Capital Gains on Hereditary Shares

Capital Gains on Hereditary Shares

The sale of an inheritance share (the abstract part of an undivided inheritance) does not generate capital gains subject to IRS (Income Tax) in 2026, according to Ruling No. 7/2025 of the Supreme Administrative Court. However, the direct sale of a specific immovable property from the estate by the heirs remains subject to the payment of capital gains tax under IRS.

The alienation of the abstract right to the inheritance is not considered a sale of real estate, resulting in exemption from income tax. If the heirs sell a property from the undivided inheritance, the Tax Authority considers that there is room for capital gains taxation, with specific calculation rules.

Fundamental decision

The Supreme Administrative Court, in Ruling No. 7/2025, standardized jurisprudence to the effect that the onerous alienation of an inheritance share does not constitute an onerous alienation of real rights over immovable property for the purposes of Article 10, n. º 1, line a), of the IRS Code.

Thus, when the object of the transfer is the abstract right to inheritance or to a share of the inheritance — and not a specific and individualized property — the gains obtained should not be subject to capital gains tax under the Income Tax.

However, the situation will be different when the heirs directly sell a specific property belonging to the undivided inheritance. In these cases, the Tax Authorities have been interpreting that there is a transfer of a specific asset, with the gains being taxable as capital gains under the general terms of the Income Tax.

With this decision by the Supreme Administrative Court, it has been definitively established that the transmission of a hereditary share represents the mere transfer of the right to inheritance, which means that it does not involve the sale of a specific asset, but rather an abstract right. This understanding is particularly relevant as it opens the possibility for taxpayers to request a refund of the tax paid in situations where the alienation of a hereditary share or the right to inheritance has been taxed, provided that the transfer did not involve a specific and determined property.

About taxpayers who have recently paid the tax, they now have the option to request a refund. Eligibility for this refund depends on the legal deadline for an official claim, which is three months, counted from the situations provided for in Article 102 of the Tax Procedure and Process Code (CPPT), and the official review, which, according to Article 78 of the General Tax Law (LGT), may be initiated up to four years after the assessment. This is an interpretation with relevant effects, capable of allowing taxpayers to challenge income tax assessments issued in the last 4 (four) years.

A detailed analysis of the deed of sales is recommended with the support of the Tax Authority (AT), without dispensing with specialized legal and tax support to confirm the exemption.

Beyond Legal advises national and international clients on the management of undivided inheritances, sharing processes and estate planning.

This note is for informational purposes only and does not replace consultation with a lawyer for analysis of the specific case.