Europe's Best Kept Secret

Transcription

1 Why Portugal is your top tax choice 2012 Leendert Verschoor

2 Portugal Among the 20 most visited countries in the world Portuguese language is spoken by about 230 million people around the world But why Portugal is your top tax choice? 2

3 Agenda Investing in/through Portugal Buying property in Portugal Taking up residence in Portugal 3

4 Investing in/through Portugal? 4

5 Madeira International Business Centre Corporate Income Tax (CIT) reduced rates 5% CIT rate from 2013 to 2020 (4% in 2012) on income derived from transactions with non-resident entities (non-eu sourced income, in case of holding companies). These rates apply to thresholds of taxable income depending on the number of jobs created. Income exceeding the threshold is taxed at 25%. Income derived from intra group services (e.g. treasury, coordination and distribution centers) is outside the scope of the MIBC special tax regime, being taxed at 25%. Jobs creation Taxable income threshold (EUR) millions millions millions millions millions More than millions Europe's 5 Best Kept Secret

6 Madeira International Business Centre Other advantages Interest, royalties and services paid to non-resident entities are exempt from withholding tax. Parent-Subsidiary Directive Withholding tax exemption on distribution of profits to EU/EEA and Swiss parent companies (10% shareholding and 1-year minimum holding period required; 25% and 2 years for Switzerland). Interest and Royalty Directive Withholding tax reduction (until 30 June 2013) and exemption (from 1 July 2013 onwards) on interest and royalties paid between EU or Swiss associated companies. Stamp duty exemption. Foreign tax credit relief. Europe's 6 Best Kept Secret

7 Madeira International Business Centre Double Taxation Treaties (DTT) MIBC licensed companies benefit in general from the provisions of the wide network of DTT signed by Portugal (more than 60). Restrictions apply however in the case of the DTT signed with Brazil, Canada, Spain, United States of America, Netherlands, Mexico and Switzerland. Exemption from taxation of capital gains realised by foreign shareholders (not covered by MIBC special tax regime). Special foreign tax credit relief provisions. Europe's 7 Best Kept Secret

8 Portugal as a hub for investments Links with: Africa (Angola, Cape Verde and Mozambique) Asia (including Macao) South America (Brazil) Tax benefits Double Tax Treaties Incentives for internationalization Angola Portugal/ Madeira Brazil 8

9 Buying property in Portugal 9

10 Taxation of real estate Own name Black listed company White listed company 10

11 Taxation of real estate Ownership in own name Acquisition Ownership Sale Tax IMT 6 % resident Stamp Duty 0.8% Non Tax Resident IMT 6 % Stamp Duty 0.8% IMI 0.3% to 0.5% (revaluated) and 0.5% to 0.8% (non-revaluated) PIT on rental income Marginal rates (11.5% to 46.5%) IMI 0.3% to 0.5% (revaluated) and 0.5% to 0.8% (non-revaluated) PIT on rental income Final rate of 16.5% PIT on 50 % of the capital gain at progressive rates from 11.5% to 46.5% Reinvestment relief may apply PIT: Final rate of 25% 11

12 Taxation of real estate Ownership through a company Acquisition Ownership Sale IMI 0.3% to 0.5% White IMT 6 % (revaluated) and 0.5% to 0.8% listed (non-revaluated) Stamp Duty company 0.8% CIT on rental income at 16.5% Black listed company IMT 10 % Stamp Duty 0.8% IMI 7.5 % CIT on rental income at 16.5% Deemed rental income of 1/15 of the Tax Registered Value Sale of property: CIT at 25% Sale of shares by resident individual: PIT at 25% Sale of property: CIT at 25% Sale of shares by resident individual: PIT at 25% 12

13 Taxation of real estate Rules for 2012 create (again) penal rates for acquisition and ownership through blacklisted companies; Ownership through white listed companies may still be advantageous case-by-case analysis; Comparison: Portugal ranks well on comparison with other locations in terms of real estate taxes, with some attractive features e.g., 16.5% flat rate of rental income obtained by non-residents 13

