Trusts in Portugal act as fiduciaries or agents on behalf of other companies or natural persons in Portugal and are in charge of varied responsibilities we will shortly present. Our company incorporation agents in Portugal can give more details about trusts in Portugal and how they can be activated. Please explore this article and also talk with our experts to find out more on this topic and also on company incorporation in Portugal.
| Quick Facts | |
|---|---|
| Definition of trust | A trust is a legal entity based on an agreement between a trustor and a trustee where the latter has the right to hold and manage specific assets for the benefit of a third party, named beneficiary. |
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Who can set up trusts in Portugal? |
Tax residents in Portugal |
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Legislation |
There is no specific regulation concerning trusts in Portugal. Madeira trusts are subject to international laws. |
| Trusts as planning tools in Portugal | Trusts are often used for settling assets and reducing or removing inheritance tax liability, under certain conditions. |
| Can benecifiaries become trustees? |
Yes, at a certain point. |
| Purpose of a trust in Portugal |
For managing varied types of assets in the name of the owners/settlors, in the best interest of beneficiaries. |
| Who decides the way the assets can be used? |
The settlor |
| Required documents to open a trust in Portugal |
Trust Deed is the main document. |
| Period of a trust in Portugal |
Can be established by the settlor. |
| What are the rights of a trust settlor in Portugal? | Must be informed about the way the trust is managed. |
| Is the information of a trust publicly disclosed? (YES/NO) |
NO |
| When is a trust terminated in Portugal? |
When the settlor decides so. |
| Can a trust be annulled? (YES/NO) |
YES |
| Taxation of trusts in Portugal |
Ranging from 28% to 35%. Specific tax conditions apply. |
| Working with our agents in Portugal |
Our Portuguese representatives can help foreigners in setting up trusts in Portugal in a professional and efficient manner. Contact us and discover the prices for our services. |
Table of Contents
How does a trust work in Portugal?
A trust in Portugal has the main purpose of properly administering and managing the assets, shares, and bonds of a company or person living in this country. Such a trust practically has a legal obligation to take care of the assets in the name of the owners, under a written legal contract. Below is important information about trusts in Portugal:
- Assets involved in a trust can be managed for the purpose of investments and future profits.
- Trustees cannot use the assets on their personal behalf.
- Stock transfers can be made with the help of a trust in Portugal.
- Trusts in Portugal are involved in wealth management and can act as fiduciaries on the market.
Trusts can be established as private LDAs and therefore have a legal status before running the activities in Portugal. If you would like to open a limited liability company in Portugal, we suggest you talk to one of our experts in company formation in Portugal and ask for assistance. You can also discover this infographic with details on this subject:
Who needs fiduciary services in Portugal?
Fiduciary services in Portugal are normally directed to Portuguese companies looking for:
- portfolio development,
- wealth management,
- equity investments.
The management of company assets can enter the attention to one of our specialists who can provide fiduciary services under a legal agreement and the promise that he/she will work in the best interest of your personal purposes and intentions. Fiduciary services in Portugal can be a combination of tax plans and strategies, inheritance tax planning, complete retirement planning, a wide range of corporate solutions for future business investments, portfolio diversification, business risk reduction, and management, plus complete legal advice in matters of company finances.
Who can open trusts in Portugal?
A trust in Portugal can be established by foreign or domestic investors with a clear criminal record and no financial crimes involved. The benefits of having a trust in Portugal are huge, and among them, the financial ones and the possibility of sustaining the business portfolio in a large percentage. One of our company formation agents in Portugal can give immediate support for opening a trust in Portugal. They can help you open a company in Portugal by handling the formalities involved.
About trusts in Portugal and their use
Trusts in Portugal can be managed by specific companies. There are certain reasons why trusts are set up in Portugal, and among them, the following are the most important:
- Family assets can be controlled with the help of trusts in Portugal. Also, protection is offered in this case. It can be established from the beginning who the beneficiaries of the trust in question are, as well as how the assets can be distributed, taking into account the shares and amount. Many people set up a trust in Portugal to protect their wealth in case of divorce.
- Good tax planning can be done with the help of a trust in Portugal. There are certain tax exemptions applicable to trusts in Portugal. A specialist in the field can help you in this direction, explaining the conditions under which certain taxes can be avoided.
- With the help of a trust in Portugal, one can protect minor children, including those with disabilities. Thus, it can be ensured that the wealth is distributed and managed correctly from this point of view. A trust in Portugal can help you in this regard.
- Assets can be set for other purposes. For example, they can be passed during and after the lifetime of the person in question to family members. It can be said that it is a matter of safety in terms of the distribution of assets in the family, without financial risks.
- Setting up a trust in Portugal does not require certification, and family members can have access to the wealth left behind. We emphasize here that trusts in Portugal are private ,and these can be made up of properties, company shares, cash, and land, as the case may be.
You might want to check this video presentation with details on this topic:
Trusts in Madeira
Trusts in Madeira (an autonomous region in Portugal) have a special status because there is regulation in this case, namely, the international legislation. Thus, trust in Madeira impedes very little with Portuguese legislation, so they are detached from this point of view. Here is what you need to know about trusts in Madeira:
- According to the Decree-Law that allows the creation of trusts in Madeira, the settlor can designate the foreign law that regulates the respective trust. On the other hand, it is possible to replace the selected law at any time during the existence of the respective trust in Madeira, the autonomous region of Portugal.
