Laywer, Adriana Bonfiglioli’s Update.
Until 2022, capital gains from the sale of immovable properties in Portugal were taxed differently for residents and non-residents. Non-residents were subject to an autonomous tax rate of 28% on 100% of the capital gains, unless they resided in an EU Member State or the European Economic Area and opted to be taxed at the progressive rates applicable to Portuguese residents (ranging from 14.5% to 53%). In contrast, residents were only taxed on 50% of the capital gains, a significant advantage that was not extended to non-residents.

This discrepancy created a clear violation of European law, as confirmed by multiple rulings from Portuguese Tax Courts, including the Supreme Court. Faced with these legal challenges, the Portuguese Government decided to align the tax regime for non-residents with that of residents, effectively ending the discriminatory treatment.

To implement this change, the Tax Authority issued Circular Letter no. 20255 on 14th April 2023, clarifying the new tax framework for real estate capital gains obtained by non-residents. Here’s what you need to know:

Until 31 December 2022: Capital gains were taxed at 28% on 100% of the gain for non-residents, with no option to benefit from the 50% reduction available to residents.

As of 1 January 2023: Non-residents are now taxed on only 50% of the capital gains, which must be aggregated with their other worldwide income. This aggregated income is then subject to progressive IRS rates, ranging from 14.5% to 53%.

This means that non-residents selling property in Portugal after 1 January 2023 must include the capital gains in their annual income declaration. Importantly, while foreign income is considered to determine the applicable tax rate, it is not subject to taxation in Portugal. The goal is solely to calculate the appropriate rate for the Portuguese-sourced income.

These changes have significant implications for non-residents who own property in Portugal and are considering selling. Navigating this new regime requires a clear understanding of the rules and careful planning to avoid unexpected tax liabilities. With the right guidance, however, the process can be managed smoothly and stress-free.

In the past, I’ve worked with clients who assumed that, as non-residents, capital gains taxes wouldn’t be a concern, believing there would be no communication between countries. In both cases—clients from England—they were eventually traced back to their home country, and the fines from a property sold two years prior caused significant stress and complications. This is exactly why having an expert like me by your side is crucial. From the moment the offer is accepted to the registration of capital gains the following year, I ensure the process is handled smoothly and without surprises. My guidance not only helps you comply with regulations but also provides peace of mind, knowing every detail is managed professionally and proactively.

Get in touch with Adriana Bonfiglioli to discuss your personal needs: Website or email: adriana.bonfiglioli@gmail.com
Since 2016, Adriana has made Portugal her home, gaining firsthand experience with the intricacies of the real estate market. Motivated by a deep passion for helping individuals and families, she specializes in guiding clients through informed decision-making when relocating to Portugal. With a strong legal foundation and membership in the Bar Association, Adriana brings exceptional expertise to navigating the complexities of real estate transactions. Her diverse international background further enhances her ability to provide valuable insights and unwavering support, ensuring a smooth and confident transition for her clients into their new chapter.