Oscar Valdez, a Mexican high net-worth individual is planning to invest in
new recreational and tourist facilities (spa resort, golf links, holiday
cottages, restaurant, etc.) in Portugal. Part of the investment will be
wholly-owned by Mr. Valdez, part of the investments will be made together with
local Portugal investors. The development of the various sites may take several
years after the acquisition of land and property and hence, the business
operations are expected to commence after the development of the sites has been
completed (depending on the type of facility, after one to five years). Mr.
Valdez is interested in structuring his investment in such a manner that:
Mr. Valdez could split the business operations and the real property by
setting-up separate companies for the various business operations and for the
real property. The real property companies are then renting out the property to
the operational companies.
The rental income will be subject to corporate tax in Portugal at a rate of
28%, regardless as to whether the real property company is resident in Portugal
or not. Additional taxes will be due if the real property companies are
established in "black-listed" offshore jurisdictions. During the development
phase, the operational companies will have accumulated losses. If the real
property companies are resident in Portugal, both the real property companies
and the operational companies can be held by a Portuguese holding company. In
this way, the entire group can claim group relief under Portuguese law, as a
result of which the profits of the real property companies can be offset against
the initial losses of the operational companies, thus minimising exposure to
If the Portuguese holding company is owned by a foreign holding company under
such conditions that dividends will
then this would result in an effective tax planning solution. The
effectiveness is further increased if the international holding company is owned
by an IBC or a tax-exempt company in an offshore jurisdiction.
These conditions would be met if the Portuguese company is owned by a UK
holding company, the latter being owned by a company on the BVI, as illustrated
by the diagram below.
Note: A holding company in, for example, Cyprus, would not work as
long as Cyprus is black-listed under Portuguese law.
A bespoke 'offshore' solution can be complex and requires careful planning and execution. We therefore encourage our clients to contact us directly, without obligation.
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