Portugal plans to introduce tax on real estate fortunes

Portuguese Prime Minister Antonio Costa gestures during a debate at Parliament in Lisbon. (AFP)
Updated 15 October 2016

Portugal plans to introduce tax on real estate fortunes

LISBON: Portugal will introduce a tax on real estate fortunes above 600,000 euros ($661,000) in 2017 to help pay for pensions, the government has said.
The tax, fiercely opposed by the real estate sector which fears it will put the breaks on foreign investment, was included in Socialist Prime Minister Antonio Costa’s draft budget for 2017.
“The taxation of large real estate fortunes will enhance the sustainability of our social security system and contribute to fiscal justice,” he told parliament.
If the value of all real estate owned by a taxpayer surpasses 600,000 euros ($661,000), a levy of 0.3 percent will be applied to the amount above this threshold, according to the draft budget.
The government expects the measure will raise 160 million euros ($176 million) each year.
“The taxation of real estate fortunes will make it possible to raise pensions,” said Catarina Martins, a lawmaker with the far-left Left Block party which backs the minority Socialist government.
The threshold of 600,000 euros will spare most beneficiaries of the country’s so-called “golden visa” scheme, which has helped fuel demand for real estate among wealthy foreigners from outside the European Union.
Cash-strapped Portugal in October 2012 started offering “golden” visas to non-EU citizens willing to invest 500,000 euros in property, make a capital transfer of one million euros or create 10 jobs.
The Portuguese visas allow foreigners to travel within Europe’s 26-country Schengen free trade zone without restriction.
Portugal has issued nearly 4,000 “golden” visas that have generated investments of 2.37 billion euros since the scheme was launched at the end of 2012, most of them to Chinese, Brazilians and Russians.
The Association of Lisbon Homeowners (ALP) criticized the new tax, calling it an “unprecedented fiscal attack against the real estate sector.”
The measure will also affect foreign buyers who have flocked to Portugal to take advantage of tax exemptions granted to European retirees who move for the first time to the country.
French nationals account for 27 percent of all foreign real estate buyers, followed by Britons who account for 18 percent.
“With this measure, the government has shot itself in the foot. Portugal can’t constantly change the rules of the game,” added Henrique Moser, a lawyer with the Telles law firm which specializes in real estate.
The government also decided to raise its tax on home rentals for tourists, which have up until now been lower than those applied to long-term rentals.
The measure comes as home rental websites such as Airbnb have seen their business soar in Lisbon and other Portuguese cities.
The number of people who have stayed in accommodation in the Portuguese capital has doubled to 433,000 in 2015 from 213,000 the previous year.
Costa came to power in November 2015 after his party teamed up with the Communists and Left Block to oust a center-right administration.
The tiny leftist parties did not formally join the new government, but Costa relies on them for a majority in parliament to pass legislation.

Saudi Arabia PIF’s $40bn boost aimed at post-pandemic profit

Updated 34 min 38 sec ago

Saudi Arabia PIF’s $40bn boost aimed at post-pandemic profit

  • Since the COVID-19 crisis began, the PIF has spent $7.7 billion amassing a portfolio

DUBAI: The Public Investment Fund (PIF), Saudi Arabia’s ambitious sovereign wealth fund, is seeking to use the extra $40 billion it was recently granted from government reserves to benefit the Kingdom and its citizens when the current coronavirus disease (COVID-19) pandemic is over.

A spokesperson for the PIF said that the injection from reserves held by the Saudi Arabian Monetary Authority — announced last week — “allow us to tap into a number of local and global investment opportunities at attractive prices. This includes investments in sectors that are well positioned to drive economic growth and value creation and derive benefits for the citizens of our country well beyond the current crisis.”

Since the COVID-19 crisis began, the PIF has spent $7.7 billion amassing a portfolio of shake stakes in some of the best-known corporate brand names in the world, including Boeing, Disney, Facebook and Marriott International. It also took big holdings in independent oil companies Shell, Total and BP, as well as banking giants like Citigroup and Bank of America.

The shares of these and other investments in the PIF spending spree had been affected by the dramatic downturn in the US stock market after the first pandemic related lockdowns. They have since recovered almost to all-time highs as US authorities took emergency measures to support its financial institutions.

Some investors are calculating that there will be a rapid economic recovery when the lockdowns end, to send stock markets soaring again.

“The PIF’s role is to invest the nation’s wealth in a way that generates long-term attractive returns and a diversified source of wealth for the Saudi people. The uncertainty caused by COVID-19, and the subsequent drop in global oil prices, highlights why our economic diversification efforts are so important. Capital injections from the government are an established source of funding for the PIF, as outlined in our strategy as part of our Vision Realization Program,” the PIF spokesman said.

The fresh resources for the fund, which has $320 billion of assets under management, will provide extra firepower to take advantage of perceived bargains. Yasir Al-Rumayyan, governor of the PIF, said last month: “You don’t want to waste a crisis. We’re looking into any opportunities.”