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Newsletter May 2022

Legal Updates

Condominium debts on the purchase and sale of real estate from 2022 onwards

Law No. 8/2022 of 10 January came into force on April 10, adding article 1424-A to the Portuguese Civil Code, establishing, for the Purchase and Sale of real estate, the obligation of a “written declaration stating the amount of all condominium charges in force” for the property to be transacted.

Article 3 of the referred law states that this declaration constitutes a “mandatory document to be attached to the deed or certified private document of sale of the property in question”. It must be requested from the Condominium Administrator by the seller, and the former must issue it within a maximum period of 10 days. Therefore, when the nature of the property justifies it – that is, when it is part of a condominium -, it will be one more document to be validated by the Notary, Lawyer or Solicitor and subsequently attached to the deed of sale. Alternatively, the purchaser may expressly declare that he waives the declaration and assumes all of the seller’s debts to the condominium. The amendment serves the double purpose of protecting the purchaser, avoiding surprises in relation to possible existing or hidden debts, and preventing (or, at least, discouraging) the seller from “disappearing” without notice, with debts to the condominium.

It should be noted that, until now, nothing prevented the parties, in their free contractual autonomy, from requesting any documents from each other that they considered necessary and essential for the correct determination of their will, even if they did not serve or were not required by law for the Purchase and Sale of the property. Even so, by being explicitly stated in the Law, a possible abuse of the dominant party by any astute seller is prevented and transparency is promoted in what is (and should be) one of the most solemn acts possible.

Article 54 of the Portuguese Notaries’ Code was also amended to reflect this new regime, referring to the aforementioned declaration.

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Holding companies - equivalent to financial institutions for stamp duty purposes?

For some time now, Portuguese case-law has been faced with the need to standardise itself in order to clarify whether the provision present in Article 7, no. 1, paragraph e) of the Portuguese Stamp Duty Code covers holding companies, equating them in this case to financial institutions.

The arbitral decision, published on 28 October 2020, rendered in Case No. 911/2019-T, had already considered that, for the purposes of applying the exemption provided for in the aforementioned article, the borrowing holding company should be qualified as a “financial institution”, basing the decision on European legislation (article 3(1) (22) of Directive 2013/36/EU of the European Parliament and of the Council of 26 June 2013 and Article 4(1) (26) of Regulation EU No. 575/2013 of the European Parliament and of the Council of 26 June 2013). Thus, interest and commissions charged, guarantees given and the use of credit granted by credit institutions, financial companies and financial institutions to holding companies could benefit from stamp duty exemption.

Despite this position, a short time later, on 2 November 2020, a new arbitral decision was issued, in Case No. 856/2019-T, in which the Court took a completely different position, by determining that holding companies should not be deemed as “financial institutions” and that only holding companies subject to the supervision of the Bank of Portugal fall within such concept (for the purposes of the aforementioned tax exemption), based on the definition set out in Article 2-A, z), point i. of the Portuguese General Regime of Credit Institutions and Financial Companies. Last March, the Portuguese Supreme Administrative Court, in Case No. 0118/20.3BALSB, faced with the same question, decided to refer the case to the Court of Justice of the European Union for a preliminary ruling. It will now be up to the CJEU to clarify the issue.

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Business Updates

New doors of investment in Portugal

Despite the restrictions imposed on Golden Visa applications in Portugal, mainly on property investment in the main Portuguese urban centres, the first quarter of the year is marked by the growth of luxury housing supply in these areas.

In this respect, several luxury housing projects in Lisbon, Porto and surrounding areas and in different stages of construction stand out, such as Vista do Paço, a condominium consisting of 10 villas in Paço de Arcos, Edifício Possidónio da Silva 45, a XX century residential building in the parish of Estrela that will “receive” 8 more luxury flats throughout this year and Prata Riverside Village that will have 107 new luxury homes on the banks of the Tejo River.

In the Algarve, a new project is growing in Quinta do Lago with 89 luxury villas, each with its own private garden and heated pool, as well as a shared luxury complex with a golf course, clubhouse and commercial area with restaurants, bars and gyms.

Further north, more specifically in Foz do Douro, a luxury development is being built under the name Casas de Nevogilde, with its own private garden, pool and terrace.

The strong investment by the real estate sector in this type of housing in the main Portuguese cities is here to stay and, not being illegible for Golden Visa application purposes, is a great investment opportunity in Portugal for secondary housing and property enhancement.

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Acquiring real estate with Crypto-Assets

As virtual currency is increasingly present in our daily lives, the need to legislate on this matter has arisen. The Portuguese Notaries’ Association is the entity preparing the regulation that allows this type of transactions, without the need for conversion into fiat currency – this regulation came into force in the month of April.

The new instructions for real estate transactions with virtual currencies, without the need for conversion into euros, foresee a tighter control: it will be fundamental that investors report and prove in detail the origin of the money, as a means of preventing tax crimes.

This control mainly involves the provision of the following data: identification of the parties involved in the transaction, price and type of the virtual currency, submission of proof of purchase of the cryptocurrency, submission of information about the wallets, and the day of the deed.

This data will be shared with the notaries within 5 days until the signing of the deed, so that they can send it to the Portuguese Central Department of Investigation and Prosecution and the Portuguese Financial Intelligence Unit.

In case the business value exceeds two hundred thousand euros, besides what was mentioned above, it is imperative that this operation is communicated to the authorities and that a comparison of the value of the virtual currency until the day of the promissory contract and its value until the day of the deed is carried out.

It should be noted that until then, this type of transaction using cryptocurrencies could already be carried out, but only preceded by a conversion to fiat currency.

With these amendments, Portugal once again demonstrates its update regarding the dynamics of international markets and the future of the real estate market.

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