Selling Portuguese property held in a trust has become more expensive for many UK residents. On 1 January 2026, a new double taxation treaty between Portugal and the United Kingdom took effect. As a result, Portugal can now tax the gain when you sell your stake in a structure whose value comes mostly from Portuguese real estate. In other words, you no longer need to own the bricks and mortar directly for a Portuguese tax bill to apply. This guide explains, in plain English, what changed and what to check before you sell.
The shift is easiest to follow through a real case. Specifically, the Portuguese Tax Authority decided it in binding ruling Informação Vinculativa No. 21788, and the new treaty effectively overrides that outcome from 2026 onward.
Selling Portuguese property held in a trust: the short version
For years, selling shares or interests in a company or trust offered a simple way to sell Portuguese property “indirectly”. Because the older 1968 treaty handed the right to tax that gain to the seller’s country of residence, Portugal often collected nothing. However, the new treaty closes that gap with a “property-rich” clause. Therefore, when more than 50% of what you sell derives from Portuguese real estate, Portugal gains the right to tax the profit. For many UK residents, that means a Portuguese capital gains charge where none existed before.
1. What a “property-rich” structure actually is
A “property-rich” entity is any company, fund, partnership or trust whose value comes mostly, normally more than 50%, from real estate. The classic example is a holding company or trust whose only meaningful asset is a single house or apartment.
People use these structures for sound reasons. For example, they support estate planning, privacy, or cross-border succession. Sometimes the property simply sits inside a family trust that already existed. When you sell Portuguese property held in a trust, the key question is what you are really selling: your interest in the structure, or the property itself. Historically, those two routes carried very different tax outcomes. Today, however, the international trend, and the Portugal–UK treaty, treats them the same way.
2. The case that illustrates the problem (PIV 21788)
The Portuguese Tax Authority’s binding ruling 21788 addressed a textbook cross-border situation:
- a trust based in the United States, treated as tax-transparent there;
- whose only asset was a single urban property located in Portugal;
- owned by an individual who was tax resident in the United Kingdom;
- who, in 2020, sold her interest in the trust instead of selling the property directly.
Three countries held a potential claim. Portugal hosted the property, the UK hosted the seller, and the US hosted the trust. Consequently, the decisive question was which treaty applied, and what that treaty said about this kind of gain.
3. Why Portugal could not tax the gain back then
Because the US trust was tax-transparent, the relevant treaty was the one between Portugal and the United Kingdom. Unfortunately, that treaty dated from 1968 and was the oldest one Portugal had in force.
Its capital gains article (Article 13) only let Portugal tax direct sales of Portuguese real estate. A sale of trust interests did not fit that wording. As a result, it fell into the catch-all category of “other property”, which the treaty taxed only in the seller’s country of residence, the UK. The Tax Authority therefore concluded that Portugal could not tax the gain, even though the underlying asset was a Portuguese building.
Notably, Portuguese domestic law was never the problem. In fact, Portugal’s own income tax codes (the CIRS for individuals and the CIRC for companies) already taxed the indirect sale of property-rich structures. The treaty simply outranked domestic law and pointed the gain to the UK.
4. What the new 2026 Portugal–UK treaty changes
Parliament approved the new convention through Resolution No. 206-A/2025, and it has applied since 1 January 2026. Crucially, it rewrites Article 13 and adds an explicit “property-rich” clause. This clause covers gains from selling shares or comparable interests, and it expressly includes interests in partnerships and trusts, where:
- more than 50% of their value derives, directly or indirectly, from real estate located in the other country; and
- that 50% threshold was met at any point in the 365 days before the sale.
When those conditions apply, the country where the property sits, Portugal in our example, can tax the gain. In practice, this aligns the treaty with the OECD and UN model treaties, with the multilateral OECD model standards behind the BEPS project, and with Portuguese domestic law. Therefore, the study behind this analysis concludes that the new wording justifies revoking ruling 21788 and applying one consistent rule: the gain from selling Portuguese property held in a trust now belongs to Portugal.
