall be provided as well. Whenever the company’s Stockholders are foreigners, the aforementioned documentation shall also be provided with the certification of The Hague Convention Apostille or, alternatively, be legalized in a Portuguese consulate. Foreigner stockholders shall also demand their inscription at the Portuguese Tax Authorities in order to obtain their Portuguese Taxpayer number.
Which documentation a corporate stockholder needs to incorporate a company?
Corporate Shareholders or Quota Holders shall provide the Commercial Registry with the notarized and certified copies of the following documents: the Commercial Registry Certificate of the company; the taxpayer number of the company; the updated by-laws and articles of association of the company certified by the president of the board of directors; the shareholders’ meeting resolution (or the board of directors’ meeting resolution, accordingly with the by-law prescriptions) approving the incorporation of the company; the Identity cards, passports, Taxpayer Numbers and addresses, not only of the directors or mangers of the corporate Shareholder, but also of the directors or mangers nominated to the incorporated company; Whenever the Shareholders are foreign companies, the aforementioned documentation shall also be provided with the certification of The Hague Convention Apostille or, alternatively, be legalized in a Portuguese consulate. Foreign corporate stockholders shall also demand their inscription at the Portuguese Tax Authorities in order to obtain their Portuguese Taxpayer number, as well as the foreign directors or managers that could be nominated.
Why to incorporate a company with CAIADO GUERREIRO?
Because of our know-how, in a continuous strengthening, we have the skills to assist you in all the incorporation proceedings with swiftness, competence, efficiency and confidentiality. To Acquire Real State Properties in Portugal The public service “Casa Pronta” (home at the moment) allows to undertake, in just one administrative counter or through the internet, and in an immediate basis all the proceedings necessary to conclude and register a real state property transfer, since the procedure is conducted by a Portuguese lawyer carrying a digital certificate. This procedure should be applied, namely, on the selling, the donation or the exchange of a real state property, existing or not a mortgage or any other charge.
Which is the most significant advantage of using this service?
Assuming that all the proceedings are undertaken in just one Administrative Counter or in the internet (since a Portuguese lawyer carrying a digital certificate conducts the procedure), the parties will avoid unnecessary proceedings and meetings, being the contract registered in just one single act. Moreover, the parties can make in advance a date proposal to practice all the proceedings related to the business conclusion.
Which documentation is necessary to buy or sell a real state Property in Portugal?
The License of Use (a document issued by the Local Town Hall for purposes of approving the use of the same, for example, habitation license); The Property Registration Certificate (Document of the Public Land Registry that certifies the ownership); The Real Estate Tax Document (issued by the Tax 7 Authorities, this document certifies that the property is registered for tax purposes); and finally the Personal data of both parties: Identity cards or passports, as well as their Taxpayer Numbers and addresses. The foreign parties shall provide a true certified and notarized copy of your personal documents that shall also be provided with the certification of The Hague Convention Apostille or, alternatively, be legalized in a Portuguese consulate. Foreign Parties shall also demand their inscription at the Portuguese Tax Authorities in order to obtain their Portuguese Taxpayer number, but if they are non-resident in any European Union Member State, they will have to establish a tax representation in order to obtain their Portuguese taxpayer Number.