14 Taxation of real estate - comparison Spain (including Canaries) Property Transfer Tax 7% on the fair market value (may differ according to the location) Annual Property Tax 0.4% to 1.10% on the cadastral value 3% on property owned by nonresidents 3%, on the value of the 3% on 25% of the tax Cape Verde contract. registration value France Greece 5.09%, on the purchase price (or on the market price if higher) 8% up to 20,000 and 10% for the excess Tax rates differ according to the location of the property Rates from 0,2% to 1% for the value exceeding to 2012, 2% for property values exceeding 5,000,000 Non resident individuals without PE Capital Gains Taxed at 19% Taxed at 20% + Property tax at 3% Rental income Gross income taxed at 24% Withholding tax 10%/20%? If EU tax resident: Rates range from withholding tax at 19% / If 0% to 40% non-eu tax resident: (minimum rate of subject to the one-third 20% applies) withholding tax Taxed from 0% to 20%, according to the holding period Progressive rates ranging from 0% to 45% 14

15 Taxation of real estate - comparison Property Transfer Tax Annual Property Tax Non resident individuals without PE Capital Gains Rental income Bermuda Not applicable Private dwellings taxed at progressive rates (from 0.6% to 19%) Not applicable Not applicable Saint Lucia Not applicable Residential property Not applicable taxed at 0.25%. Italy Registration tax may The tax rate ranges Taxed at progressive be levied in a fixed between 0.4% and 0.7% rates from 23% up to amount or (can be increased up to 43% proportional amount 0.9%) (1%, 3% or 7%) UK 4% on the consideration paid for land transactions (5% if over 1m ) National non-domestic rate, paid by business occupiers does not apply to landlords (except vacant property) Exemption for foreign investors who do not carry on a trade Taxed at progressive rates (from 10% to 30%) Taxed at progressive rates from 23% up to 43% 20% rate for foreign investors who do not carry on a trade 15

16 Taxation of real estate - comparison Property Transfer Tax Annual Property Tax Non resident individuals without PE Capital Gains Rental income Netherlands 6% on market value (reduction to 2% for dwellings) Rates depend on the municipality Exemption unless the non-resident is engaged in a trade or business therein and the property is part of the assets 30% is levied on the deemed yield of the net assets Sweden 4.25% SEK1,200/ flat, maximized to 0.4% for dwellings Flat rate of 30% Flat rate of 30% Ireland 1% for dwellings with values not exceeding 1m (2% applies on the excess) A flat rate levy of, currently 200, applies to rented residential properties, holiday homes and second homes (subject to certain exemptions) Rate of 30% 20% withholding tax Germany General tax rate of 3.5% Rates vary between 0.1% and 0.6% of the fair market value Standard progressive income tax rates for property sold within 10 years after acquisition Progressive rates 16

17 General tax appraisal of urban real estate Urban real estate still appraised under the previous rules ( CA rules ) is to be appraised under the current rules ( IMI rules ) during 2012 As a result: The tax registration value should in principle INCREASE The IMI rate will DECREASE Impact on the IMI annual charge will depend on the combined effect of both factors above 17

18 Taking up residence in Portugal 18

19 Financial Times praises Portugal the country s recovery is underway 19

20 Marginal Personal Income tax rates Maximum rates applicable in the E.U. Tax rate 60.00% 55.00% 50.00% 45.00% 40.00% 35.00% 30.00% 25.00% 20.00% 15.00% 10.00% , ,731 * 36,300 * 15, ,000 * 68, , ,000 55,694 * 75,000 32,800 * 41,793 19,501 20, , ,084 * * * 60, % 0.00% * Fixed rate applicable to the entire taxable income Country 20

21 Personal Income Taxation Residents are subject to progressive rates: Taxable Income (Euros) Tax Rate (%) Deductible amount (Euros) Up to 4, % 0 From 4,898 to 7,410 14% From 7,410 to 18,375 24,5% From 18,375 to 42, % 2, From 42,259 to 61,244 38% 3, From 61,244 to 66, % 6, From 66,045 to 153, % 7.442,67 Over 153, % 12,

22 Personal Income Taxation - For 2012 and 2013: Solidarity surcharge of 2.5% on taxable income in excess of EUR 153,300 - Example: Gross income : EUR 350,000 (couple) Taxable income: EUR 155,750 EUR