5. Why the US angle matters too
There is a useful detail for anyone whose structure touches the United States. Importantly, the Portugal–US treaty already contains a property-rich rule (its Article 14, mirroring the US “FIRPTA” approach). So whether the trust counts as transparent (pointing to the UK treaty) or as opaque and taxed in the US (pointing to the US treaty), both treaties now let Portugal tax the gain on property-rich interests tied to Portuguese real estate. In short, the escape route has closed from both sides.
6. What to check before selling Portuguese property held in a trust
Are you a UK resident, or resident in another country whose treaty with Portugal contains a property-rich clause? If you hold Portuguese real estate through a trust, holding company or fund, keep these points in mind:
- Selling the “wrapper” is no longer a shortcut. Selling your interest in the structure can now trigger Portuguese capital gains tax, exactly like a direct sale.
- The 50% test looks back 12 months. Stripping assets shortly before a sale rarely helps, because the rule tests the threshold across the prior 365 days.
- Timing and residency still matter. The outcome can change with the sale date, your residency, and how each country classifies the structure.
- Older rulings are not a safe guide. Decisions based on the pre-2026 treaty, including ruling 21788, no longer reflect the current position.
- Estate planning deserves a fresh look. Structures built years ago for succession or privacy may now carry tax consequences that did not exist at the time.
For UK readers who want the source documents, the UK government’s page on tax treaties with Portugal sets out the official texts.
Things to remember
The 2026 Portugal–UK treaty brings indirect property sales into line with international standards. For most expats and international families, the headline is simple. If you are selling Portuguese property held in a trust, and the value comes mainly from that property, expect Portugal to claim its share of the gain. This holds true regardless of where you live or where the structure sits. The good news is that, with the right advice, these outcomes are predictable and easy to plan for well before a sale.
How MCS Can Help
Madeira Corporate Services (MCS) has advised international families, investors and companies for more than 25 years. Moreover, our team combines legal, tax and corporate expertise to help you understand how the new Portugal–UK treaty affects selling Portuguese property held in a trust. We review existing trusts and holding structures, and we plan property sales efficiently and in full compliance. If you own, or plan to buy, Portuguese real estate through a structure, we can assist with estate planning, real estate matters and tax advisory in Portugal.
Finally, if you are considering relocating to Madeira or restructuring how you hold Portuguese property, we invite you to book a consultation tailored to your needs.
This article is provided for general information purposes only and reflects the legal and tax framework in force at the date of publication. It does not constitute, and must not be relied upon as, legal, tax, accounting, financial, or investment advice, nor does it create a client relationship of any kind between the reader and Madeira Corporate Services (MCS) or any of its members, employees, or affiliates.
The content draws, in part, on an academic study published in Ciência e Técnica Fiscal No. 442 (2026) concerning binding ruling PIV 21788 and the new double taxation convention between Portugal and the United Kingdom. The views expressed in that study belong to its author and do not bind the Portuguese Tax and Customs Authority, the Centre for Fiscal and Customs Studies, or MCS. References to legislation, treaties, administrative rulings, and case law are simplified for a general audience and do not reproduce the full legal text.
Tax and legal rules in Portugal, the United Kingdom, the United States, and other jurisdictions change frequently and are often subject to differing interpretations by the competent authorities and the courts. Their application depends entirely on the specific facts of each case, including residency, the classification of the structure involved, the timing of transactions, and the interaction between domestic law and the applicable double taxation treaty. The treatment of trusts, in particular, varies significantly from one jurisdiction to another. Nothing in this article should be taken as a representation as to the tax outcome of any particular transaction.
While reasonable care has been taken to ensure accuracy at the time of writing, MCS makes no warranty, express or implied, as to the completeness, accuracy, or current applicability of the information, and accepts no liability for any loss or damage arising, directly or indirectly, from any action taken or not taken in reliance on it. Readers should obtain independent professional advice tailored to their individual circumstances, and based on the legislation and treaties in force at the relevant time, before taking or refraining from any action.
Miguel Pinto-Correia holds a Master Degree in International Economics and European Studies from ISEG – Lisbon School of Economics & Management and a Bachelor Degree in Economics from Nova School of Business and Economics. He is a permanent member of the Order of the Economists (Ordem dos Economistas)… Read more
