The Portuguese Constitutional Court, in Ruling 348/2025, declared the unconstitutionality, with general binding force, of the rule contained in Article 44(2) of the Personal Income Tax Code (CIRS), in the interpretation according to which, to determine the gains subject to personal income tax relating to capital gains from the onerous sale of real estate, it established an ‘ineligible presumption’. In other words, the realisation value was considered to be the higher amount received and the property’s taxable value (VPT), without allowing the taxpayer to prove that the amount received was lower.
The Constitutional Court based its decision on the principle of the ability to pay, enshrined in articles 103(1) and 13 of the Constitution of the Portuguese Republic, taking the view that the absolute (inescapable) presumption that the realisation value would always be the VPT, when higher than the transaction value, could lead to the taxation of gains not earned, thus violating tax justice and tax equality. The Court emphasised that the tax law must allow the taxpayer to prove the reality of the tax facts, and cannot impose presumptions that do not enable proof to the contrary, otherwise it would be arbitrary and discriminatory.
It is important to note that in 2015, with the entry into force of Law 82-E/2014, paragraph 5 was added to article 44 of the CIRS, expressly allowing the taxpayer to prove that the realisation value was lower than the VPT, thus removing the ineligible presumption and bringing the rule into line with the Constitution.
Confirmation of the Understanding: Return of Personal Income Tax by the Tax Authority
The understanding that the Tax Authority will have to return personal income paid on capital gains until 2014, based on the version of article 44(2) of the CIRS in force at the time, is correct, but with essential nuances:
- The Constitutional Court’s ruling has general binding force, which means that the rule declared unconstitutional cannot be applied in new cases and, in principle, can be the basis for requests to review personal income tax assessments made based on that rule until 31/12/2014.
- Since 2015, the law has allowed the presumption to be rebutted, so the situation no longer arises.
- However, the IRS refund is not automatic: taxpayers who have been taxed based on the rebuttable presumption (i.e. the realisation value of which was fixed by the VPT, without the possibility of proof to the contrary) will have to apply to the Tax Authority for a review of the assessments, invoking the unconstitutionality now declared.
- The possibility of review is subject to the legal deadlines for complaints, appeals or ex-officio review, so each case must be analysed individually regarding the possibility of reimbursement.
Conclustion
The Constitutional Court’s ruling 348/2025 declared Article 44(2) of the CIRS unconstitutional, in its version until 2014, because it violated the principle of the ability to pay, obliging the Tax Authority not to apply this rule and to reassess the situations in which it has been applied, provided that taxpayers request a review of the assessments and are within the legal deadlines for doing so. As of 2015, the law allows the presumption to be rebutted, so the issue no longer arises for subsequent years.
If you believe you may be affected, consult a tax advisor to assess your situation and assist with your claim.
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