In Portugal, capital gains from real estate assets correspond to the profit obtained from the sale of a house. They consist of the difference between the price at which someone bought a property and the price to which this same property has been sold. If there is a loss instead of profit, then there is no tax. In Portugal, the sale of real estate can sometimes have unpleasant surprises. Real estate gains are heavily taxed, and their calculation is important to take into account before any final decision. Selling your house in Portugal is not easy. Whether buying or selling property in Portugal, taxes are as usual. How to calculate the capital gain on real estate assets in Portugal ? How to calculate the taxes on the capital gain in Portugal ? How to benefit from a tax exemption for the resale of your property in Portugal ? Lisbob, the expatriate assistant in Portugal, tells you all about the capital gains of real estate assets and taxes related to the sale of house in Portugal.
How to calculate the capital gain in Portugal?
The formula for calculating the capital gain of a real estate asset in Portugal is as follows :
PLUS-VALUE (PV) = Value of Sale - (Acquisition Value x Devaluation Coefficient) - Valuation Fees - Expenses related to the Purchase and Sale of the Property
The devaluation coefficient is fixed each year by the Portuguese Government. Here are the different rates of the 2019 budget law :
The expenses may include works or investments done into the house, such as the installation of solar panels, provided they have been completed during the five years preceding the sale and are properly documented, as well as the expenses engaged with IMT, Registro notarial, as well as with real estate brokerage, such as the cost of buying and selling the property.
Taxes on real estate gains in Portugal
The sale of real estate must always be reported in Appendix G of the IRS statement (model 3) of the seller and, if there is any gain, it is taxed as income up to 50% of the value of the profit.
The value of real estate gains in Portugal are subject to IRS taxation corresponding to 50% of the value of the profit obtained. For example, if you realized a capital gain of 20,000 euros, only 10,000 euros will be taken into account in the IRS calculation.
If you decide to not invest capital gains from the purchase of another property, you must indicate, in your IRS tax return, the costs of work, improvement or replacement of windows, real estate mediation fees, the costs of issuing the energy certificate, the real estate municipal taxes and expenses with registers and acts.
IRS exemption for real estate gains
There are situations in which capital gains from the sale of real estate in Portugal are exempt from the payment of the IRS. Indeed, it is possible to be exempt from IRS on the sale of its property in Portugal :
- If the sold property was purchased before January 1, 1989 - in which case the capital gain will not be subject to IRS ;
- If the value of the sale of permanent housing is reinvested in the acquisition, construction or work in new permanent housing - in this case, the reinvestment must have been made within 36 months of the sale (or in the 24 month before purchase). In this case, it is necessary to use the total value of the sale, otherwise the capital gains will be taxed proportionately.