Sale of companies with real estate: tax implications

The sale of companies that have real estate in their assets is an increasingly frequent operation in the Portuguese market, especially in sectors such as hospitality, education, industry, commerce, health, among others. However, despite often being seen as an alternative to the direct sale of the properties themselves, this operation raises a set of tax implications that must be understood rigorously. The way the transaction is structured can significantly influence the tax burden of both the seller and the buyer.

1. Sale of quotas or shares vs. direct sale of the property

The first essential distinction is between:

• Direct sale of the property, subject to Municipal Property Transfer Tax (IMT), Stamp Duty and potential capital gains under IRC or IRS.
• Sale of the company that owns the property, through the transfer of quotas or shares.

At first glance, the sale of the company may seem more financially efficient, especially since the transfer of shares is not subject to IMT, except in specific situations provided for by law. However, this option does not eliminate capital gains taxation or dispense with a careful analysis of the corporate structure.

2. IMT: when it should be overdue on the sale of shares

Although the general rule excludes the transfer of quotas or shares from the scope of the IMT, there are relevant exceptions. The tax is due when the following conditions are met cumulatively:

• The company is predominantly real estate, that is, more than 50% of its assets are made up of properties located in Portugal.
• The operation results in the acquisition of at least 75% of the share capital or gives the buyer control of the company.

In these cases, the IMT is calculated as if the property had been transferred directly, applying the rates corresponding to the type of property (residential, commercial, rustic, etc.).

This point is particularly sensitive in transactions for the acquisition of companies with relevant real estate assets, and it is common for the parties to adjust the price or structure of the transaction to mitigate this impact.

3. Taxation of capital gains

For the seller

The sale of shares can generate taxable capital gains:

• Companies: capital gains are taxed in the IRC and can benefit from the participation exemption regime, provided that the following requirements are met:
  • Own at least 10% of the capital,
  • Minimum period of detention of 12 months,
  • The investee company is not predominantly real estate (unless the real estate is allocated to economic activity).
• Indivíduos: as mais-valias são tributadas no IRS, como regra geral à taxa de 28% (14% para micro ou pequenas empresas), com exceções para residentes noutros países da UE/EEE ou para participações qualificadas.

For the buyer

The cost of acquiring the shares is not amortizable but may be relevant for future capital gains effects. In private equity or restructuring transactions, this variable is often integrated into medium-term tax planning.

4. Stamp Duty

The transfer of shares is not subject to Stamp Duty, except when the transaction is carried out through certain acts subject to specific taxation (e.g., certain financial transactions). The direct transfer of real estate implies Stamp Duty at the rate of 0.8%.

5. Tax Due Diligence and associated risks

Acquiring a company with real estate implies assuming your entire tax history, including:

• Tax debts,
• Pending litigation,
• Risks associated with the accounting valuation of real estate,
• Possible future corrections by the Tax Authority.

Therefore, tax and legal diligence is indispensable. In many cases, the buyer needs contractual guarantees, price adjustments or indemnification mechanisms to mitigate risks.

6. Revaluation and taxable value of the asset (VPT)

Even when the transaction occurs at the level of shareholdings, the property retains its VPT, which will remain relevant to:

• IMI,
• IMT in future issuances,
• Determination of capital gains in the event of direct sale of the property.

The operation alone does not trigger an automatic update of the VPT, which can be advantageous or unfavorable depending on the case.

7. Tax planning and operation structuring

The sale of companies with real estate can be structured in several ways, each with different tax impacts:

• Direct sale of shareholdings,
• Sale of the properties followed by the sale of the “clean” company,
• Previous splits or mergers,
• Creation of vehicle companies (SPV),
• Internal reorganizations to separate operating assets from real estate assets.

The choice of the ideal structure depends on factors such as:

• Objectives of the parties,
• Nature of the properties,
• Applicable tax regime,
• Investment time horizon.

The sale of companies with real estate is a complex operation, where taxation plays a decisive role. Although the transfer of shareholdings can, in many cases, offer advantages over the direct sale of properties, there are important exceptions, namely within the scope of IMT, which can substantially change the tax cost of the operation.

For sellers and buyers, the key lies in rigorous analysis, in-depth due diligence and proper tax planning. Only in this way is it possible to ensure that the operation takes place efficiently, transparently and in accordance with the strategic objectives of both parties.

Count on ValuingTools to ensure a rigorous valuation and expert advice in the sale or purchase of companies. Talk to us and turn every decision into a safe step for the future of your business.