Europe's Best Kept Secret · Europe's Best Kept Secret 5 6-30 16 millions 31-50 26 millions 51-100...
Transcript of Europe's Best Kept Secret · Europe's Best Kept Secret 5 6-30 16 millions 31-50 26 millions 51-100...
Europe's Best Kept Secret
Why Portugal is your top tax choice2012
www.pwc.pt
LeendertVerschoor
Among the 20 mostvisited countries in theworld
Portugueselanguage is
Portugal
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language isspoken byabout 230million peoplearound theworld
But why Portugal isyour top tax choice?
Agenda
Investing in/through Portugal
Buying property in Portugal
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Taking up residence in Portugal
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Investing in/through Portugal ?
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Madeira International Business Centre
Jobs creationTaxable incomethreshold (EUR)
1-2 2 millions
3-5 2.6 millions
• 5% CIT rate from 2013 to 2020 (4% in 2012)on income derived from transactions withnon-resident entities (non-EU sourcedincome, in case of holding companies).
• These rates apply to thresholds of taxable
Corporate Income Tax (CIT) reduced rates
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6-30 16 millions
31-50 26 millions
51-100 40 millions
More than 100 150 millions
• These rates apply to thresholds of taxableincome depending on the number of jobscreated.
• Income exceeding the threshold is taxed at25%.
• Income derived from intra group services (e.g.treasury, coordination and distributioncenters) is outside the scope of the MIBCspecial tax regime, being taxed at 25%.
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
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(10% shareholding and 1-year minimum holding period required; 25% and 2 years forSwitzerland).
• 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.
Madeira International Business Centre
Double Taxation Treaties (DTT)
• MIBC licensed companies benefit in general from the provisions of the wide network of DTT signedby Portugal (more than 60).
• Restrictions apply however in the case of the DTT signed with Brazil, Canada, Spain, United States ofAmerica, Netherlands, Mexico and Switzerland.
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• Exemption from taxation of capital gains realised by foreign shareholders (not covered by MIBCspecial tax regime).
• Special foreign tax credit relief provisions.
Portugal as a hub for investments
• Links with:
― Africa (Angola, Cape Verde and Mozambique)
― Asia (including Macao)
― South America (Brazil)
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• Tax benefits
• Double Tax Treaties
• Incentives for internationalization
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Portugal/Madeira
BrazilAngola
Buying property in Portugal
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Taxation of real estate
Own name Black listedcompany
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Own name
White listedcompany
company
Taxation of real estateOwnership in own name
Acquisition Ownership Sale
TaxIMT – 6 %
IMI – 0.3% to 0.5% (revaluated)and 0.5% to 0.8% (non-revaluated)
PIT on 50 % ofthe capital gainat progressiverates from 11.5%
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resident Stamp Duty –0.8%
PIT on rental income – Marginalrates (11.5% to 46.5%)
to 46.5%
Reinvestmentrelief may apply
Non TaxResident
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 – Final rate of16.5%
PIT: Final rate of25%
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Taxation of real estateOwnership through a company
Acquisition Ownership Sale
“Whitelisted”
company
IMT – 6 %
Stamp Duty –0.8%
IMI – 0.3% to 0.5%(revaluated) and 0.5% to 0.8%(non-revaluated)
Sale of property: CITat 25%
Sale of shares byresident individual:
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company 0.8%CIT on rental income at 16.5%
resident individual:PIT at 25%
“Blacklisted”
company
IMT – 10 %
Stamp Duty –0.8%
IMI – 7.5 %
CIT on rental income at 16.5%
Deemed rental income of 1/15of the Tax Registered Value
Sale of property: CITat 25%
Sale of shares byresident individual:PIT at 25%
Taxation of real estate
• Rules for 2012 create (again) penal rates for acquisition andownership through “blacklisted” companies;
• Ownership through “white listed” companies may still beadvantageous – case-by-case analysis;
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advantageous – case-by-case analysis;
• Comparison: Portugal ranks well on comparison with other locationsin terms of real estate taxes, with some attractive features – e.g.,16.5% flat rate of rental income obtained by non-residents
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Taxation of real estate - comparison
PropertyTransfer Tax
Annual PropertyTax
Non resident individuals without PE
Capital Gains Rental income
Spain(includingCanaries)
7% on the fairmarket value (maydiffer according tothe location)
0.4% to 1.10% on thecadastral value
3% on propertyowned by non-residents
Taxed at 19%Gross incometaxed at 24%
3%, on the value of the 3% on 25% of the taxTaxed at 20%
Withholding tax
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Cape Verde3%, on the value of thecontract.
