Do you occupy your home on a rent-free basis? If so, it is prudent to document the arrangement with an Occupation Contract (Contrato de Comodato). This contract authorises a named person to live in the property, normally without payment of rent and for a limited period. It is commonly required when a house is owned by an offshore company and the occupant is the owner or one of the shareholders of the company.
Essentially, it is a gratuitous agreement between two parties. One party (the lender – o comodante) provides an asset of value and the other party (the borrower – o comodatário) undertakes to use it with care and return it at the end of the agreed period. It functions like a loan, but without any money involved.
An occupation/commodatum agreement is a legal mechanism for lending an item/property to another person while ensuring that it is returned in good condition. This type of contract is provided for in the Civil Code - Article 1129 - 1141.
As a rule, the duration of an occupation/commodatum agreement is determined by the two parties involved. Article 1130 of the Civil Code establishes that the lender, based on a right of limited duration, cannot enter into the same contract for a longer period. If this occurs, the contract will be reduced to the maximum duration permitted by the stipulated right.
The same article also refers to exception clauses associated with lease agreements, as outlined in Article 1052 of the Civil Code. One such exception is that if the borrower wishes to renounce or transfer their rights, the occupation/commodatum agreement will only terminate at the normal expiry date.
The contract has two primary purposes. First it documents that the occupant has a place of residence in Portugal as required by the Immigration Services when applying for a Residence Permit. Second, it confirms that the property is occupied without payment of rent and provides an explanation to the Tax Authorities as to why the offshore company does not receive rental income. Some utility companies may also require similar proof when installing new services or transferring the contract.
The wording of the contract will depend on each individual case, and it is advisable to consult a lawyer and your financial advisor or fiscal representative of the offshore company.
It would normally contain clauses defining:
the property
the ownership of the property
the occupier
the authorisation for occupation of the property during a fixed period on a rent-free basis
the responsibility for payment of utilities such as water, gas, electricity, and telephone (normally borne by the occupier)
the general responsibilities of the owner
the general responsibilities of the occupier
Sources of information:
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