If you're selling a house in Portugal, planning is key, especially when it comes to expenses and taxes. When you get to the moment of selling your house, you'll first of all establish the asking price, while the approximate extra costs and expenses should also be on your radar. However, many people often forget about the taxes that have to be paid when selling property in Portugal. We have all the details about the tax payable when selling a property in Portugal, including capital gains tax in Portugal for non-residents and residents.
Paying IRS (income tax) - Capital Gains Tax
Like many other countries, Portugal imposes a capital gains tax on the sale of assets. It only applies to gains made on real estate and investments, and you only have to pay IRS income tax when the sale of the house brings you profit, that is, the payment of real estate capital gains. Since 2021, when you sell a property in Portugal, residents pay taxes on only 50% of their gains. In the case of a house inherited and then sold, the amount subject to taxation is also 50% of the capital gain. This value is added to the other income to determine the IRS rate to be paid.
Capital gains tax in Portugal for non-residents
If you want to sell your house but you are not a Portuguese resident or you live outside Portugal, you will have to pay capital gains tax just like any other citizen resident in Portugal. The conditions are as follows:
Residents within the European Union
If you reside within the European Union, you will have to pay the capital gain at 50%, according to the marginal tax rates (currently between 14.5% and 48%), with the addition of a solidarity tax of 5%. In order to determine the amount of the rates to be paid, the income obtained abroad will be taken into account.
Residents outside the European Union
If you live outside the European Union, including UK expats who aren't residents in Portugal, you will have to pay the full capital gains (100%), at a special flat rate of 28%.
How can I avoid capital gains tax in Portugal?
There are some exceptions to paying capital gains tax in Portugal in the following circumstances:
- Whenever the money you get from the sale of the house is invested in another permanent home, within 36 months after the sale or 24 months before the sale;
- When the property was acquired before 1989;
- When the individual is over 65 years of age or retired and invests the capital gains obtained in life insurance, individual membership of an open pension fund or contributions to the public capitalisation regime within six months after the sale.
It is highly recommended, if you're going to sell property in Portugal, to seek the help of a real estate agency who will be able to guide you through the whole process. Estate agents in Portugal usually have legal and financial departments that can help you define and specify the exact amounts you will have to pay and when to pay them, as well as having experience working with foreign clients.