Published on and written by Cyril Jarnias
Investing in Portugal through a Real Estate Civil Company (SCI)
Investing in Portugal through a Real Estate Civil Company (SCI) offers a unique opportunity to tap into a booming real estate market while benefiting from significant tax advantages. This investment mechanism, while attractive, also involves potential pitfalls that are crucial to know in order to optimize your wealth strategy and avoid costly mistakes.
Why Choose an SCI to Invest in Portugal?
By examining the procedure for creating an SCI, the tax advantages specific to Portugal, as well as the administrative and legal difficulties investors may face, this article guides you through the essential points to consider for informed investing and maximizing the return on your assets.
Good to know:
Creating an SCI in Portugal may allow you to benefit from the NHR (Non-Habitual Resident) tax regime if you meet the required conditions.
The Advantages of Investing in Portugal via an SCI
Favorable Tax Framework for Foreign Investors
Portugal offers a very attractive tax environment for foreign investors, notably through specific regimes such as the IFICI (Incentivo Fiscal Investigação Científica e Inovação), introduced in 2025. This regime provides a flat tax rate of 20% on certain income, as well as a tax exemption on foreign-source income (excluding pensions), which enhances the country’s competitiveness and particularly attracts international profiles.
For those investing in strategic sectors such as tourism or manufacturing, there are also tax incentives including:
- Tax credits.
- Partial or total exemptions from property taxes (IMI) and transfer taxes (IMT).
- Exemptions from stamp duty on investment-related transactions.
Tax Incentives via an SCI
Investing in Portugal through an SCI (Real Estate Civil Company) allows non-European resident partners to optimize their taxation:
- Possibility to apply the favorable IFICI regime if the activity falls within the scope of the scheme.
- Potential benefit from a reduced corporate tax rate for certain structures and special economic zones (e.g., the Madeira free zone with a 5% rate until 2028).
- Increased deduction related to capitalization: in 2025, the deductible amount is increased by up to 50% compared to the usual ceiling, making corporate structuring even more attractive.
Economic and Political Stability
Portugal stands out for its political stability and predictable regulatory framework. The country has shown sustained economic growth for several years, supported by:
| Indicator | Recent Value |
|---|---|
| GDP Growth (2024) | +2.1% |
| Controlled Inflation | ~3% |
| Fitch Sovereign Rating | BBB+ |
Management Flexibility Offered by the SCI
The SCI provides investors with great flexibility:
- Free choice in the distribution of shares according to contributions.
- Simplified transfer of real estate assets between partners or heirs without direct sale.
- Possibility to easily integrate new financial partners.
Compared to purchasing as an individual or through a sole proprietorship, this structure better protects personal assets while allowing for collective management suited to the situation.
Administrative Ease for European Investors
European nationals benefit in Portugal from:
- Simplified access to the real estate market without major restrictions.
- Streamlined procedures for registering their company through the single desk “Empresa na Hora,” often allowing creation in under an hour.
- No or almost no obligation of local tax residence under certain legal configurations.
Checklist:
- Quick opening of a professional bank account
- Express registration with local administrations
- Facilitated access to bank financing
High Potential Thanks to the Dynamic Tourism and Real Estate Sectors
The Portuguese tourism sector is experiencing remarkable growth with over 30 million annual visitors expected by the end of 2025, generating strong seasonal rental demand, especially in Lisbon, Porto, and the Algarve.
On the real estate side:
| City | 12-month change in price per m² for existing housing (%) |
|---|---|
| Lisbon | +7% |
| Porto | +6% |
| Algarve | +9% |
Growing international demand coupled with favorable tax schemes ensures strong rental potential as well as speculative potential during property resales.
In summary, investing via an SCI offers not only tax optimization but also enhanced legal security and optimal exposure to a promising market that fully benefits from Portugal’s economic dynamism.
Good to know:
Investing in Portugal through an SCI offers a favorable tax framework, particularly thanks to tax treaties aimed at avoiding double taxation for foreign investors. Tax incentives such as partial exemption of rental income, combined with the country’s economic and political stability, make it an attractive investment destination. The SCI allows management flexibility, adapted to the needs of European investors, and simplifies administrative procedures compared to other structures. The booming tourism sector, with 27 million annual tourists in 2022, boosts investment profitability, as does the growing demand in the Portuguese real estate market, attracted by a preserved quality of life and a reasonable cost of living.
Optimizing the Legal Structure for Real Estate Purchase
A Real Estate Civil Company (SCI) is a company formed by at least two individuals or legal entities, whose purpose is the management or purchase of one or more real estate properties, without commercial intent. It allows for the acquisition, ownership, management, or transfer of real estate assets. Partners hold shares proportional to their contributions, and the company is managed by one or more managers designated in the articles of association.
