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Newsletter March 2020

Legal Updates

Are you a landlord? Learn what to change on your personal income tax

The 2020 State Budget, approved last February 6th 2020, is still pending for promulgation. Nevertheless, some impact measures to those who are landlords are already known.

A positive novelty is the exclusion of the incidence capital gains following the transfer of real estate allocated to local accommodation (category B incomes), traditional rental (category F incomes), as long as the real estate continues to generate property income during the five years after the transfer.

On other hand, the coefficient applicable to income obtained from the exploration of local accommodation in the form of housing or apartments located in containment areas is increased from 0.35 to 0.50, remaining unchanged when the local accommodation is located outside these containment areas.

Finally, we would like to draw your attention to the fact that on 1 January 2020, came into force the Ministerial Order no. 370/2019, which introduces changes to Annex F (property incomes) of the personal income tax return declaration, introducing two new tables to be filled in by taxpayers who opt for autonomous taxation and who may benefit from a reduced rate.

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Tax benefits extended for another year

The Portuguese government decided to maintain for another year, until December 2020, a range of tax benefits that were at risk of expiring, in terms of Personal Income Tax, Corporate Income Tax, Value Added Tax and Stamp Duty.

Among the benefits that were maintained are, for instance, the personal income tax exemption, applicable to the pensioner’s saving accounts interest rates in balances up to 10,500 euros and the corporate income tax exemption, granted to banks based in foreign countries and related to interest on loans and gains on swap contracts signed with banks based in Portugal.

With said measure, the Government intends to assess the purposes of each of the previously mentioned tax benefits, while the Tax and Customs Authority concludes, in the coming months, a detailed analysis regarding their application.

It should also be noted that the Government is now obliged by law to present to the Parliament, during the first half of each year, a quantitative report of all the tax benefits granted, including a broken-down analysis of each one.

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Business Updates

High point of the Portugal-Índia relation

Portugal has had a stable and positive relationship with India, whose origin dates back to the arrival of Vasco da Gama in 1498. Recently, a new golden age in the Portugal-India relation has been evidenced, especially with the state visit, in the highest form of diplomatic contact, of the President of the Republic, Marcelo Rebelo de Sousa, last February.

Several bilateral contracts, of various fields, were signed during this visit. Among these, should be highlighted the commitment to facilitate visas and residence permits for workers and students and the Portuguese technical assistance for the local water supply and salubrity network.

The President of the Republic concluded that this visit was a “mission accomplished at the political level, a mission accomplished at the business level, a mission accomplished at the human level and the affirmation of the Portuguese presence here in India and in the world” and also confirmed that the President of India will visit Portugal next year in order to maintain strong diplomatic relations and bilateral economic development.

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Real estate investment is to continue

In Portugal, more than 17,000 projects of real estate licensing are in development. In Lisbon, more than seven thousand new apartments during the next few years are foreseen, most of them located in the city center. Nearly 2,400 new apartments are located in Campo de Ourique, Estrela, Santo António, Misericórdia e Santa Maria Maior, with values that can reach up to €9,500 per square meter, with the average price of about 3,200 euros per square meter.

In Oporto, the predictions indicate a lower number of new houses when compared with the capital, also followed by lower selling prices. The confidence of the foreign investor deserves to be highlighted. In 2018 almost 15% of the houses sold in Lisbon were acquired by foreigners, which represents 28% of the total amount transacted in the Real Estate market of the capital.

French and Brazilian seek a house for residency or as second home and invest more in the areas of Avenida da Liberdade, Amoreiras, Estrela e Príncipe Real. Investors of Brazilian nationality also represent a significant portion of the golden visas’ beneficiaries, a mechanism that already represents a 4,4 million investment in Real Estate. Also in the Real Estate market sector for offices, the predictions point to the maintenance of the interest and investment in the city of Lisbon. These numbers are estimated by the Real Estate Consultant Savills.

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