Offshore

[pato]

When I purchased my villa 25 odd years ago I was advised to buy it through an offshore company and I did just that, I formed a company in Gibraltar. What is the situation today, is it advantageous to own it through an offshore? can I pack it in, obviously there will be a cost but I've no idea how much. I'd be grateful for information on the subject.

[maccasa]

my last information for BUYING using offshore was its a no-no as far as tax goes due to the changes in the laws 3-4 yrs ago. However for an existing purchase I reckon you should speak to a lawyer.

[EMM]

Sounds like a bit of a minefield, is gibralter still one of the recognised offshore holdings ??.
When we bought we avoided offshore like the plague on the recommendation of agents and lawyers.

If you are considering selling as already said get a good lawyer first and establsih the true status.

[e-richard]

Pato, this is definitely not a topic upon which I would expect the Forum to advise on.

No question. Pay a professional for professional advice that is specific to yourself and your specific circumstances.

[shanagarry]

Pato,

It is a minefield and all the suggestions to take good advice is sensible.

Since the heady days of 2003 when the rules changed - they have changed several times since and it is not as onerous as it was. However, Gibraltar is 'black listed' as opposed to 'white listed' and comes with a different set of rules. Offshore has an appeal to many - so its not the ogre some would have you believe it is.

We are in Malta (white listed - for now) and are just about to sell the property to an individual who wants the offshore company. The 2003 change caused the Portuguese Government to rethink their strategy when they realised the numbers of properties that were in offshore companies and the influence of their beneficial owners - could create a serious political problem if they all 'upped sticks' and went. That was a distinct possibility especially in the Golden Triangle - so they made concessions and have continued to do so ever since.

If you do bring it onshore and especially if yours is 25 years old - probably still valued in escudos - it won't be cheap. Our property is of a similar vintage and the cost was estimated to be €160,000 to bring it onshore. Get one of the companies that advertise on here and in The Resident to do the sums for you - it will probably cost about €500 - but its a useful exercise.

[pato]

If you do bring it onshore and especially if yours is 25 years old - probably still valued in escudos - it won't be cheap. Our property is of a similar vintage and the cost was estimated to be €160,000 to bring it onshore. Get one of the companies that advertise on here and in The Resident to do the sums for you - it will probably cost about €500 - but its a useful exercise.

160,000 euros to bring it onshore? who get's that, I didn't pay that for the property in the first place, surely you're mistaken there. I thought initially the Idea was to save the tax on the property and that was it, pay the tax due on the purchase and you can revert to onshore, am I wrong?

Thanks for the reply by the way

[shanagarry]

Pato

That's why you need to go to the experts - no two cases are the same.

I will explain our situation to hopefully make it 'clearer' - but your situation may be a lot different. In those days long ago, the only way us foreigners could buy a property in Portugal was through an offshore company and a spin-off of that facility was that you didn't pay Stamp Duty (I can't remember the Portuguese name for it). The system allowed you to 'declare' the value of the property at any level you wished - and that was invariably abused. There was a 'kind' of system that allowed you to change that value as time went by - but it was never used - mainly because of the bureaucracy involved. Values were understated as a matter of course - primarily to keep down the annual rates .

This practice lead to a situation where properties were still being declared at the original value - which in many cases was a few thousand escudo - where in reality the 'value' was several 10s of thousands of escudo more.

In 2003, the 'game' changed. Properties were valued by the various Camaras in line with the huge surge in the market at that time and as I'm sure you know that a reasonable property valued at say $10,000 escudo in 1980 was now worth somewhere close to €500,000+ in Carvoeiro but a whole lot more in the Golden Triangle.

I decided to explore the possibility of bringing our property on shore when all the furore blew up in 2003 and went to Finesco (as they were called then) to get some advice. After relieving me of €500 they carried out a complete analysis and I could tell by the look on the guy's face when we were invited back to discuss their findings that this was going to be bad news. Like I mentioned previously, the valuation process employed when our place was built in 1984 was no different from any others and ours was $6,800 escudo but now it was considerably more. The calculation took that value together with the Camara value and based the tax (stamp duty) as a % of the difference - €160,000 was the amount I would have had to pay to bring it onshore. Needless to say it is still offshore.