General Operation in France
- The SCI is governed by Articles 1845 to 1870-1 of the Civil Code.
- Decisions are made collectively in general meetings.
- Partners’ liability is unlimited but proportional to their share of the capital.
- The SCI is fiscally transparent: profits are taxed directly at the partner level, unless an option for corporate income tax is exercised.
- Contributions can be in cash, in kind, or in industry.
General Operation in Portugal
- There is no direct equivalent to the French SCI in Portugal. The closest structures are the Portuguese civil company or certain real estate investment vehicles (OIC – Organismos de Investimento Coletivo).
- OICs can be set up in corporate or contractual form and are subject to prior authorization from the CMVM (Portuguese Securities Market Commission).
- Only the OIC’s assets are liable for its debts.
Specifics of Creating an SCI in Portugal and Legal/Tax Differences
| Aspect | France (SCI) | Portugal (OIC, civil company, others) |
|---|---|---|
| Legal status | SCI: civil company without commercial purpose | No SCI; similar structures: OIC, civil companies, Lda, SA |
| Taxation | Fiscal transparency (PIT) or CIT by option | Taxation depends on structure: OIC, Lda, SA, etc. |
| Creation | Simple procedure, free articles, no minimum capital | Regulated procedure, CMVM authorization for OIC, articles to be drafted |
| Transfer | Easy through share transfer | Depends on chosen structure |
| Inheritance regime | Advantageous, allows anticipating asset transmission | Subject to Portuguese law, different rules |
| Liability | Unlimited, proportional to contribution | Depends on structure: sometimes limited to share capital |
| Corporate purpose | Real estate management only | OIC: rental management/investment; others: broader |
Advantages of Using an SCI for a Real Estate Purchase in Portugal
- Ease of estate planning: Transferring shares is simpler than division or co-ownership, allowing effective inheritance planning.
- Taxation: Possibility to choose the most advantageous tax regime based on family situation and asset objectives.
- Share distribution: Suitable for spreading ownership among multiple partners, families, or investors. Share transfers are more flexible than selling an undivided property.
- Management flexibility: The articles allow free organization of decision-making and appointment of manager(s).
Tips for Choosing the Legal Structure Based on the Property and Goals
- For a family purchase: favor a structure equivalent to a family SCI, or a Portuguese company with articles adapted to asset management.
- For a rental investment: a commercial company (Lda or SA) may offer tax advantages under the Portuguese corporate income tax regime.
- For a property development or resale project: prefer an adapted commercial company (e.g., property development company).
- Always adapt the articles to the reality of the property (use, number of partners, financing, etc.) and to medium/long-term objectives.
Potential Legal Pitfalls and Challenges
- Protecting partners’ interests: Include preemption, approval, and exit clauses in the articles to avoid deadlocks.
- Compliance with local laws: Adapt the articles and management to Portuguese law requirements (registration, taxation, banking management, etc.).
- Double taxation and international taxation: Pay attention to tax treaties between France and Portugal to avoid double taxation on real estate income.
- Unlimited liability: Depending on the structure, partners may be liable with their personal assets.
Practical Examples
| Case | Chosen Structure | Role in Success/Failure |
|---|---|---|
| French family acquiring a villa in Lisbon via a French SCI | French SCI, not recognized as such in Portugal | Difficulties with local management and taxation, need to create a Portuguese company to optimize management |
| Investor creating a Portuguese Lda to buy several apartments | Quota company (Lda) | Facilitates rental management, allows risk separation, suitable Portuguese taxation |
| Heirs receiving shares in a Portuguese real estate company | OIC or Portuguese company with adapted articles | Facilitated transfer, collective management, but vigilance on inheritance taxation |
Recommendations to Optimize the Legal Structure of a Real Estate Investment in Portugal
- Consult a lawyer or tax specialist in Franco-Portuguese law.
- Compare advantages/disadvantages of the French SCI and Portuguese structures (OIC, Lda, SA).
- Draft clear articles of association including essential clauses for management and transfer.
- Verify compliance with Portuguese legislation (registration, taxation, reporting obligations).
- Anticipate transmission: favor ownership via shares to facilitate succession.
- Stay informed of legal and tax developments in both countries.
The success of a real estate investment in Portugal largely depends on the choice of legal structure and the quality of the articles. Professional guidance is strongly recommended at every stage.
