IRS Portugal: how to get a tax rebate on real estate capital gains for non-residents

Taxpayers not resident in Portugal, who have sold property in the country, can claim a refund. We explain how on legal grounds.

IRS in Portugal for non-residents
IRS in Portugal for non-residents / Unsplash
9 June 2021, Redaction

Capital gains on the sale of property is one of the issues that raises most doubts for those who want to go ahead with the process of selling a house in Portugal. And in the case of taxpayers not resident in Portugal, IRS income tax also raises controversy, because until now the Portuguese Tax and Customs Authority applied the tax on 100% of real estate capital gains, when it should only be 50%. But there is a way to recover that money from the IRS. We explain how to get a tax rebate on real estate capital gains in Portugal for non-residents on a legal basis.

In Portugal, the superior courts have determined that the tax on capital gains obtained by a non-resident taxpayer in Portugal for the sale of a property located in the country should only be levied on 50% of the capital gain, as opposed to the 100% considered until now by the Portuguese Tax and Customs Authority, as indicated by Belzuz Abogados in this article written for idealista/news.

Courts contradict the Tax Authorities

Numerous non-resident taxpayers for tax purposes in Portugal have been taxed on their IRS for the totality of the capital gains obtained from the sale of property located in Portuguese territory while a resident taxpayer is only taxed for half of the value.

In effect, IRS assessments issued to non-residents that consider the totality of the real estate capital gain for taxation purposes can be challenged, with the taxpayer having the means to react, namely in court or through arbitration.

The Tax Authority has been losing in first instance judicial and arbitration proceedings in which the same question of law was discussed, having appealed to higher courts.

In 2020, following several rulings in the same direction, the Supreme Administrative Court, standardised jurisprudence, in the sense that article 43, no. 2 of the IRS Code which provides that only 50% of the capital gain is taxed, by being applicable only to residents, is incompatible with the European Union rules, restricting the movement of capital and, therefore, assessments that do not apply this rule to non-residents should be annulled as illegal.

How to get an IRS tax refund in Portugal 

Therefore, non-resident taxpayers in Portugal, "who have sold property located in Portugal, must submit the IRS declaration in Portugal corresponding to the year 2020 until 30th June 2021, whether they have calculated a capital loss or capital gain. In the latter case, where the sale of a property in Portugal results in a capital gain, they will be faced with an IRS assessment that will consider the total capital gain for taxation purposes.

Following that assessment, the taxpayer has at their disposal judicial and arbitration means that allow them to challenge the assessment and request the reimbursement of the difference that would correspond to them if the Portuguese Tax and Customs Authority had considered only half of that amount.

*Rafaela Cardoso, Tax Law Department at Belzuz Abogados S.L.P. - Portuguese Branch

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