Everything about capital gains tax in Portugal

Profits from the sale of a property or investments does not escape the Lusitanian tax authorities. These gains are taxed at variable rates, depending on residency status and the nature of the gain. Since 2023, residents and non-residents have been treated equally, with 50% of the gain taxed at marginal income tax rates. Find out more about capital gains taxation in Portugal in this article. Determine your situation and find out how you will be taxed, our comparisons and tips for reducing your exposure.

 

Capital gains tax for Portuguese residents

Capital gains tax in Portugal is a tax levied on the sale of a portuguese property or investments acquired after 1988. Calculating the taxable gain is fairly straightforward:

Taxable gain = Sale price – Purchase price – Acquisition costs – Property improvement costs over the last 12 years.

 

This taxable gain forms the basis of your tax calculation. Importantly, it is only taxed at 50%. It is then added to your other annual taxable income and taxed at the standard rate, between 13.25% and 48% depending on your tax bracket.

Tax does not apply if a resident of Portugal sells his or her main residence and uses the proceeds to buy another primary residence in the European Union.

This tax also applies to capital gains on shares, securities and bonds, which are taxed at a flat 28% rate (or 19.6% for those living in the Azores).

Portuguese tax residents must declare their gains in their annual IRS tax return, with a submission deadline of June 31 of the following year. Failure to comply with tax obligations or late payments may result in administrative penalties.

 

Capital gains tax for non-residents in Portugal

Capital gains tax for non-residents in Portugal used to be subject to a flat tax rate of 28%. However, from January 1, 2023, only 50% of real estate gains are taxed. The rate is based on marginal tax rates ranging from 13.25% to 48% for 2024. To determine the rate applicable to these capital gains, the non-resident’s worldwide income is taken into account (even if it is not taxed in Portugal).

Dividends and interest are taxed at a flat rate of 28%. However, the taxpayer can also opt for taxation at marginal rates. A tax credit is available for countries with a double taxation agreement.

 

The case of the NHR status

Under the NHR regime, capital gains are taxed in the same way as residents. Gains are added to your professional income and are then subject to the standard tax scale.

Income from abroad is generally exempt if taxed in the source country. A special case exists if these earnings come from a blacklisted jurisdiction without a tax agreement. In this case, they remain taxable at 28% or 35%.

Gains from the sale of foreign shares in the portfolio are taxed at a flat rate of 28% in Portugal for NHR, as the NHR exemption does not apply in these cases.

 

Comparison of capital gains tax rates with European countries

Taxation in Portugal may seem both high for some, and rather flexible for others. To judge objectively, here’s a comparison with other European neighbors:

 

Country	Capital gains tax rates	Exemptions and reductions
Portugal	13,25% to 48% (residents and non-residents)	50% reduction for residents on real estate capital gains Exemption for primary residence reinvested in a new principal residence in the EU/EEA
Spain	19% to 26% (residents), 19% to 24% (non-EU/EEA residents), 24% (other non-residents)	Exemption for principal residence reinvested in a new principal residence in the EU/EEA Reduction for residents over 65
France	19% (income tax) + 17.2% (social security contributions)	Allowances for length of ownership Exemption for principal residence
Italy	26% (residents and non-residents)	Exemption for residents who have owned their primary residence for more than 5 years Deductions for length of ownership
Germany	25% (income tax) + 5.5% (solidarity)	Annual allowance of €1,000 Exemption for principal residence if reinvested in a new principal residence in the EU/EEA

 

How to reduce exposure to capital gains tax?

Real estate investment in Portugal can be heavily impacted by capital gains tax. To limit its impact, we’ve put together a few tips:

Reinvest your gains

If you sell your main residence and invest in a new main residence in the European Union, you are potentially eligible for tax exemption. The new acquisition must have taken place 36 months after the sale, or 24 months before the sale.

 

Consider tax amortization benefits

In Portugal, you may be able to deduct certain expenses related to your property, such as depreciation, which can help reduce your capital gains tax liability.

 

Take advantage of tax losses

In the same tax year as your capital gains, you could have also suffered from some losses. If so, no worries because these losses can be used to offset the gains in order to reduce your tax liability. In Portugal, you can keep these carry-forwards for five long years.

 

Use tax-efficient investment structures

If you’re investing in stocks and other securities, think about using tax-efficient investment structures like pension funds or life insurance plans. Doing this could give you a little extra room to breathe when it comes to capital gains tax.

 

Consider donating to charity

If you’re looking to sell an asset and want to lower your capital gains tax, think about giving part of the earnings as a gift to charity. In Portugal, donations made to registered charities can be deducted from your taxes. This will help in lowering your overall income and therefore reduce your liability for capital gains tax.

 

Seek professional advice

Tax rules shift fre­quently. They constantly alter base­d on individual situations. Consulting an advisor or accountant proves wise. This professional guidance­ could help you navigate the complex syste­m.

 

Is there capital gains tax on inherited property in Portugal?

Yes, there is capital gains tax on inherited property sales in Portugal. They are taxed at 50% of their value and included in the IRS, with a few exceptions.

 

Does Portugal have death duties?

There has been no inheritance tax in Portugal since 2004. However, heirs pay Stamp Duty of 10% on the value of inherited assets, with exemptions for spouses, descendants and ascendants. If you’ve read our article on how to get a mortgage in Portugal, you already know that there are stamp duties on many transactions in Portugal.

 

In-depth look at the taxation of capital gains in Portugal for crypto.

Capital gains tax in Portugal for cryptocurrencies varies depending on the holding period and the type of asset.

For cryptocurrencies held for at least 365 days, capital gains from their sale are exempt. If they’re held for less than 365 days, the gain is taxed at 28%. Non-Fungible Tokens (NFTs) are subject to that same tax break. Crypto-to-crypto transactions are generally tax-free in Portugal, with taxation deferred until the crypto is sold for fiat currency.

 

For professional traders and businesses dealing in crypto, progressive tax rates between 14.5% and 53% apply on profits, rather than the 28% flat rate. Mining income is also taxed at these rates.

But be warned: The treatment of capital gains may change depending on individual circumstances and asset type. So it’s always better to consult a specialist when seeking personalized advice.