Real estate in Portugal has proven to be an excellent investment over the years. Although there has been observed some stagnation in real estate sector during the years of European economic crisis, the property prices and demand are again on the rise. However, when you sell your Portuguese property you still have to deal with the Taxman before spending the profits. This means that you have to declare the sale and report the gain in a Portuguese Income Tax Declaration in the year, following the sale.
How is the Capital Gain Calculated?
The purchase price should be adjusted by the Inflation Adjustment Coefficient. The purchase price is subtracted from the sale price. This is your gross gain. Then subtract any qualifying buying or selling costs (real estate agent’s commission on a sale, notary fees during purchase, IMT – property transfer tax, stamp duty, property registration fees) and documented capital improvements to the property in the past 12 years. This is your net taxable gain.
Resident vs. Non-Resident Individuals
If you are a Non-Resident for tax purposes in Portugal, the Capital Gains Tax calculation is quite simple: 28% of the full net profit.
If you are a resident in Portugal, there are two options:
- One half of the capital gain of the adjusted net profit on the sale of your principal residence is added to overall income for the fiscal year and taxed at marginal rates.
- Gains may be rolled over if another principal residence of equal or greater value is bought between 24 months prior and 36 months after a sale. When only a partial reinvestment is made, the gain is calculated on a pro-rata basis. Rollover relief is also applicable upon reinvestment in a new principle residence anywhere in the EU within the above mentioned time periods. Proof of Residency will be required in order to be eligible for tax relief.
Whatever your plans, it is always wise to seek experiences, professional advice when mitigating Capital Gains Tax. Potentially, there are many thousands of Euros at stake. With strict rules and rigid deadlines, careful planning is in order if you want to take full advantage of the opportunities at hand. Getting advice after the sale may be better than none at all but your best approach is to plan carefully before you sell.
The information was presented by Eurofinesco company – the expert in Fiscal & Expatriate Services
For further information please contact: fiscalrep@eurofinesco.com
09/05/2016
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