Capital Gains

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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