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IMI
IMT and IMI
This is getting a bit confusing!
For details of the new tax proposals to take effect from 2004 you can see the Finance page. You should note that the change in sisa tax rates HAS been effected as from 1st June to prevent a stalling of the property market so any sales now will pay sisa tax at new lower rates and the Government will make good any shortfall in receipts suffered by the local councils charging lower sisa rates on non revalued properties. Word is that the strict revaluation of property by the tax department will not come fully into effect until next year.
The 1/15th tax that a Guest mentioned is nothing to do with the present proposals. That was introduced as from 901.01.2002 when the rate charged was pushed up to 2%. If no income is decalred by an offshore company owning property in Portugal the tax dept will presume an income equal to 1/15th of the rateable value and charge tax at 25% on that income AFTER allowable deductions.
Perhaps I should ask Steen to post that information on the Finance page although it must be realised that the two parts are completely separate, one being law and the other a proposed law (which I feel WILL go through) and we do not know yet whether this 1/15th income rule will persist or not. What is sure is that the prposal pushes up the rates from 2% to 5%.
The message is DON'T PANIC (yet!)
There are some solutions and I will produce those for worried owners as soon as I am able.
For details of the new tax proposals to take effect from 2004 you can see the Finance page. You should note that the change in sisa tax rates HAS been effected as from 1st June to prevent a stalling of the property market so any sales now will pay sisa tax at new lower rates and the Government will make good any shortfall in receipts suffered by the local councils charging lower sisa rates on non revalued properties. Word is that the strict revaluation of property by the tax department will not come fully into effect until next year.
The 1/15th tax that a Guest mentioned is nothing to do with the present proposals. That was introduced as from 901.01.2002 when the rate charged was pushed up to 2%. If no income is decalred by an offshore company owning property in Portugal the tax dept will presume an income equal to 1/15th of the rateable value and charge tax at 25% on that income AFTER allowable deductions.
Perhaps I should ask Steen to post that information on the Finance page although it must be realised that the two parts are completely separate, one being law and the other a proposed law (which I feel WILL go through) and we do not know yet whether this 1/15th income rule will persist or not. What is sure is that the prposal pushes up the rates from 2% to 5%.
The message is DON'T PANIC (yet!)
There are some solutions and I will produce those for worried owners as soon as I am able.-
Kidson
SISA - Documentation
Herewith extract from todays Portugal News net:
Promissory contract demands by notaries illegal
Following the introduction this week of the new revised property tax laws, notaries throughout the country are demanding the presentation of promissory contracts as a prerequisite to execute the transfer of a property.
But according to the Justice Ministry, notaries are actually breaking the law, as a promissory contract does not necessarily have to be drawn up between the buyer and seller.
Since Monday, when the new Sisa tax law came into effect, notaries throughout the country have been using contradicting criteria, resulting from a misinterpretation of the law. In an attempt to avoid acts of fraud emanating from declaring a value that is inferior to the real value, notaries are demanding promissory contracts whose values correspond with the declared values.
The illegality stems from the fact that a promissory contract is not registered, and therefore cannot serve as evidence for tax inspectors suspicious of the declared value of a property transaction.
Relief?????
Promissory contract demands by notaries illegal
Following the introduction this week of the new revised property tax laws, notaries throughout the country are demanding the presentation of promissory contracts as a prerequisite to execute the transfer of a property.
But according to the Justice Ministry, notaries are actually breaking the law, as a promissory contract does not necessarily have to be drawn up between the buyer and seller.
Since Monday, when the new Sisa tax law came into effect, notaries throughout the country have been using contradicting criteria, resulting from a misinterpretation of the law. In an attempt to avoid acts of fraud emanating from declaring a value that is inferior to the real value, notaries are demanding promissory contracts whose values correspond with the declared values.
The illegality stems from the fact that a promissory contract is not registered, and therefore cannot serve as evidence for tax inspectors suspicious of the declared value of a property transaction.
Relief?????
CGT
In reply to Concerneds comments over CGT
Any disposal of property in Portugal can create a CGT liability if a profit is made. For TAX RESIDENTS there are some tax breaks.
