Rich French fleeing taxes find sanctuary in Portugal

Vasco da Gama Bridge, Lisbon, Portugal. The French have now overtaken the British as the biggest group of foreign home buyers in Portugal. Photo / Thinkstock
Vasco da Gama Bridge, Lisbon, Portugal. The French have now overtaken the British as the biggest group of foreign home buyers in Portugal. Photo / Thinkstock

Lisbon real estate agent Paulo Silva says Portugal's property market has a Frenchman to thank. Francois Hollande, that is.

"The French president's taxes are prompting many to flee their country," Silva, who heads real estate agency Aguirre Newman, said in an interview. "Many of these wealthy French are coming to Portugal to take advantage of a series of tax benefits that are better than in other countries."

An increase of 70 billion euros ($109 billion) in taxes in France over the last three years and fiscal breaks provided by Portugal are driving wealthy French people to seek homes in the Atlantic Ocean-hugging country.

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While Portugal's sun, sand and sea have long attracted property investors, the French have now overtaken the British, who used to be the biggest group of foreign home buyers in the country before it sought a bailout in 2011 and real estate prices dropped.

Sotheby's International Realty has seen scores of French investors buying up Portuguese luxury real estate, the company's managing director in Portugal, Gustavo Soares, said this month.

"The French were our biggest foreign clients in the first six months of the year followed by Brazilians and British nationals," Soares said in an interview. The tax benefits Portugal is offering foreigners has been "extremely important" in attracting French investors, he said.

Portuguese home prices rose 4 per cent in the first quarter from the same period a year ago, the biggest increase since at least 2010, the National Statistics Institute said on July 1.

No taxes

Nuno Durao, head of real estate company Fine & Country in Portugal, has a similar tale to tell.

After not selling a single house to a French person in more than a decade, he closed five deals for as much as 1 million euros each with property investors from France this year.
"The French are finally coming to Portugal," Durao said in an interview. "They like our country, but they like our tax regime even more."

Under Portugal's so-called non-habitual-resident program, foreign pensioners who come to live in the country may have their pension income exempt from taxes as long as it's paid from a foreign source. France, meanwhile, only taxes its residents.

"This means that the pension income may end up not being taxed at all," said Luis Filipe Sousa, a tax manager at PricewaterhouseCoopers in Lisbon.

Hollande, France's first Socialist president since Francois Mitterrand's term ended in 1995, added to a tax regime that had already been made heavier by his predecessor Nicolas Sarkozy. It has left France with the highest tax burden in the euro region.

Hollande's burden

Among Hollande's first steps after winning power in May 2012 were to push through a tax of 75 per cent on annual incomes of more than 1 million euros and to raise the capital-gains tax.

French movie star Gerard Depardieu, who played Obelix in films about one of France's most beloved fictional characters, was among the most high-profile people to flee Hollande's taxes by moving to Belgium. He later acquired Russian citizenship.

Gerard Depardieu
Gerard Depardieu

French real estate investor Geoffroy Moreno is among those who has escaped Hollande's taxes by moving to Lisbon and is now selling property to his fellow countrymen.

The 35-year-old was at a real estate fair in May in Paris promoting the sale of apartments at five buildings he is renovating in and around the Portuguese capital.

"I have many French friends calling me about properties in Lisbon," Moreno said in an interview. "The French, especially those with money, are looking to escape Hollande's aggressive fiscal policy and taking advantage of Portugal's generous tax benefits for foreigners."

Golden chance

The French, along with the British and the Chinese, accounted for more than half of the 3,500 property purchases made by foreigners in the first quarter of the year, according to the Portuguese Real Estate Professionals and Brokers Association.

The purchases haven't been confined to the Lisbon area.

At the Troia Resort, a cluster of luxury villas on a finger-shaped peninsula south of the capital, real estate agents are busy showcasing the last units to French, Chinese and other potential foreign buyers.

French property buyers come to Portugal seeking a tax break while the Chinese are seeking to take advantage of the country's property-for-visa program, said Fernando Neves, a real estate agent promoting Troia.

Not forever

Portuguese Economy Minister Antonio Pires de Lima has praised Portugal's tax breaks and golden visas for their effect on the property market in a country that completed its international bailout program in May.

These programs have "attracted a lot of foreign investment," Pires de Lima said on May 27.

"You see a lot of French and Chinese potential buyers here these days," said Neves. "We're telling these clients that tax benefits and golden visas are like golden opportunities, they won't last forever."

- Bloomberg

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