In the current real estate landscape—characterised by rising property values and strong investor activity—understanding the tax treatment of property sales is essential. This information focuses on the capital gains regime applicable to individuals who sell real estate located in Portugal, whether resident or non-resident.
Important: This newsletter refers exclusively to private individuals who do not carry out a professional or business activity of purchasing and selling real estate. If the activity qualifies as a business, or if the seller is a company, different tax rules will apply.
1. What Are Capital Gains?
Capital gains (mais-valias) are the positive difference between the sale value and the acquisition cost of a property. For tax purposes, the gain is calculated by deducting eligible expenses from the sale price and applying a monetary adjustment to the acquisition cost.
2. Residents vs. Non-Residents: Aligned Taxation Regimes
Portuguese Tax Residents:
- Gains from the sale of real estate are taxed under Category G of the IRS Code. Only 50% of the net capital gain is included in the taxable income, and taxed at progressive IRS rates, which may go up to 48%, plus applicable surcharges.
Non-Residents:
- Since 2023, non-resident individuals benefit from the same tax regime as residents:
o Only 50% of the capital gain is taxable;
o Taxed at progressive IRS rates (no longer a fixed rate of 28% as before 2023);
o The applicable rate is determined by considering the taxpayer’s worldwide income (englobamento fictício), solely for rate-setting purposes
Retroactive Refunds
Non-residents who sold Portuguese real estate and were taxed on 100% of the capital gain at a flat 28%, may file a special complaint with the Tax Authorities:
- Based on EU and Portuguese case law, it is possible to request a recalculation under the correct rules (50% inclusion).
Proper compliance is essential to avoid litigation and corrections.
3. Points to Consider
To ensure correct tax treatment and avoid unnecessary exposure, individuals should keep in mind:
- The importance of timing;
- The need for full and accurate documentation of improvements and related costs;
- The correct use of Annex G or G1 in the annual IRS tax return;
- The possibility of claiming overpaid tax.
How We Can Help
Our team advises clients, both resident and non-resident, on all aspects of property sales in Portugal. Namely, we provide strategic guidance on:
- Pre-sale structuring and estimation of the tax due;
- Verifying eligibility for exemptions and reliefs;
- Filing complaints or refund claims for overpaid taxes;
- Reviewing compliance with the latest AT interpretations.
In partnership with:
Beyond Legal | Tax Department OTS-LCCV Law Firm
Dr. Daniela Lopes Costa – Of Counsel Lawyer
Dr. Carlos Afonso – Of Counsel Lawyer
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