For NON RESIDENTS whether companies or individuals there are no breaks other than the application of an inflation indexation allowance (useless!) and production of receipts proving acquisition expenses (taxes and legal fees) and capital expenditure on the property during the previous 5 years.
Thus if your offshore company sells to you and a profit is made, even if hat is a "paper" profit the company may pick up a tax bill. In the bad (good?) old days this often used to be avoided/evaded but that is no longer an option.
This is one of the main reasons offshore use blossomed as it effectively locked in the gain even if a low price was declared. It is still a good reason to stay offshore but of course the cost is now becoming prohibitive.
Any disposal of property in Portugal can create a CGT liability if a profit is made. For TAX RESIDENTS there are some tax breaks.
For NON RESIDENTS whether companies or individuals there are no breaks other than the application of an inflation indexation allowance (useless!) and production of receipts proving acquisition expenses (taxes and legal fees) and capital expenditure on the property during the previous 5 years.
Thus if your offshore company sells to you and a profit is made, even if hat is a "paper" profit the company may pick up a tax bill. In the bad (good?) old days this often used to be avoided/evaded but that is no longer an option.
This is one of the main reasons offshore use blossomed as it effectively locked in the gain even if a low price was declared. It is still a good reason to stay offshore but of course the cost is now becoming prohibitive.
IMI etc
Martin
Your view is shared by many and I do believe these new rules will have a negative effect on inward investment.
Your view is shared by many and I do believe these new rules will have a negative effect on inward investment.
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Concerned
IMI
I think that we should be grateful to Biffa for his comments and sound advice this week and always, and perhaps we could all lobby the now flush Financas on his behalf to make a donation to West Ham's fighting fund for next year's campaign. No one likes to see a great club play in Div1 after so many good years in the top flight .
PS I am not a Hammers supporter but a follower of Charlton but like most Londoners have a soft spot for all the capital's clubs.
PS I am not a Hammers supporter but a follower of Charlton but like most Londoners have a soft spot for all the capital's clubs.
Unpaid taxes
If you don't pay up your property taxes the Financas will first put a charge on the property and eventually sell it at auction, take their tax and hold on to the remander for you to collect!
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Mark
Having followed this thread with great interest as an offshore property owner, I now find myself even more concerned and confused, particularly in respect of timing.
Like many other guest on this board, I have been receiving a wealth of advice and information, all conflicting!! Is the following understanding correct?
For 2003 (presumably billed in early 2004), the IMI will be 2% of the existing Valor Patrimonal. For 2004, it will be 5% of the existing Valor Patrimonal. However, at some point in the future, the VP will be revalued close to the market value of the property, and the IMI will be 5% of this rate. In this case, will there be any backdated charge? That is, will I get a supplementary retrospective IMI charge for say, 2004 at 5% if the property is not revalued until 2005?
Am I also correct in assuming that this increased IMI rate (5%) is in addition to the "Deemed Rental Income" tax? (The 25% of 1/15 of the Valor Patrimonal) Will this "Deemed Rental Income" also be charged on a new property valuation eventually? And backdated?
I have been advised to migrate my offshore company to Delaware, although I have not done this yet (and not before the 31st May deadline for this year suggested to me). Does anyone have any views on this option?
I note that most people are saying "don't panic yet", but it occurs to me that we could all be commited to a huge future tax bill already!
Like many other guest on this board, I have been receiving a wealth of advice and information, all conflicting!! Is the following understanding correct?
For 2003 (presumably billed in early 2004), the IMI will be 2% of the existing Valor Patrimonal. For 2004, it will be 5% of the existing Valor Patrimonal. However, at some point in the future, the VP will be revalued close to the market value of the property, and the IMI will be 5% of this rate. In this case, will there be any backdated charge? That is, will I get a supplementary retrospective IMI charge for say, 2004 at 5% if the property is not revalued until 2005?
Am I also correct in assuming that this increased IMI rate (5%) is in addition to the "Deemed Rental Income" tax? (The 25% of 1/15 of the Valor Patrimonal) Will this "Deemed Rental Income" also be charged on a new property valuation eventually? And backdated?
