Tax planning when buying a property in Faro

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Even across the Atlantic, an uncommon origin in recent years, Portugal is perceived by Americans as a new dream destination, and the Algarve is establishing itself as one of the favorite regions to live or invest.

Attractive tax advantages like NHR status or tax exemption of cryptocurrency earnings are a bonus in addition to attractive sunshine, security and relaxing lifestyle.

Quinta de Faro

Faro, the capital of the Algarve, was not historically a destination for tourists and expats, but in recent years it has acquired a new vibe. The rise of novelty restaurants and high-end hotels as well as proximity to the beach and airport make Faro the new hot spot in the Algarve.

Quinta de Faro was created with the aim of filling a gap in the city’s real estate offer, diversifying it with a luxury condominium of independent villas, with breathtaking views of the Ria Formosa.

Awareness advice

Awareness Consulting has been advising its clients for more than 10 years. A “tailor-made suit” is the goal with each client, promoting high tax efficiency in the strategies implemented.

With the above in mind, Quinta de Faro has partnered with Awareness Consulting to ensure buyers of Quinta de Faro can access high-level advice available to help set up the right ownership structure. assets, taking into account the uniqueness of each client and their objectives and future prospects for the properties.

How to determine the right tax optimization strategy.

A conversation with potential buyers about their goals and future expectations as well as a small battery of questions help determine the right tax strategy.

Usually the questions are:

– What is the intended use of the asset? A permanent life? Long term rental ? Short-term rental? An initial rental situation then in the future the owners become permanent residents? Do you intend to resell in the near future?

– The source of the funds? Is a bank mortgage necessary? Are the funds held privately? Are the funds “trapped” in a business? Are the funds held by a fiduciary structure?

– Do the future heirs live in a country that imposes heavy inheritance taxes?

Different solutions for different purposes

Following the various meetings with potential buyers of villas in Quinta de Faro, we became aware of the multitude of solutadvised. Different needs and goals require different structures.

Here are some examples of possible structures:

– Direct purchase by individualsindividual

The simple solution for those who want to live in the property and hold the funds privately or who need a mortgage.

With This solution does not incur any structure costs and avoids capital gains tax when the property is sold by transferring the proceeds to a new property or a pension fund.

The downside of this solution is the potential inheritance tax liabilities for foreign heirs.

– Purchase by an LLC or a foreign entity.

The solution usually implemented by entrepreneurs and businessmen who have the funds available in a company and want to avoid paying taxes on the distribution of dividends. A foreign company or entity can easily own property in Portugal.

With this solution, the fundSecurities held by a company (trust fund, pension fund, etc.) can be used without the need to pay taxes on the distribution of dividends.

– Purchase by a Portuguese SARL.

The solution generally recommended for buyers who wish to make short-term rentals or sell the property in the near future.

In this solution, the shareholder can be the natural person or a foreign company that will allocate the funds to carry out the purchase.

A “spin-off” solution that has been advised for those who want to do short-term rental has beenn also to buy the property privately or with a foreign SARL, then, when the time comes to do the short-term rental, create a Portuguese company to manage the short-term rental activity.

AWARENESS Accounting, Lda

Place Alexandre Herculano 22 4 B, 8000-160 Faro

www.awareness.pt

+351 964 474 731

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