Portugal must change planning system to accommodate international investors

Portugal needs to change its planning system in order to accommodate a new wave of international real estate investors, says Caiado Guerreiro partner Tânia Pinheiro.

“The type of investor and the type of real estate projects have changed in recent years,” says Pinheiro. “Foreign investment funds are players in this market – Portugal is still keen on attracting foreign investment.”

Pinheiro adds that it is essential to work in partnership with lawyers from other practice areas when tackling major international real estate projects. One of the reasons for this is that the tax implications are particularly complex, in light of the recent Organisation for Economic Co-operation and Development (OECD) base erosion and profit shifting (BEPS) action plan, which was implemented to tackle international tax avoidance.

“The tax analysis and the tax implications are always part of the work in real estate transactions,” Pinheiro says. “The acquisition of real estate has a significant tax burden, and if transactions are not properly structured, the tax bill might be high, and even a deal breaker.” However, such transactions offer excellent opportunities for law firms to “cross-sell” services in other practice areas, she adds.

Navigating Portugal’s urban planning system can be problematic for clients. Pinheiro says real estate clients’ biggest challenge is the amount of time it can take to obtain licences for projects. “It is difficult to explain this to international clients who want a concrete plan implemented within a certain deadline,” she explains. Pinheiro says the system needs to change to accommodate this new breed of international investor now coming to Portugal. “We need to improve the law and proceedings and adapt to the new reality,” she adds.