I have been advised to migrate my offshore company to Delaware, although I have not done this yet (and not before the 31st May deadline for this year suggested to me). Does anyone have any views on this option?
I note that most people are saying "don't panic yet", but it occurs to me that we could all be commited to a huge future tax bill already!
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Peter Belinfante
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Mark
Hi Peter,
Not sure why you ask that, but if you look back at some of the earlier posts in this thread, many people have worked out that this could be a huge difference.
Last year my property tax was about 1,300 Euro, 1.3% of a Valor Patrimonal of 100,000 Euro. This will increase to 5%, i.e 5,000 Euro. However, if the Valor Patrimonal is increased closer to the market value of the property as is suggested, this could be 5% of 400,000 Euro, i.e 20,000 Euro. If the revaluation takes place, say in 2006 (it may take that long) and the difference is backdated to 2004, that could give rise to a backdated increase for the 3 years of 45,000 in addition to that years 20,000 charge, a tax bill of 65,000 Euro!!
This is all in addition to the "Deemed Rental Tax", which could add a further 2000 to 6000 Euros per annum, depending on what costs are allowed to offset.
I am sure that most offshore owners will be in a similar position, especially those with older properties that have been offshore owned for some time, which will have lower VPs. Of course this all depends on the answers to the assumptions and questions I made in my earlier post, which I don't think anyone has concrete answers to at the moment.
The point I was making is that if the authorities backdate the revaluations, then it is already too late to avoid these charges, at least for this year.
What is your situation, where do you stand on this?
Not sure why you ask that, but if you look back at some of the earlier posts in this thread, many people have worked out that this could be a huge difference.
Last year my property tax was about 1,300 Euro, 1.3% of a Valor Patrimonal of 100,000 Euro. This will increase to 5%, i.e 5,000 Euro. However, if the Valor Patrimonal is increased closer to the market value of the property as is suggested, this could be 5% of 400,000 Euro, i.e 20,000 Euro. If the revaluation takes place, say in 2006 (it may take that long) and the difference is backdated to 2004, that could give rise to a backdated increase for the 3 years of 45,000 in addition to that years 20,000 charge, a tax bill of 65,000 Euro!!
This is all in addition to the "Deemed Rental Tax", which could add a further 2000 to 6000 Euros per annum, depending on what costs are allowed to offset.
I am sure that most offshore owners will be in a similar position, especially those with older properties that have been offshore owned for some time, which will have lower VPs. Of course this all depends on the answers to the assumptions and questions I made in my earlier post, which I don't think anyone has concrete answers to at the moment.
The point I was making is that if the authorities backdate the revaluations, then it is already too late to avoid these charges, at least for this year.
What is your situation, where do you stand on this?
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Guest
to my mind this has ceased to me a tax matter and more a political matter
as the only way to defeat this will be by screaming and kicking (eg petrol tax uk)...those in uk i would suggest had better contact their mps and remind them that this tax threatens to destroy legal investment iin portugal by its oldest ally....and if the claim is made about some tax dodging offshore folks getting their comeupence...perhaps it would be woth reminding htem that with places like gibraltar...offshore services were sold to them as a means to survive after the armed forces went away..with no industry or agriculture there were few altenatives
this too will destroy many jobs in gibraltar and other places.
the portuguese government have had billions from europe.....perhaps if they are to start cracking down they could start with their own citizens who regulary offer discounts ie no vat or iva if you pay cash.
this tax if it goes through will DESTROY property investment here.
be warned
as the only way to defeat this will be by screaming and kicking (eg petrol tax uk)...those in uk i would suggest had better contact their mps and remind them that this tax threatens to destroy legal investment iin portugal by its oldest ally....and if the claim is made about some tax dodging offshore folks getting their comeupence...perhaps it would be woth reminding htem that with places like gibraltar...offshore services were sold to them as a means to survive after the armed forces went away..with no industry or agriculture there were few altenatives
this too will destroy many jobs in gibraltar and other places.
the portuguese government have had billions from europe.....perhaps if they are to start cracking down they could start with their own citizens who regulary offer discounts ie no vat or iva if you pay cash.
this tax if it goes through will DESTROY property investment here.
be warned
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Guest
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Guest