Succession Planning in Portugal
Successionplanning is a legal tool that allows the testator (the person who makes a will) to organize the distribution of assets according to his or her wishes. With the succession planning carried out in advance, possible disputes after the testator's death are avoided.
One of the main tools of succession planning is the will, which defines how assets will be distributed, according to the testator's wishes and desires. In addition to the will, there are other tools to consider: donations, trusts and life insurance. Another strategy could be to create a fund and asset management, more geared towards complex and comprehensive assets and family businesses.
Unlike many other European countries, there is no traditional inheritance tax in Portugal. This means that there is no tax to be paid when bequeathing assets to direct heirs, such as children, spouses or grandchildren, if Portugal is considered the main and official residence of the testator and heir.
In Portugal, the inheritance law follows a clear legal structure. When someone dies, a certain part of the estate automatically goes to the direct heirs, regardless of what is written in the will. As a general rule, at least two thirds of the inheritance must be passed on imperatively in accordance with the law. However, there is the possibility of opposing this legal succession. Since the entry into force of the Brussels IV Regulation in 2015, the testator can decide which law will be applied: that of his/her country of origin or Portuguese. However, to implement this possibility, the testator cannot be a Portuguese national or have dual nationality, this must be explicitly stated in the will in Portuguese.
The Rules of Succession in Portugal for Foreigners
In the case of foreigners, inheritance can be affected by tax regimes from your country of origin. If you reside in Portugal but your tax residence is still registered in another country, all your assets may be subject to inheritance tax in that country.
THE succession planning in Portugal can be advantageous for direct heirs due to the absence of inheritance tax. However, tax regulations of the country of origin should not be disregarded. The transfer of assets can be optimized through a defined strategy that also takes into account possible donations and other legal instruments. Early advice from a lawyer in the area ensures this optimization.
What are capital gains and how do they apply to Inheritances?
Beyond Legal profit generated from the sale of a property, calculated by the difference between the sale price and the purchase price (in this case, the value attributed in the inheritance). For non-residents, the capital gains of a property located in Portugal are determined and taxed in Portugal. The tax on capital gains must be paid by the heir, even if he is a non-resident. Taxation is applied at the time of sale of the property and calculated in Portugal. Documented expenses, such as brokerage, deed and work to enhance the value of the property, can be deducted when calculating the capital gains.
Impact of double taxation
Portugal has agreements to avoid double taxation with several countries. However, in this case, the initial taxation always occurs in Portugal. The taxpayer can subsequently deduct the tax paid here in their declaration in the country of residence, according to the rules of the applicable agreement.
Choose to plan your succession, define the distribution of your assets, protecting them and your family relationships. Professional advice is essential. At Beyond Legal, we have a team of lawyers can assist in organize this process smoothly.
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