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Imposto
Sobre o Rendimentos - Rendimentos de Mais Valias (IRS) or Capital Gains Tax
in Portugal is payable on the gains made from the sale of any asset,
including property in Portugal. It is chargeable on any gain unless
made by a Portuguese tax resident who subsequently re-invests the gain in
another permanent residence. It is possible to gain partial tax relief when
there is partial reinvestment.
Calculating
the tax due
IRS is calculated on the difference
between the purchase price of the property and the price at which it is
subsequently sold. In addition, certain deductible expenditure is allowable
and an indexation coefficient is applied to the purchase price to account for
inflation.
Allowable expenditure would include
all the purchase costs - notary and legal fees, IMT paid - as well as the
costs of any improvements made to the property which are likely to have
increased its value made within 5 years prior to the sale. Make sure
you keep copies of all invoices for such expenditure as unsubstantiated
expenditure may be disallowed.
CGT Rates in
Portugal
For non-residents a flat 25% is
charged although most non-residents will then be charged CGT in their home
country and the amount paid in Portugal would be deducted to arrive at the
net figure due. For Portuguese tax residents the rate is based on 50% of the gain.
The tax has to be declared in the
annual return which must be submitted by your accountant by 25th May in the year following the year of gain
(the Portuguese tax year runs from 1st January to 31st December). The
tax then has to be paid within 30 days to avoid penalties - currently €50
plus interest at 1% of the tax due each month. Your solicitor or fiscal
representative is obliged to retain funds in Portugal for this payment.
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