Described as the ‘Algarve tax bombshell’ by the Sunday Times, the ‘Reforma do Patrimonio’ will impose an annual tax of five per cent of the value of every property owned by an offshore company, from 1 January next year.
he Portuguese government is, however, allowing exemptions for companies registered in three jurisdictions – Malta, New Zealand and, bizarrely, Delaware in the US.
ccording to the report an estimated 75 per cent of foreigners have bought their Portuguese properties by means of an offshore company structure.
ane Stubbs, tax partner at PricewaterhouseCoopers in Jersey, said information received from the firm’s Portuguese office had confirmed that the tax had been stepped up.
‘Currently it is two per cent, going up to five per cent in 2004,’ she said.
owever, Mrs Stubbs said she was not so convinced by the estimated number of owners who would be hit by the higher tax.
‘We are wondering if these include timeshares, which may have bumped up the figure.
We have an administration office here and only a couple of our clients are affected, so it may not be as widespread,’ she explained.
he Sunday Times refers to Jersey as a ‘blacklisted’ tax haven.
Mrs Stubbs said the Portuguese government had included the Island on a blacklist of sorts.
‘The list includes jurisdictions with a more favourable tax regime, based on their finance ministry’s idea of what constitutes a tax haven – all the old favourites, like Gibraltar, Hong Kong, BVI and Cayman.
Mrs Stubbs said the Portuguese rate of tax started at 12 per cent, up to 40 per cent, so it was indeed less favourable than the Jersey rate.
However, she suggested a better understanding of the Island’s finance industry might be something that the Island’s negotiators could tackle during any forthcoming talks on the EU tax package.