Good to know:
A Real Estate Civil Company (SCI) is a useful legal structure for acquiring and managing real estate properties, allowing flexible distribution of shares among partners and advantageous inheritance planning, both in France and Portugal. In Portugal, creating an SCI involves specific tax and legal particularities, such as less administrative formality but careful attention to compliance with local laws, which may differ from French practices. For example, more favorable taxation may apply, but often requires vigilance regarding double taxation. An SCI facilitates estate management and transfer of assets by avoiding heavy inheritance taxes, but poses challenges such as managing conflicts between partners, requiring clear agreements to protect each other’s interests. Optimization requires a precise analysis of the property type to determine the most suitable structure; for instance, choosing between an SCI and another form may depend on whether the acquisition aims for long-term rental activity. Studies indicate that some investors have failed due to non-compliance with local regulations, thus highlighting the importance of consulting legal and tax experts for every step, from creation to day-to-day management. In conclusion, although the SCI offers substantial advantages, personalized advice is crucial to prevent potential pitfalls related to real estate investment in Portugal.
Tax Optimization with an SCI in Portugal
Concept of the Real Estate Civil Company (SCI) and Its Role in Portugal
The SCI is a legal structure allowing at least two people to jointly acquire, manage, or transfer real estate properties. It facilitates collective ownership of buildings, rental management, and asset transmission. Partners hold shares, simplifying asset distribution and decision-making compared to standard co-ownership.
Tax Advantages of an SCI for Investors
- Corporate Income Tax (CIT) or Personal Income Tax (PIT):
- In France, the SCI is generally fiscally transparent (PIT) but can opt for CIT. In Portugal, it is recommended to structure the investment via an equivalent company (such as a SIGI or Portuguese company), since the French SCI has no local existence.
- Taxation can be optimized depending on the chosen tax regime (CIT or PIT), allowing tax pressure to be smoothed according to generated income and profit distribution.
- Taxation of Dividends:
- Dividends paid to partners are subject to the taxation of their country of residence. The SCI allows flexible distribution, which can be interesting depending on applicable tax treaties.
- Optimization of Expenses and Depreciation:
- The SCI can deduct certain expenses (loan interest, renovation work, management fees), thereby reducing the taxable result.
Taxation of Portuguese Residents vs. Non-Residents in the Context of an SCI
| Category | Portuguese Resident | Portuguese Non-Resident |
|---|---|---|
| Taxation of rents | Subject to PIT (IRS) | Subject to PIT at a flat rate |
| Real estate capital gains | Taxable on 50% of the gain | Taxable on 100% of the gain |
| Social security contributions | Applicable | Often not applicable |
Concrete Examples and Case Studies
Example 1: A French couple creates an SCI to acquire an apartment in Lisbon. They deduct loan interest and expenses, reducing their tax base. Profits are distributed as dividends, optimized thanks to the Franco-Portuguese tax treaty.
Example 2: A non-resident investor structures their investment via a Portuguese company to benefit from local CIT (lower rate than PIT for high income), and reinvests profits in new real estate projects, deferring personal taxation.
Double Taxation Rules and Optimization via the SCI
The tax treaty between France and Portugal avoids double taxation on real estate income. Rents received in Portugal by a French SCI are taxed in Portugal, then in France with a tax credit.
An adapted structure (SCI or local company) allows maximizing the benefit of these treaties and choosing the most advantageous taxation.
Potential Pitfalls and Common Mistakes
- Poorly drafted articles, leading to conflicts between partners.
- Non-compliance with local reporting obligations (risk of tax audit).
- Poor anticipation of inheritance rules or capital gains upon resale.
- Non-compliance with Portuguese legislation if the SCI is not recognized locally.
Practical Advice from Tax Experts
- Always consult a bilingual tax lawyer (France-Portugal) before any structuring.
- Favor a local company (SIGI or Portuguese company) for exclusively Portuguese investments.
- Optimize the distribution of shares to anticipate transfer and limit inheritance taxes.
- Keep rigorous accounting and comply with all reporting obligations in Portugal and the country of residence.
Summary of Points to Watch and Recommendations
| Essential Recommendation |
|---|
| Systematically consult a local and international tax expert |
| Study tax treaties to avoid double taxation |
| Carefully draft the articles of the SCI or Portuguese company |
| Ensure compliance of operations with Portuguese and French legislation |
Tax structuring via an SCI or a Portuguese company is an effective optimization tool, but requires in-depth expertise to avoid pitfalls and maximize benefits.
