Meet The Members Europe – Why Portugal? Understanding the region’s opportunities

Most of the things that create Portugal’s appeal are intangible: the generous light, the mood and warmth of its people, the ever-changing landscape, its cosmopolitan diversity, and its position at the westmost tip of Europe.

Facts are also important. It has one of the lowest crime rates in Europe (and in the world), one of the best free universal healthcare systems, a stable democratic and progressive political system, and respect for all creeds and lifestyles.

There’s an enticing special tax regime for newcomers, from pensioners, to skilled workers, to entrepreneurs. There are specially devised government incentives for urban rehabilitation, the rental market, technology, and R&D, and a patent box regime for the development of new intellectual property.

There’s an arbitration regime for tax disputes up to €10 million, the rule of law is strong, there are no barriers or limitations for foreign direct investment, and business have freedom of establishment, and to trade goods and services.

Investing in real estate: spotting the investment opportunities and finding the right corporate and tax structure, project management

The real estate market has been hot in Portugal in the last seven years. As the market marches towards maturity, and with rising inflation and interest rates, structuring your investment becomes paramount.

We have a housing problem in Portugal: luxury accommodation keeps being sold off-plan, and there’s an absolute scarcity of housing for the middle classes, with demand far outpacing supply. It’s a situation that many countries in Europe experience.

Once you have decided on your investment (location, size, purpose, capital expenditure and financing mix), it’s time to think about Special Purpose Vehicles (SPVs).

“There’s an enticing special tax regime for newcomers, from pensioners, to skilled workers, to entrepreneurs.”

We at VCA are very keen on SICAFI; it is a (lightly) regulated company type, structured as an investment fund, which means that there are several exemptions and reductions in applicable taxes. Taxation is due at reduced rates when dividends are distributed, meaning in general terms that companies will benefit from participation exemption, and there is also a general reduction or exemption in capital gains from the redemption or sale of the shares of the SICAFI.

The SICAFI are especially tax-effective for non-residents, either private citizens or companies.

The government has just launched the program “Mais habitação” currently under public discussion with civil society stakeholders (VCA participated), and in the parliament from the end of March 2023. The intent is to accelerate the zoning and licensing process committed to the local city authorities to increase volumes of construction. Substantial tax incentives are being designed to encourage “build to let” or “buy to let”. There are special reduced tax rates for investment in urban development, available throughout the major banks.

You can either buy a ready and approved project and save two years, or choose a local architect and have your bespoke project presented to the city council. VCA can help you with both options. We have strong ties with the relevant real estate brokers and the renowned architects who can make a difference in finding the right location and adding brand value to the project. Once you have made your acquisition, is time to think about developing.

“There are special reduced tax rates for investment in urban development.”

With increasing prices in manpower, materials and financing costs, project management is crucial for the financial success of your venture. VCA will see you through the tenders to choose contractors and will manage the legal aspects of your project to completion.

Either you are looking at a short or long term investment there is a roadmap for success which is partly based on sound legal advice from the first stages of the project to actual delivery and management.

VCA is in a very strong position to deliver the advice and support you need.