3% on 25% of the taxregistration value
Taxed at 20%+Property tax at 3%
Withholding tax10%/20%?
France
5.09%, on thepurchase price (or onthe market price ifhigher)
Tax rates differaccording to thelocation of the property
If EU tax resident:withholding tax at 19% / Ifnon-EU tax resident:subject to the one-thirdwithholding tax
Rates range from0% to 40%(minimum rate of20% applies)
Greece8% up to € 20,000and 10% for the excess
Rates from 0,2% to 1%for the value exceeding€800.000. 2010 to2012, 2% for propertyvalues exceeding €5,000,000
Taxed from 0% to 20%,according to the holdingperiod
Progressive ratesranging from 0%to 45%
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Taxation of real estate - comparison
Property TransferTax
Annual PropertyTax
Non resident individuals without PE
Capital Gains Rental income
Bermuda Not applicablePrivate dwellings taxedat progressive rates(from 0.6% to 19%)
Not applicable Not applicable
Saint Lucia Not applicable Not applicable
Taxed atprogressive rates
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Saint Lucia Not applicableResidential propertytaxed at 0.25%.
Not applicableprogressive rates(from 10% to30%)
Italy
Registration tax maybe levied in a fixedamount orproportional amount(1%, 3% or 7%)
The tax rate rangesbetween 0.4% and 0.7%(can be increased up to0.9%)
Taxed at progressiverates from 23% up to43%
Taxed atprogressive ratesfrom 23% up to43%
UK
4% on theconsideration paid forland transactions (5%if over 1m£)
National non-domesticrate, paid by businessoccupiers does notapply to landlords(except vacantproperty)
Exemption for foreigninvestors who do notcarry on a trade
20% rate forforeign investorswho do not carryon a trade
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Taxation of real estate - comparison
PropertyTransfer Tax
Annual Property TaxNon resident individuals without PE
Capital Gains Rental income
Netherlands
6% on marketvalue(reduction to2% fordwellings)
Rates depend on themunicipality
Exemption unless thenon-resident is engagedin a trade or businesstherein and the propertyis part of the assets
30% is levied onthe deemed yieldof the net assets
Sweden 4.25%SEK1,200/ flat, maximizedto 0.4% for dwellings
Flat rate of 30% Flat rate of 30%
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to 0.4% for dwellings
Ireland
1% fordwellings withvalues notexceeding €1m(2% applies onthe excess)
A flat rate levy of, currently€200, applies to rentedresidential properties,holiday homes and secondhomes (subject to certainexemptions)
Rate of 30%20% withholdingtax
GermanyGeneral tax rateof 3.5%
Rates vary between 0.1%and 0.6% of the fair marketvalue
Standard progressiveincome tax rates forproperty sold within 10years after acquisition
Progressive rates
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General tax appraisal of urban real estate
Urban real estate still appraised under the previous rules (“CA rules”) is to beappraised under the current rules (“IMI rules”) during 2012
As a result:
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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 bothfactors above
Taking up residence in Portugal
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Financial Times praises Portugal‘the country’s recovery is underway’
250,731
60.00035,060
36,300
15,269
175,000
68,200
300,000
100,000
55,694
32,800
75,00041,793
19,501
20,294
153,301
171,084
60,361
30.00%
35.00%
40.00%
45.00%
50.00%
55.00%
60.00%
Ta
xr
ate
*
Marginal Personal Income tax rates
Maximum rates applicable in the E.U.