So back to your statement - you didn't pay that for the property in the first place and you thought the idea was to save tax. The two issues are very different - the amount you (or your lawyer) declared is the key issue (not what you paid) and has it been changed to reflect recent changes to values? You won't have paid the stamp duty either (that's the tax you saved). I apologise if you know all this stuff - but the easiest way to explain is with a case history.

You might find it useful to speak to Nigel Anteney-Hoare at Sovereign - he is the expert on such matters or to the organisation who manage your offshore company. I wouldn't be too bothered about bringing it onshore unless you have pressing reasons to do so - the entire topic has been blown out of all proportion - especially by people who don't understand it and lawyers who won't put themselves out to transact it but it will cost you a few bob if you decide to do so.

[shanagarry]

Pato

That stamp duty tax was called SISA Tax - its now called IMT

[Bruce Wallis]

We bought in 2003 when all this Offshore stuff blew up.
We were advised we could save a fortune by buying offshore......
But other advice....our Portuguese solicitor actually, warned us that if the proposed legislation to close off these offshore loopholes came in.....as it did.......we would be storing up a load of grief for ourselves when we came to sell.

We were paying the man, so we took his advice. Good advice as it has since been proved.

[sam]

We bought our property 17 years ago, and investigated and weighed up the pros & cons of going off shore and decided against it. When we bought the situation was quite simple, but not so now. We are certain we made the right decision for us, but every case is different, and I agree - this is one for the professionals.

[shanagarry]

Offshore is the same as Negative Equity - it's only a problem when you want/need to sell.

I can't complain at the running costs - €872 in rates per annum and €252 for Fiscal Representation + €350 for the company fee - there's nothing onerous in that. I did have concerns back in 2003 when all the changes came about - but they never lived up to the hype that was put about by all the 'experts'.

I have managed to sell it in the offshore - job done.

[pato]

Thanks everyone for your involvement, It's been very helpful

[jonc]

Good that you managed to sell the off-shore company. It certainly simplifies the process if the purchaser wants to keep it that way.

When we were buying last year, we were interested in a property which was off-shore in a UK limited company, and were advised by our UK accountant that if we took on the off-shore company, were became liable for any outstanding debts of the limited company for the previous seven years. Given that the UK company had a CCJ against it, this looked like a credible risk.

Moving a property on-shore is a process of the off-shore company selling it to you, then winding itself up and so is the equivalent of you buying a new property with all the associated legal costs and stamp duty. This is why it is expensive - if your property is off-shore you don't actually own it, you own the entity which owns it.

Jonathan

[widge]

Pato you need to be careful & discreet. My understanding is that when the Portuguese outlawed offshore company villa ownership the option given to those with offshore status was as follows.

1 Bring the villa on shore & pay the capital gains tax on the difference between the value of the villa on the offshore company balance sheet and the current market value..................or

2 Leave the villa offshore and accept that the rates / tax payable on the true market value of your property are c. 5% per annum not 0.5% per annum.

We are talking big numbers and as everyone else has advised you need professional advice and confidentiality to protect your position.

[shanagarry]

Pato

The location of your Offshore Company is also a crucial point.

In 2003 when the sword of Damocles fell, many previously safe Offshore locations were 'black listed' (Gibraltar, Channel Islands etc) which means they are the ones that pay the 5% rates (IMI) - those in White Listed jurisdictions (Malta and Delaware) pay the same as those with onshore status.The additional cost being the fees to run the company and make the annual return.

There was a suggestion made at the time (2003) by all those in the 'I told you so' camp that offshore was getting its come uppence - egged on by some legal firms keen to get their hands on the massive fees for either re-domiciling or bringing the property into the owner's name(s) - but it never happened to the extent that was forecast. The word on the 'street' now is that €1M+ properties are finding favour in the offshore community again - I wonder why?

Go and take the advice but do not be panicked into a course of action you may later regret - offshore is not the ogre it is being made out to be. Future legislation may change that but only matters when you come to sell it. I have friends who in 2003 rushed out to bring their property onshore or redomicile and now regret it - following three changes to the legislation - that has all but removed the onerous burden of an offshore company. There are some drawbacks especially if you are keen to sell or you want to get a mortgage. Buyers and Mortgagors for offshore companies are fairly thin on the ground - so even if you find a buyer who needs a mortgage - sound him/her out first.