- Trusts in Madeira are exempt from taxes on dividends received from royalties, shares, and interest on deposits.
- Trusts in Madeira cannot carry out specific financial activities.
We recommend that those interested in trusts in Madeira, Portugal, discuss all aspects with one of our experts. We can explain the conditions and differences between trusts in Portugal and trusts in Madeira.
Setting up a trust while residing in Portugal
Tax residents in Portugal can easily set up trusts here with the help of a professional, namely a trustee. Thus, individuals can benefit from complete services for opening a trust in Portugal, in order to better manage their wealth and distribute it within the family under the desired conditions. On the other hand, tax residents in Portugal can open a trust here if they want to cut or remove the inheritance tax liability, thus using a rather important financial tool, respecting certain conditions. In most cases, a trust opened while living in Portugal proves to be a proper solution for various financial objectives, benefits, and tax implications. As there is no legislation in this regard, it is good to seek specialized advice when opening a trust in Portugal and to make sure that you understand all the implications from a legal point of view and beyond.
Trust limitations in Portugal
It is also the local legislation that underlines trust limitations in Portugal. Find some of them below:
- Financial activities through trusts are not accepted in Portugal. There is no tax imposed on special beneficiaries like licensed entities or non-resident companies, under certain conditions.
- Immovable properties in Portugal are not accepted in a trust.
- Trusts in Madeira, one of the autonomous regions of Portugal, cannot be used by Portuguese residents.
We remind you that we can help foreigners set up a company in Portugal or any autonomous region of this country, in a fast and reliable manner.
When can a trust be closed in Portugal?
Closing a trust in Portugal can be done in two ways: once an event has occurred and has been mentioned in the trust, which will then be closed, or if the beneficiaries/trustees decide to close the respective trust in Portugal. From a legal point of view, closing a trust in Portugal may seem quite difficult, but it is important to have specialized support in this case. We offer assistance and guidance if you want to learn more about trust regulations in Portugal.
Taxation of trusts in Portugal
The flat tax of 28% is applicable on trust distributions, alongside the stamp duty of 10% rate on gifts delivered from a trust, plus the capital gains tax. However, the stamp duty tax can be eliminated if the beneficiary of the trust is related to the settlor, who can be a family member. If you would like to know more about the taxation of trusts in Portugal, you are more than welcome to address your inquiries to our consultants.
Foreign trusts and taxation in Portugal
Residents in Portugal with foreign trusts must pay attention to the taxation in this case. For example, a 35% tax is imposed for the distribution of foreign trusts if the trustee is in the so-called “blacklist jurisdiction”. But if this trustee is not domiciled in one of the blacklisted countries/jurisdictions, then a 28% tax is imposed. The Controlled Foreign Corporation (CFC) in Portugal imposes rules regarding non-distributed passive income in a foreign trust, mostly if a Portuguese resident holds control over the trust in question and its assets.
On the other hand, there are distinct guidelines for the taxation of “non-habitual residents” (NHR) living in Portugal. In this case, the NHR rules may deliver complete tax exemption of foreign source income. However, the exemption rules might not apply to foreign trust income of Portuguese residents. But more details on this subject can be provided by our local team of experts.
Trust distribution under the NHR regime in Portugal
Trust distribution should be done after careful analysis because, in certain cases, as in the case of the NHR regime, income might be exempt from taxation. What you should consider in the case of the trust distribution to the beneficiary in another jurisdiction, after the trustee receives several income types, is the OECD model, where “other income” is specified, according to Article 21. Here, the rule where the trust income is levied only where the beneficiary is resident.
Why work with us when setting up a trust in Portugal
It is good to know that both foreigners with residence in Portugal and citizens of this country can opt for our fiduciary services when opening a trust. This way, all legal aspects can be explained before registering a trust in Portugal. In addition, the taxation of the distribution of trusts must be fully understood, taking into account that in certain cases it may also be a tax exemption. We have extensive experience in setting up trusts in Portugal, and we know the legislation, so our clients can benefit from our expertise from the start.
Economy of Portugal in a few lines
Portugal is a top business destination for numerous entrepreneurs worldwide who want to benefit from a great and appealing climate for their activities. The tourism sector is quite prolific and provides a multitude of investment possibilities to foreign investors of any kind. Spain, the UK, France, the Netherlands, and Germany are the main investors in Portugal, who benefit from simple business formalities, appealing investment incentives, and many important encouragements offered by the government. We have gathered facts and information about the economy in Portugal that you might find useful:
- According to the Central Bank of Portugal‘s indicators, the economic growth recorded in Q4 of 2024 was around 1.3%.
- The economic growth recorded in Q4 of 2024 was largely due to the services sector and its strength.
- Another important aspect to highlight regarding the Portuguese economy is the private consumption sector, which recorded a growth of almost 2.8% in 2024.
Besides assistance for trusts in Portugal, foreigners can benefit from other services too. Our accountants in Portugal are at your disposal when you start a business in this country. Those interested in setting up a company in Portugal can get in touch with our local agents and find out more about the formalities of the formation process.