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0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
Ta
xr
ate
Country
*
**
*
*
* * *
* Fixed rate applicable to the entire taxable income
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Residents are subject to progressive rates:
Personal Income Taxation
Taxable Income (Euros) Tax Rate (%) Deductible amount (Euros)
Up to 4,898 11.5% 0
From 4,898 to 7,410 14% 122.45
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From 7,410 to 18,375 24,5% 900.50
From 18,375 to 42,259 35.5% 2,921.75
From 42,259 to 61,244 38% 3,978.23
From 61,244 to 66,045 41.5% 6,121.77
From 66,045 to 153,300 43.5% 7.442,67
Over 153,300 46.5% 12,041.67
Personal Income Taxation
- For 2012 and 2013: “Solidarity surcharge” of 2.5% ontaxable income in excess of EUR 153,300
- Example:
Gross income : EUR 350,000 (couple)
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Taxable income: EUR 155,750
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Personal Income Taxation
Some income subject to flat rates:
• Investment income (interest, dividends, etc.) 25 %
• Capital gains on sale of shares 25 %
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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 %
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Taxation of life insurance products
• Beneficial tax regime
― Taxation only on withdrawals in excess of contributions.
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― 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%.
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Inheritance and gifts
• No tax on inheritance and gifts for spouses, descendants andascendants;
• Stamp tax at 10% or other transfers for no consideration;
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Assets outside Portugal out of scope
• No wealth tax
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Taxation of Trusts
• Concept of trust not recognised under Portuguese law.
• Tax treatment vary on a case-by-case basis – may be tax efficient wayof holding assets.
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• However, since 2012, Controlled Foreign Companies (CFC)legislation covers the use of trusts
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“Gold Visas”
• No EU workers must have legal residency and work permits.
• New special regime provides for residence titles for foreign individuals whoinvest in Portugal.
• “Gold Visas”: special residence titles delivered to foreign individuals who startan activity in Portugal and:
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an activity in Portugal and:
― transfer capital of 1 Million Euros or more to Portugal; or― acquire immovable property worth 500 000 Euros or more; or― create at least 30 jobs
For a minimum period of 5 years.
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RERT III – Tax Amnesty
• RERT III: special regularization regime for tax residents, in respect of assetsheld outside Portugal as of 31 December 2010.
• Third tax amnesty since 2005.
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• Collections from RERT III reached 258 Million Euros.
• Regularised assets of 3.4 Billion Euros.
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Non Habitual Residents
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Tax regime for non-habitual residents
Who may benefit?
The status of non-habitual resident in Portugal will be granted to an individualwho:
- qualifies as tax resident in Portugal for a certain tax year; and
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- did not qualify as a Portuguese tax resident in any of the prior five years.
Status applies for 10 consecutive years.
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What income is taxable?
Taxation at a flat rate of 20% on the net income from:
- employment income; and
- business and professional income
Tax regime for non-habitual residents
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from listed “high value-added activities of a scientific, artistic or technicalnature”
Examples: Architects, Engineers, Companies’ top managers, …
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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 therules of a Double Tax Treaty (DTT); or
Tax regime for non-habitual residents
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rules of a Double Tax Treaty (DTT); or
― such income is taxed in the State of source (”blacklisted” tax havensexcluded) under its domestic legislation (if no DTT exists) and it maynot be regarded as arising from a Portuguese source, underPortuguese tax rules.
Different (but similar) conditions apply for each type of income
Pension income may be exempt in both countries
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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;
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• Dividends from Netherlands: EUR 45,000;
• Employment income (“high value-added activities”): EUR 50.000.
Tax regime for non-habitual residents - Example
Non-habitualresident
Resident
Employment income EUR 10,000 EUR 20,279.97
UK Pension - EUR 121,679.47
Interest from Jersey EUR 15,000 EUR 15,000
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EUR 15,000 EUR 15,000
Rental income from Florida - EUR 32,447.86
Dividends from Netherlands - EUR 11,250
Total tax liability EUR 25,000 EUR 200,657
Net Income EUR 500,000 EUR 324,343
2013 State Budget – What to expect ?
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2013 State Budget – What to expect ?
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20% flat tax rate for(self) employmentHub for investments No inheritance/gift tax
Things toremember....
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(self) employmentincome
Opportunities for realestate investments
Hub for investments No inheritance/gift tax
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Non-habitual residentsexemption of foreign
source income,including pensions
No wealth tax
Find out more...
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www.pwc.pt/pt/fiscalidade/individuals-taxation.jhtml
www.pwc.pt
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