In Portugal, not all legal structures commonly used in common law jurisdictions exist under Portuguese law. One important example is the trust.

Portugal does not recognise the trust as a domestic legal institution. It is therefore not possible to create a Portuguese trust governed by Portuguese law. However, individuals connected to Portugal may still be involved in foreign trusts created under other legal systems, such as those of the United Kingdom or the United States.

From a tax perspective, Portuguese authorities tend to analyse the economic substance of the trust rather than its formal legal classification. As a result, payments or distributions received from a trust may be taxed in Portugal, depending on the specific circumstances.

Foundations in Portugal

Foundations, on the other hand, are fully recognised under Portuguese law and are part of the civil law tradition.

A foundation is created when a person or family allocates assets to a specific purpose, usually linked to social, cultural, educational or charitable goals. Foundations are often used to protect assets over the long term and to preserve a legacy aligned with certain values.

They are subject to supervision and must operate strictly in accordance with their stated purpose. Because of this, foundations are not typically used for private asset management alone, but rather for projects that include a clear public or social interest component.

Companies for Asset Holding and Wealth Structuring in Portugal

Companies are the most commonly used and practical structure in Portugal for holding and managing assets.

They are widely used to own real estate, operate businesses, manage investments and organise family wealth. Portuguese companies provide clear ownership rules, structured governance and easier succession planning, as shares or quotas can be transferred without directly transferring the underlying assets.

Companies are fully integrated into the Portuguese legal and tax system, which makes them predictable and legally secure. Although companies require accounting, reporting and ongoing compliance, they are generally simpler and more flexible than trusts or foundations when operating within Portugal.

Structuring Assets in Portugal: The Bottom Line

In summary, trusts do not exist as a domestic legal structure in Portugal and can only be used as foreign arrangements with limited recognition. Foundations are recognised but are designed for specific long term purposes with public interest elements. Companies remain the main and most effective vehicle for structuring and managing assets under Portuguese law.

Frequently Asked Questions

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Can I create a trust under Portuguese law?
No, Portugal does not recognise trusts as a domestic legal institution, so you cannot create a Portuguese trust governed by Portuguese law.
How are foreign trusts treated in Portugal?
Individuals in Portugal can be involved in foreign trusts, but Portuguese authorities focus on the economic substance of the trust for tax purposes, which may result in taxation of payments or distributions received.
What is the purpose of a foundation in Portugal?
Foundations in Portugal are used to allocate assets for specific purposes, often linked to social, cultural, educational, or charitable goals, and must operate in accordance with their stated purpose.
Why are companies preferred for asset management in Portugal?
Companies are preferred because they offer clear ownership rules, structured governance, and easier succession planning, making them practical for holding and managing assets in Portugal.
Are foundations suitable for private asset management in Portugal?
Foundations are not typically used for private asset management alone, as they are designed for projects with a clear public or social interest component.