23 Personal Income Taxation Some income subject to flat rates: Investment income (interest, dividends, etc.) 25 % Capital gains on sale of shares 25 % Non-residents subject to flat rates: Rental income 16.5 % Capital gains on sale of real estate 25 % Capital gains on sale of Portuguese shares exempt Employment and self-employment income 21.5 % 23

24 Taxation of life insurance products Beneficial tax regime Taxation only on withdrawals in excess of contributions. Mitigated taxation of withdrawals from qualifying policies - Income excluded from tax: 1/5, after 5 and before 8 years Effective rate: 20% 3/5, after 8 years Effective rate: 10%. 24

25 Inheritance and gifts No tax on inheritance and gifts for spouses, descendants and ascendants; Stamp tax at 10% or other transfers for no consideration; Assets outside Portugal out of scope No wealth tax 25

26 Taxation of Trusts Concept of trust not recognised under Portuguese law. Tax treatment vary on a case-by-case basis may be tax efficient way of holding assets. However, since 2012, Controlled Foreign Companies (CFC) legislation covers the use of trusts 26

27 Gold Visas No EU workers must have legal residency and work permits. New special regime provides for residence titles for foreign individuals who invest in Portugal. Gold Visas : special residence titles delivered to foreign individuals who start an activity in Portugal and: transfer capital of 1 Million Euros or more to Portugal; or acquire immovable property worth Euros or more; or create at least 30 jobs For a minimum period of 5 years. 27

28 RERT III Tax Amnesty RERT III: special regularization regime for tax residents, in respect of assets held outside Portugal as of 31 December Third tax amnesty since Collections from RERT III reached 258 Million Euros. Regularised assets of 3.4 Billion Euros. 28

29 Non Habitual Residents 29

30 Tax regime for non-habitual residents Who may benefit? The status of non-habitual resident in Portugal will be granted to an individual who: - qualifies as tax resident in Portugal for a certain tax year; and - did not qualify as a Portuguese tax resident in any of the prior five years. Status applies for 10 consecutive years. 30

31 Tax regime for non-habitual residents What income is taxable? Taxation at a flat rate of 20% on the net income from: - employment income; and - business and professional income from listed high value-added activities of a scientific, artistic or technical nature Examples: Architects, Engineers, Companies top managers, 31

32 Tax regime for non-habitual residents What income is exempt in Portugal? In general, income from a foreign source will be exempt (with progression) from taxation, provided: such income is taxed/may be taxed in the State of source under the rules of a Double Tax Treaty (DTT); or such income is taxed in the State of source ( blacklisted tax havens excluded) under its domestic legislation (if no DTT exists) and it may not be regarded as arising from a Portuguese source, under Portuguese tax rules. Different (but similar) conditions apply for each type of income Pension income may be exempt in both countries 32

33 Tax regime for non-habitual residents example Married couple; Interest from Jersey: EUR 50,000; Rental income from Florida: EUR 80,000; UK pension: EUR 300,000; Dividends from Netherlands: EUR 45,000; Employment income ( high value-added activities ): EUR

34 Tax regime for non-habitual residents - Example Non-habitual resident Resident Employment income EUR 10,000 EUR 20, UK Pension - EUR 121, Interest from Jersey EUR 15,000 EUR 15,000 Rental income from Florida - EUR 32, Dividends from Netherlands - EUR 11,250 Total tax liability EUR 25,000 EUR 200,657 Net Income EUR 500,000 EUR 324,343 34

35 2013 State Budget What to expect? 35

36 2013 State Budget What to expect? 36

37 Things to remember... Hub for investments No inheritance/gift tax 20% flat tax rate for (self) employment income Opportunities for real estate investments No wealth tax Non-habitual residents exemption of foreign source income, including pensions 37

38 Find out more

39 This publication has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication, and, to the extent permitted by law. PricewaterhouseCoopers, its members, employees and agents do not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it PricewaterhouseCoopers. All rights reserved. In this document, refers to PricewaterhouseCoopers & Associados - Sociedade de Revisores Oficiais de Contas, Lda., which is a member firm of PricewaterhouseCoopers International Limited, each member firm of which is a separate legal entity.