Real Estate Tax – Aggravated rate (7,5% per year)
The tax authorities have recently made public their understanding of the Real Estate Tax Law concerning the aggravated tax rate for properties held by private persons domiciled located in blacklisted jurisdictions (7,5% per year, applicable over the patrimonial tax value).
In this set of documents recently made available, the tax authorities argue that, among other cases, the aggravated rate is applicable when a private person is domiciled in a low tax jurisdiction.
In our view, this understanding is not in compliance with the law.
Notwithstanding, our advice is that companies that have real estate located in Portugal reexamine their holding structures.
The Portuguese Real Estate Tax Code foresees an aggravated rate of 7,5% (per year, applicable over the patrimonial tax value), applicable when two cumulative requirements are verified:
- An entity holds real estate in Portugal;
- Such entity is dominated or controlled, directly or indirectly, by an entity established in a “blacklisted” territory.
For this purpose, a domain relation is considered to exist when one entity (the dominant) can exercise, directly or through companies or persons, a dominant influence over the other entity (the dependent entity). A company is presumed to be dependent on another if the latter, directly or indirectly:
- Holds the majority of the share capital of the dependent company;
- Holds more than 50% of the voting rights; or
- Has the possibility of appointing more than 50% of the administration/management board members or of the supervisory board.
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José Freitas
Partner