Offshore Property

When owning a property in an offshore corporate structure there are mainly two risks involved:

1. Changes in legislation and related tax issues 
2. “Locked in” Capital Gains Tax (CGT)

 Changes in legislation and related tax issues

In 2003 changes in local legislation meant that countries outside of Portugal (sometimes referred to as Offshore Centres) were classified by an international body known as OECD as either Black List or White List jurisdictions. The Black List jurisdictions were for the most part countries that offered beneficial tax regimes (eg: Gibraltar, Isle of Man) that were out of line with the White List countries.

Property-owning companies on the Black List faced a higher tax, and for this reason many decided to re-domicile to other non Black Listed jurisdictions, principally Malta and Delaware, USA. Malta, being English-speaking and a full member of the European Union, was immediately attractive and many companies moved there. Delaware, being one of the 53 States of the USA also offered security, and many companies relocated there.

At the time the overwhelming view of most clients and their professional advisers was that they wanted to continue to own their properties through a corporate structure, but not in places such as Gibraltar and other Black Listed jurisdictions. 

Most clients continue to be of the opinion that the benefits of corporate ownership far outweigh the disadvantages, if such financial penalties can be avoided.

“Locked in” Capital Gains Tax (CGT)

It is likely that there is a ‘locked in’CGT liability because the property is a company asset which is likely to have increased in value. If the company is ever called upon to sell that asset out of the company to a 3rd party they are likely to face a CGT liability (which in practice is payable by the underlying owners of the shares). Good agents and professional advisers will inform you about this. We personally make a point of explaining this to all our clients. We have a settled market here in the Algarve, and the intention is (and always has been) that properties in corporate ownership remain in corporate ownership. In other words the ‘locked in’ CGT liability should never materialise. The locked in’ CGT liability issue has become part of the negotiation which we undertake for vendors and buyers.

You can be assured that we have considerable experience and are doing this to great effect. If you are having questions regarding these risks do not wait to contact us.

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