Capital gains tax (CGT) is a tax on the profit made from selling assets such as property, shares, and investments.
Many countries impose CGT, and Portugal is no exception. Understanding how this tax applies to different assets and taxpayer categories is essential for effective financial planning.
Whether you’re a resident, a non-resident, or a Non-Habitual Resident (NHR), Portugal’s CGT rules vary significantly and can impact your tax liability.
Capital Gains Tax is a tax levied on the profit earned from selling an asset. Many countries impose CGT, including Spain, where property sales and investment profits are taxed under different rules.
Capital Gains Tax in Portugal applies to various types of assets, including real estate, shares, and certain investments.
The rate and method of taxation depend on whether the seller is a resident, a non-resident, or an NHR.
For residents in Portugal, capital gains tax is applied at a progressive rate, but only on 50% of the gain. This means:
Non-residents selling Portuguese assets are taxed based on 50% of the capital gain, but at the progressive tax rate (view rates here) applicable to non-residents.
However, a tax treaty between Portugal and the seller’s country of residence may alter the tax obligation.
It is important to note that: capital gains from shares held for more than one year are also taxed on 50% of the gain at either progressive rates or a flat 28% rate.
The Non-Habitual Resident (NHR) scheme provides tax benefits, but it does not offer an automatic exemption on capital gains tax in Portugal.
Capital gains from selling real estate in Portugal are subject to CGT under the following conditions:
Capital gains from the sale of your directly owned property are generally taxed at a rate of 28% for individuals or progressive tax rates (if your income is over €39,000 per annum then the flat rate of 28% is beneficial.
Either way it is on 50% of the gain.
If it the property is your primary residence, there may be exemptions if the profit is reinvested in another primary residence in Portugal.
The tax rate on capital gains for non-residents based on the progressive tax rates on 50% of the gain, if the property is directly owned.
If the property was owned by a company or used for a short-term rentals as a way of income it is deemed as a business and therefore you need to wait for 36 months for post the ceasing of the business to qualify for 50% reduction on CGT.
If you don’t wait, then the levy of CGT is on an incredible 95% of the CGT value.
If you sell your primary residence and reinvest the proceeds in another primary residence, you may be exempt from capital gains tax on the profit.
If you downsize and thus create surplus equity CGT can be avoided if you reinvest and meet certain criteria.
For this to apply, you need to be over 65 years old or can prove you have officially retired.
On disposal, you can offset costs and charges which amount to IMT/legal & estate agents fees along with any refurb or other costs where works were carried out to enhance the asset value.
This needs to be supported by invoices with addresses, names and NIF numbers.
Be mindful, that if the property is jointly owned then ensure that invoices are equally shared in value terms to equalise the CGT costs on a joint tax return.
Capital gains from the sale of shares are taxed at a rate of 28%, or progressive tax rates (if your income is over €39,000 per annum then the flat rate of 28% is beneficial.
Either way it is on 50% of the gain, if you held the shares for more than one year.
Non-residents are also taxed on 50% of the capital gains from the sale of shares and other securities.
The progressive rate of tax is used, unless a tax treaty exists between Portugal and the non-resident’s country of residence is receiving the tax due.
Capital gains from units in investment funds are subject to a 28% tax.
While this is technically income tax and not CGT, dividends from shares are generally subject to the same 28% tax for residents.
Sale Price: €500,000
Original Purchase Price: €300,000
Renovation & Legal Fees: €30,000
Net Capital Gain: (€500,000 – €300,000 – €30,000) = €170,000
Taxable Gain (50% Rule): €85,000
Tax Rate Applied: Progressive income tax rates or flat 28%
Final CGT Liability: Will vary based on your individual income level
There are no specific CGT allowances in Portugal, but deductions can be made for documented expenses related to asset improvement, legal fees, and transaction costs.
Portugal does not impose an inheritance tax, meaning asset transfers upon death are subject only to a 0.8% stamp duty.
Double Taxation Agreements (DTAs) with various countries may reduce your capital gains tax in Portugal liability depending on the specific treaty terms.
Always check if a DTA exists between Portugal and your country of residence for possible reductions in tax rates.
Portugal’s blacklist includes jurisdictions that are not compliant with international tax transparency standards.
These jurisdictions are typically non-cooperative with international tax authorities and may have low or zero tax rates on capital gains or income.
If the capital comes from one of these jurisdictions, even if the person is not a resident of that jurisdiction, they might face higher taxes or more complex tax reporting requirements.
If you are dealing with capital gains from a blacklisted jurisdiction in Portugal, it is likely that:
To minimise your capital gains tax exposure in Portugal, consider:
Capital gains tax in Portugal can be complex, with different rules for residents, non-residents, and those under the NHR regime.
Understanding how CGT applies to real estate, stocks, and other investments can help you optimise your tax strategy and reduce liabilities.
Whether you’re selling property or managing an investment portfolio, it’s crucial to seek professional financial advice to navigate Portugal’s tax landscape effectively.
At Private Client Consultancy, we pride ourselves on providing you with clear, transparent and professional advice for all your financial planning needs in Portugal and 28 other jurisdictions with peace of mind.
Get in touch today to start reducing your Capital Gains Tax liability in Portugal.
Disclaimer: Tax laws, rates, and reliefs are subject to change and may vary depending on individual circumstances and residency status. Any information provided on this website is based on our understanding of current regulations (or the date of when the content was published) and should not be considered personalised financial or tax advice. As tax obligations can differ across regions, countries and evolve over time, we strongly recommend seeking professional advice tailored to your specific situation before making any financial decisions.
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