Moving from Malta to Portugal
We are now (2019) faced with a situation whereby many property owners wished that they never had involved themselves in buying a property through an off-shore company. Many years ago many jurisdictions were blacklisted and the majority had the choice either to move to Delaware or Malta. Some opted for the latter others for Delaware. What it was all about in fact nobody realised at the time.
A normal company has shareholders, directors and capital and in general audited accounts. In the case of off-shores, the share capital was most of the time nominal and in the books, the money to purchase a property was registered as a loan of the shareholders to the company. In case of a sale, we refunded the monies to the shareholders without knowing where the monies originated from when they bought the property. How things have changed!
Some companies now suggest bringing the off-shore onshore without realising what the consequences are.
For a while it seemed that there was a legal way of transferring a company from Malta to Portugal and reducing eventual C.G.T. to pay. However after several attempts to do it for clients I feel it is not worthwhile. But I still would like to share some thoughts on this topic.
Opinion of a specialized lawyer in these matters
Malta – if the company is domiciled in Malta, we can verify that there is organized accounts and there is social capital. However, the social capital normally is not all paid and issued, though upon domiciliation it is declared that it is (paid and issued). If this does not correspond to the truth, the deed of domiciliation to Portugal is a false declaration to an authority and liable for a criminal offense.
The social capital is possible to be increased in Malta, but it will require payment of stamp duty and some alterations to take place.
Though the Binding Information Feb-2018 referred only to those companies with no organized accounting, I cannot assure that this transaction will pass the test of a tax inspection with regards to the value of the asset reflected in the accounts.
The sale of the asset out of the company, to a 3rd party, will always attract, in whichever case, the original capital gains as the Binding Information of 2013 very clearly specifies that the capital gains tax of a company when selling the asset, will be based on the value of purchase and not of a revaluation made abroad before the domiciliation to Portugal.
Others have slightly different opinions.
As mentioned above, Malta has organized accounts and a balance sheets.
What normally only is mentioned on the balance sheets in Malta is the original purchase price when the company bought the property.
In all honesty that figure is most of the times different from what really was paid, especially when the purchase took place 15 – 25 years ago. Nobody bothered where the money came from and what was declared.
How things have changed.
In most cases the balance sheet never was updated with monies spend on the property by the share-holders.
We can redomicile the company to Portugal which means that we will start here with a balance equal to those in Malta. However there is a legal way to upgrade the value in the books of Malta.
The accountants of Sovereign in Malta have agreed that if a valid valuation report is presented they can use that.
With my background and knowledge of the real-estate market in the Algarve they will accept my valuation.
This will be done by me also taking into consideration the opinion of 3 independent estate-agents.
What does re-domiciliation mean?
It means that we change the company´s head-office from Malta to Portugal. The company will get a new name which will be approved by the authorities:
For example: ABC Porperties Investments Ltd. may become ABC Properties Investments Lda.
This new Portuguese company will have:
- Share holder(s)
- An objective(s)
- A share capital.
- The shareholders will normally be the beneficiary owners
- The Director(s) could also be the Ben. Owners, but also an independent person.
- Normally the rental and management of your own property
- Normally what has been issued by Sovereign.
What are the financial consequences when selling in Malta opposed to Portugal.
Suppose the property is worth realistically € 500.000, 00 but in the books in Malta and the escritura we have only shows € 100.000, 00.
This will mean that the offshore makes a profit of € 400.000 which will be taxed at a flat rate of 25%, thus € 100.000,00
Also when the money becomes available you have to prove where it is coming from. You should have declared the shares in your home jurisdiction.
Now I have valued the property at € 400.000 and that is shown in the Portuguese books.
Again you sell for € 500.000.
The profit of € 100.000 will be taxed under the IRC regime. The first € 15K will be taxed at 17%, the remainder of € 85K at 21%
From the Shareholder(s):
a) Full name:
c) Complete address:
d) Wife´s/husband´s name, if:
e) Martial status, if:
g)-Copy of passport;
From the company:
a) Copy of Certificate of Incorporation;
b) Copy of Beneficiary Owners or declaration of Trust or share certificates;
d) Copy of IMI payment (any instalment):
Unfortunately the redom from Malta or any other jurisdiction to Portugal will not come for free.
The fees depend on the complexity of the situation but roughly it could be as follows:
Basically there are 3 players involved:
- The present administration company of the offshore company. There are several companies dealing with offshores like Sovereign – Fiduciary - Gibro HLB. The off-shore company has to be terminated in the jurisdiction of Malta. Estimated fee: € 2.500 - € 3000 ( ex VAT )
- The accountant dealing with the transfer and setting up the Portuguese company Lda. Estimated fee € 3.500 - € 4.000 ( ex VAT )
- ROBAN ReAct Lda (my company) who is coordinating the process and is the contact person between Nº 1 and 2 and the client, most of the time the Beneficial Owner and/or shareholder of the off-shore. Estimated fee between € 2.500 - € 3.000 ( ex VAT)