Thinking of selling your property in Portugal? Find out what capital gains tax you have to pay and how to pay it on time!
Anyone selling a property in Portugal who does not reside in Portuguese territory is subject to Capital Gains Tax.
To fulfil this fiscal obligation, the seller must report the property sale by filing an income tax statement, known as “Modelo 3”, for the year in which the transaction occurred. This statement must be submitted between April and June of the year following the sale, in order to avoid fines or other penalties.
How much Capital Gains Tax will I have to pay when selling my property in Portugal?
To calculate the taxable gain in Portugal, you must consider:
the sale value;
minus (purchase value x currency devaluation coefficient);
minus acquisition/sale costs;
minus property improvement costs.
This means that besides the sale and purchase values, you will also have to consider:
Currency devaluation: this coefficient changes annually and is published in an official governmental decree (“Portaria”) in Diário da República, available for consultation;
Expenses with property acquisition/sale: this includes the real estate agent's commission (if applicable, on the sale) and the property’s energy certificate, as well as expenses with the acquisition deed, registration costs and taxes (such as IMT tax and Stamp Tax);
Expenses that increased the property’s value: such as conservation, maintenance and improvement work carried out in the last 12 years.
Exceptions to Capital Gains Tax in Portugal
One of the exceptions to paying Capital Gains Tax in Portugal is a reinvestment regime in which a taxpayer becomes exempt if the sale value of a primary residency is reinvested in another residency in Portugal. However, this reinvestment regime does not apply if the person selling the property is a non-resident in Portugal.
Value of Capital Gains Tax in Portugal
Non-resident taxpayers can choose between two distinct capital gains tax regimes:
Taxation according to the regime-rule applicable to non-tax residents, which means taxation of 100% of the capital gain calculated at a 28% special tax rate;
Alternatively, taxpayers resident in another EU or European Economic Area country (provided there is an exchange of tax information) may choose to be taxed at the general IRS rate that would apply if they were tax residents in Portugal. To calculate this rate, all income is taken into account, including income obtained outside Portugal (such as employment income, as well as business and professional income). In this case, 50% of the capital gain is taxed, as is the case for residents in Portugal, at marginal tax rates (which currently vary between 14.5% and 48%), plus the additional solidarity tax (currently up to 5%).
If you have any questions regarding the tax implications of selling your property in Portugal, our team of experienced Accounts will be happy to help you. Please contact us for more information: firstname.lastname@example.org.