Capital gains tax is a key topic when considering an investment or property sale in Portugal, especially for non-residents. Understanding how the capital gains tax in Portugal for non-residents works can help you make informed financial decisions and plan effectively. Whether you’re selling property, shares, or other assets, Madeira Corporate Services guides you through the essential rules and strategies.
What is the Capital Gains Tax in Portugal?
Capital Gains Tax (CGT) in Portugal applies when an individual sells an asset at a profit, such as real estate, shares, or other investments. The gain is generally the difference between the sale and original purchase prices, adjusted for eligible costs (e.g., purchase taxes, improvement expenses, and selling fees).
For residents, capital gains are typically included in their annual income tax returns. However, for non-residents, the taxation rules have some distinct features you must know.
Capital Gains Tax in Portugal for Non-Residents:
1. Real Estate Sales
- Before January 1, 2023: Non-residents paid a flat 28% tax on the full capital gain from selling Portuguese real estate.
- Since January 1, 2023: New rules align non-resident taxation more closely with residents. Now, only 50% of the capital gain is taxable and taxed according to Portugal’s progressive income tax rates, which can reach up to 48%.
Note: The sale of a primary residence may qualify for exemptions if the proceeds are reinvested in another primary residence within the EU/EEA.
2. Sale of Shares and Other Assets
- Gains from selling Portuguese company shares are taxed at a 28% flat rate.
- If the company is more than 50% real estate-based (a “property-rich company”), the gain may be treated like a real estate sale, subject to the same 50% rule and progressive tax rates.
3. Double Taxation Treaties (DTTs)
Portugal has signed numerous Double Taxation Treaties (DTTs) with other countries to avoid taxing the same income twice. Depending on your home country’s treaty with Portugal, you may benefit from a reduced rate or tax credit.
At Madeira Corporate Services, we recommend a detailed review of applicable DTTs to optimise your tax outcome.
Exemptions and Reductions for Non-Residents
Some exemptions and reductions can apply under specific conditions:
- Inheritance and Gift Transfers: Certain exemptions are available, especially for transfers between close family members.
- Reinvestment Relief: If you sell your primary residence and reinvest in another qualifying property within the EU/EEA, you might benefit from partial or complete exemption.
- Costs Deductions: Expenses related to the acquisition and sale (like real estate commissions, legal fees, and improvement works) can be deducted from the capital gain calculation.
How Madeira Corporate Services Can Help
Navigating capital gains tax in Portugal can be complex, especially with changing rules and treaty nuances. Madeira Corporate Services offers full support, including:
- Pre-sale tax optimisation advice
- Capital gains calculation
- Double taxation treaty analysis
- Filing tax returns in Portugal
- Reinvestment strategies to minimise taxes
Our specialised team ensures you are fully compliant while identifying opportunities to reduce your tax liability.
Final Thoughts about Capital Gains Tax in Portugal Non-Residents
Rules on capital gains tax in Portugal have evolved recently, making professional advice more important than ever.
If you plan to sell assets or property in Portugal, contact Madeira Corporate Services today. Our experienced consultants are ready to assist you every step of the way, from tax planning to filing, ensuring you get the best possible outcome.
Capital Gains Tax in Portugal Non-residents: Frequently Asked Questions
1. Do non-residents pay capital gains tax when selling property in Portugal?
Yes, non-residents are subject to capital gains tax in Portugal. Since January 1, 2023, only 50% of the capital gain is taxable and it is taxed according to progressive income tax rates, similar to residents.
2. What is the capital gains tax rate on shares for non-residents in Portugal?
Non-residents pay a flat 28% tax on capital gains from Portuguese company shares. However, if the company is property-rich (more than 50% real estate assets), progressive tax rates may apply.
3. Are there any exemptions for non-residents from Portuguese capital gains tax?
Yes, exemptions may apply, such as reinvesting proceeds from the sale of a primary residence into another qualifying home in the EU/EEA. Deductions for selling costs and improvements are also allowed.
4. How do double taxation treaties affect capital gains tax in Portugal?
Portugal’s double taxation treaties (DTTs) can reduce or eliminate capital gains tax for non-residents, depending on your country of residence. You may claim tax credits or avoid double taxation altogether.
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