Good to know:
A Real Estate Civil Company (SCI) allows investors to acquire and manage real estate properties in Portugal while benefiting from a flexible structure to optimize taxation. For Portuguese residents, an SCI allows benefiting from a more advantageous corporate income tax, while for non-residents, it can offer a significant reduction in income tax and dividend taxation. For example, a French investor who structured their real estate purchases through an SCI in Portugal managed to substantially reduce their double taxation thanks to existing tax treaties between the two countries. However, it is crucial to surround yourself with tax experts to avoid the pitfalls of poor structuring that could result in heavy penalties. Additionally, there are differences in taxation between residents and non-residents, influencing the tax efficiency of an SCI, making prudent planning essential.
Pitfalls to Avoid in Portuguese Company Law
Main Pitfalls to Avoid When Creating an SCI in Portugal
- Underestimating differences between Portuguese law and foreign systems (especially French):
- The concept of SCI does not exist as such in Portuguese law. Therefore, an adapted structure must be chosen, often an LDA or SA company.
- Standard French articles of association are not transposable without rigorous legal adaptation.
- Common mistakes made by foreign investors:
- Unsuitable choice of legal form: opting for a status that does not allow achieving the desired asset or tax objectives.
- Imprecise or incomplete drafting of articles, especially regarding property management, capital distribution, and partner powers.
- Negligence regarding local registration and opening of dedicated bank accounts for the activity.
- Complexity and specificities of the Portuguese legal framework:
- Heavy administrative procedures for registering a real estate civil company (sworn translation, obtaining NIF for each partner, etc.).
- Strict accounting obligations: annual approval of accounts by partners, mandatory audits in some cases.
- Pitfalls related to tax obligations:
- Forgetting or misunderstanding the applicable tax regime: generally subject to IRC (corporate income tax), standard rate of 21%, SMEs possibly benefiting from a reduced rate.
- Non-compliance with filing deadlines (SCI or equivalent must file tax returns even without rental income).
Comparative Table: France vs. Portugal
| Criteria | France (SCI) | Portugal (LDA/SA/SIGI) |
|---|---|---|
| Legal form | Real Estate Civil Company | No direct equivalent; LDA/SA/SIGI |
| Tax status | PIT or CIT by option | IRC mandatory |
| Tax filing | Specific to SCI | Standard corporate filings |
| Accounting | Simplified if non-commercial | Mandatory, audits based on thresholds |
- Risks related to non-compliance with local regulations:
- Significant tax penalties for late filing or lack of reliable information.
- Bank account blocking if activities not traced through dedicated account.
- Personal liability potentially incurred in case of poor management.
- Consequences of insufficient due diligence before investment:
- Poor tax assessment that could lead to double taxation on certain real estate income.
- Late discovery of hidden charges: specific local taxes, high notary fees, etc.
- Increased administrative risk during subsequent transfer of shares.
Effective Strategies to Avoid These Pitfalls
- Systematically seek local legal advice specialized in Portuguese real estate law before any transaction
- Fully adapt the articles to national legal requirements
- Stay regularly informed through local legislative and administrative monitoring
- Implement professional accounting that complies with Portuguese standards
Practical Checklist:
- Always verify the choice of legal vehicle suited to the real estate project
- Conduct an exhaustive due diligence covering land titles, mortgage charges, and actual rental situation
- Scrupulously comply with all annual reporting obligations even without rental income
- Ensure all financial flows go through a bank account dedicated to the company
In summary
Properly anticipating the specific legal framework of Portugal is essential to avoid costly errors when setting up a real estate investment.
Good to know:
In the context of Portuguese company law, many foreign investors make the mistake of underestimating the complexity of the local legal framework, which is often very different from that of their home country. To avoid costly mistakes when creating a real estate civil company (SCI), it is crucial to ensure compliance with the numerous tax obligations that may differ subtly but significantly from systems elsewhere. The drafting of the company’s articles must be done carefully to avoid subsequent legal complications, and the choice of legal structure must be adapted to the precise objectives of the investment. Furthermore, failing to take into account local regulations can lead to severe penalties, jeopardizing the project’s viability. A thorough due diligence analysis is essential to uncover potential issues before committing. To circumvent these pitfalls, it is advisable to consult experienced Portuguese lawyers and regularly follow relevant legislative updates.
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Cyril Jarnias is an independent expert in international wealth management with over 20 years of experience. As an expatriate himself, he is dedicated to helping individuals and business leaders build, protect, and pass on their wealth with complete peace of mind.
On his website, cyriljarnias.com, he shares his expertise on international real estate, offshore company formation, and expatriation.
Thanks to his expertise, he offers sound advice to optimize his clients' wealth management. Cyril Jarnias is also recognized for his appearances in many prestigious media outlets such as BFM Business, les Français de l’étranger, Le Figaro, Les Echos, and Mieux vivre votre argent, where he shares his knowledge and know-how in wealth management.
