Portuguese Council of Ministers Approves REIT Framework

Portuguese Council of Ministers Approves REIT Framework

After several years of work, the Portuguese Council of Ministers has recently approved a new decree for the legal and tax framework specifically applicable to real estate investment trusts (REITs; in Portugal, sociedades de investimento e gesto imobiliria, or SIGI;). As more thoroughly described below, this framework closely resembles that which is applicable in Spain to sociedades anónimas cotizadas de inversión inmobiliaria (SOCIMIs).

Portugal REIT framework and Ally Law

From a corporate standpoint, the REITs foreseen in the new decree shall take on the form and be subject to the specific legal framework applicable to listed stock corporations, thereby being subject to regulation by the Comissão do Mercado de Valores Mobiliários (CMVM, or Portuguese Securities Market Commission). Moreover, please note that, in similar terms to SOCIMIs, these entities should be subject to a set of specific limitations in regard to its real estate-to-total asset value and debt-to-total asset value ratios, investment policy and mandatory periodical distributions of proceeds, as follows:

  • From the second year onwards, at least 80% of the REIT’s total asset value should correspond to either rights over real estate assets or participations in Venture Capital Funds (VCFs), Real Estate Investment Funds (REIF) or Real Estate Investment Companies (REIC), provided that some requirements (regarding such entities) are met;
  • From the second year onwards, at least 75% of the REIT’s total asset value should result from the ownership of real estate assets available for leasing or otherwise allocated to other forms of economic exploitation;
  • At any point in time, the REIT’s debt-to-total-asset value ratio must not exceed 60%;
  • A minimum of 75% of the net proceeds derived from the sale of any of the rights referred above must be reinvested in the acquisition of assets of the same nature, within a three-year period from such sale;
  • Finally, within nine months from each year end, REITs are required to proceed with mandatory distributions of: (i) at least 90% of the proceeds derived from participations in VCFs, REIFs and REICs; (ii) at least 75% of any other income.


In addition to the above, please note that, from a tax perspective, the regime that should be applicable to these entities should be one of its most significant attractiveness factors, under which:

  • REITs should not subject to any Corporate Income Tax (CIT) on any investment income (e.g., dividends, royalties, interest, etc.), rental income (i.e., income derived from dry leasing agreements), and capital gains arising from the sale of both real estate assets and participations in the referred entities;
  • Non-resident shareholders of REITs may benefit from reduced 10% CIT/Personal Income Tax rates imposed on distributions of proceeds and capital gains derived from the sale of such shareholdings.

This post was contributed by Vasco Carvalho Marques of Ally Law member firm Teixeira de Freitas, Rodrigues e Associados (TFRA).


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