Like many countries, Portugal imposes a capital gains tax on the sale of assets. It applies to gains made on real estate and investments; personal items are not taxable. Your exposure will depend on whether you are resident, how you own the asset and, with property, whether it is your main home.
Property
Portugal residents are liable to tax on gains made on worldwide property acquired from 1989 onwards. Gains are added to your other income for the year and taxed at the income tax scale rates 13% to 48%.
Only 50% of the gain is liable to tax and you can receive inflation relief after two years of ownership. Some exemptions are available.
Individuals with non-habitual residence (NHR) status may not have to pay Portuguese capital gains tax when selling property outside Portugal. This applies where the gain is taxable in the source country under the double tax treaty – as with UK property. If you expect to dispose of foreign property in the next few years, doing so before your NHR 10-year term ends could save you tax.
Main home exemptions and reliefs
Portugal offers two reliefs for those selling a property that was their main home.
1) When you reinvest the proceeds from one main home into a new home, you will not attract Portuguese capital gains tax provided:
- The property is owned in your name and you can demonstrate history in it.
- Your replacement home in Portugal or anywhere in the EU/EEA that has a tax treaty with Portugal.
- You complete the purchase within 36 months of the sale of your previous home (or 24 months before), and move in within six months of this deadline.
- The entire proceeds are reinvested (including fees and costs).
2) If you are either retired or aged over 65, gains are also exempt if you reinvest proceeds in an eligible insurance contract or pension fund within six months of sale.
You don’t need to reinvest the entire proceeds, and this relief is in addition to the main home rollover relief.
Life assurance policies – where you can hold a wide range of investment assets within its tax-efficient structure – are eligible for this relief. When it comes to pensions, it must provide a maximum annual payment of 7.5% of the funds value, so take advice first.
Portugal capital gains tax on investment capital
Residents selling worldwide shares, securities and bonds are taxed at a flat 28% rate. Investments obtained before 1989 are exempt.
Assets deemed to be from a ‘tax haven’ (including Gibraltar and Guernsey) are taxed at 35%.
NHR holders are not exempt from Portuguese CGT on UK capital investments.
There is no capital gains tax on the disposal of gold and precious metals, unless a series of transactions suggests the seller is actually trading. Crypto assets are not subject to capital gains tax provided you have owned them for over one year. Short-term crypto gains are taxed at 28%.
Capital gains tax for non-Portugal residents
In the past, non-residents were taxed at 28% on the full gain made from the sale of property, shares, securities or bonds in Portugal. EU residents could opt to be taxed as a Portuguese resident.
Following legal cases that reached the European Union Court of Justice, since January 2023 residents and non-residents benefit from the same tax treatment on the disposal of Portuguese real estate.
If you own Portuguese property through a non-resident corporate structure (company or trust), gains on the transfer of shares may attract 25% corporation tax (35% if from a blacklisted jurisdiction). This applies where the relevant double tax gives Portugal taxation rights. With companies based in the UK or Luxembourg, for example, corporation tax is instead payable in those countries.
Liability for UK capital gains tax
Some gains from Portuguese assets are also taxable in the UK for UK residents.
Portuguese residents with UK property are subject to UK tax as well as in Portugal. For residential property, any gain made since April 2015 is liable to UK capital gains tax, whereas for commercial property or land, it is the gain since April 2019.
Where tax is paid twice, the UK/Portugal double tax treaty ensures a credit can be given, although you pay whichever amount is larger.
Reducing your capital gains tax exposure
With careful planning, it is possible to significantly reduce your tax liability. For example, certain types of life insurance policies can offer significant tax benefits in Portugal. Speak to a specialist wealth manager about which ones may help you and how.
A cross-border wealth manager will help you find tax-efficient, compliant ways of managing your assets so that you do not pay more tax than you need to, in Portugal or the UK.
Tax rates, scope and reliefs may change. Any statements concerning taxation are based upon our understanding of current taxation laws and practices which are subject to change. Tax information has been summarised; individual should seek personalised advice.
By Christopher Moore, Partner, Blevins Franks
