Individual Income Tax (“IRS”)

Non-Residents Taxpayers

Capital Gains

Capital Gains on the sale of a property

Every property sale regardless of the amount of profit made must be reported to the Portuguese Revenue. The capital gain, after deductions, will be liable to IRS flat rate of 25%. The formula used to calculate the capital gain is as follows:

Selling Price
- (Selling Price x Inflation adjustment coefficient)
- Buying and selling costs
- Property improvements costs
= Capital Gain
x 25%            
= Tax Liability

Where:

Selling Price – is the declared selling price of the property or its property rateable value, whichever is higher.

Purchase Price – is the declared purchase or its property rateable value at the time of the acquisition, whichever is higher.

Inflation Adjustment Coefficient – The inflation will be considered to increase the value of the property.

Buying and Selling Costs – are all the costs mandatory in completing either the purchase or the selling of the property, such as, notary fees, property transfer tax “IMT”, land registry fees, real estate fees.

Property improvements Costs – Only the last five years will be taken into will be allowable for deduction.

Please note that all these costs/expenses will have to be substantiated by invoices (“Facturas”).

In which situations will the Capital Gain not be liable to IRS?

Whenever the taxpayer has sold a residential or a rural property which was acquired before 1st of January of 1989.

Individual residents in Portugal would be allowed to rollover the capital gain of the sale of permanent residential property, whenever its selling price is reinvested in a new permanent residential property, either in Portugal or in the EU.

Capital Gains on shares

The Capital Gains on shares are, by rule, liable to “IRS” whenever there is a profit from the sale of shares. Below the following situations will be taxed as follows:

Shares from Portuguese public company (“S.A.”)
  • Taxed at a flat rate of 20%
Shares (“Quotas”) from Portuguese limited Co (“Sociedade Limitada”)
  • Taxed at a flat rate of 20%
Bonds and other debt certificates
  • Taxed at a flat rate of 20%
* Not applicable to of Portuguese public company with more than 50% of their fixed assets consisting of real estate located in Portugal.

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