News State Budget for 2021 changes in the real estate sector 15/12/2020

On November 26, 2020, the State Budget for 2021 was approved. This document provides for changes with an impact on the real estate sector, both at the level of companies and individuals. Let us look at some of these changes.

IMT Tax in the acquisition of companies owning properties in Portugal

As of January 1, 2021, the acquisition of equity stake in companies (i) whose assets are more than 50%, directly or indirectly, made of properties located in Portugal, (ii) provided that the shareholder has at least 75% of the share capital or the number of shareholders is reduced to two, married or in a civil union and (iii) and involves property that is not directly related to an agricultural, industrial or commercial activity, with the exception of the purchase and sale of real estate, will be subject to IMT at a 6.5% rate.

This measure aims to standardize the IMT regime for the acquisition of equity in companies owning real estate in Portugal. In principle, a major impact could be anticipated on real estate investments held by public limited companies, mostly in our country, whose acquisition is not currently subject to IMT. However, in our opinion, this impact should not be that relevant as the rule only applies to the acquisition of companies with properties not related to an activity or whose activity consists of the purchase and sale of real estate. This change is beneficial for limited companies by quotas. Currently, any acquisition of at least 75% of the share capital of a limited company by quotas with more than 50% real estate is subject to IMT, however, as of January 1st, 2021, only acquisitions of companies holding real estate not related to an activity or whose activity is the purchase and sale of real estate will be subject to this tax.

Finally, this rule raises doubts as to its scope, since, while covering the acquisitions of companies that indirectly hold properties in Portugal, there is a risk of extending its application to transactions involving only foreign companies.

Transfer of real estate to the legal sphere of quotaholders, shareholders or participants

IMT relating to the transfer to the legal sphere of the quotaholders, shareholders or participants now focuses on the difference between the value of the assets now acquired and the amount by which the tax was previously paid in the acquisition of the respective shareholdings or units. This measure was already set forth for the dissolution of companies or investment funds, however, it now covers other onerous transfers.

Indirect holdings by entities resident in tax havens

Properties held indirectly by an entity dominated or controlled by an entity resident in a tax haven are now subject to the increased IMI and IMT rates (7.5% and 10%, respectively). Currently, these increased rates are only applicable in the case of direct holding.

The national and, particularly, international real estate investment sector has contributed in a very relevant and positive way to the country's economic recovery, being a good source of revenue for the State. We do not think that this 2021 State Budget has measures that penalize real estate investment, although some may raise doubts as to its application. However, in the present difficult socio-economic context, which comes from the public health crisis that we are experiencing, legislative changes would be expected in the real estate area in order to boost investment, which has not happened.

In “Jornal Económico”