SIGI BOOSTS REAL ESTATE IN PORTUGAL
Portugal continues its strategy of seduction among foreign investors. The government has just launched a new regime for real estate investment companies. The SIGI are of particular interest to foreign investors, as they benefit from lower taxation.
Portugal is definitely not short of ideas to attract foreign investors. While almost 20% of real estate transactions were carried out by foreign buyers in 2018The Portuguese government has just acquired a new real estate investment instrument.
At the end of January, it adopted a decree-law laying the foundations for a new investment company regime: real estate investment and management companies (SIGI), a Portuguese version of the listed real estate investment companies (SIIC). The aim of the SIGI is to further develop foreign subscriptions, by offering a favorable legal and fiscal structure, which did not yet exist in Portugal. At the same time, this new scheme aims to boost the Portuguese rental market, which is still saturated due to demand far exceeding the supply of housing.
Half of the member countries of the European Union already have similar investment company schemes. SIGIs are based on the structure of the Spanish Socimi, launched in 2009, with more benefits, especially tax benefits. In practice, SIGIs aim to invest, directly or indirectly, in real estate assets. They also aim to acquire shares and property rights in other companies, organizations and real estate investment funds, in Portugal and in Europe, or to develop construction or rehabilitation projects, mainly for rental purposes.
Predictable revenues and boosted profitability
The shareholders are assured of a certain predictability of income, since the company is obliged. Within 9 months after the end of the fiscal year, the company is obliged to distribute its profits with a specific breakdown. It must pay its shareholders dividends.
90% of the profits from its own dividends or shares in the profits of companies in which it holds shares. In the same way, it pays 75% of the rest of its earnings. Rental income or real estate capital gains. Finally, a mechanism of limitation of its indebtedness ensures a certain security to the investors. The SIGI cannot have a debt ratio higher than 60%, which obliges them to have equity capital and to remain independent of bank financing.
Article realized in collaboration with the Luso-French real estate agency in Porto.