The issue of the different treatment of capital gains obtained from the sale of real estate located in Portugal by residents versus non-residents has been the subject of much controversy between taxpayers and the tax authorities. This treatment was considered discriminatory by the Court of Justice of the European Union, and the State Budget for 2023 has put an end to the discrimination.
While residents were only taxed on 50% of the capital gain from the sale of a property, and taxed at the general, progressive rates, non-residents were taxed on 100% of the capital gain, at the flat rate of 28%. If they wanted to be taxed on only 50% of the capital gain, they had to appeal the IRS assessment.
From 01-01-2023, all sales of real estate located in Portugal, made by foreign residents, will be taxed in the same way as residents, i.e. only 50% of the capital gain will be taxed, and at progressive rates, which means that the applicable rate is no longer the fixed rate of 28%, but will be higher, the higher the income earned.
However, to determine the progressive rate to be applied, IRS taxpayers who are not resident in Portugal will have to declare all income earned worldwide. According to Circular Letter No. 20255 of 14-04-2023, for the purposes of determining the rate to be applied, all income earned, including that obtained outside the territory, under the same conditions as those applicable to residents, shall be considered.
So, if you don't live in Portugal, but in 2023 you sold a property located in Portuguese territory, be aware that you will have to declare all your incomes, not only from Portuguese sources, but worldwide, for the purposes of calculating the tax rate payable on the capital gain obtained.
Please note that it is always possible to reduce the tax payable by declaring the expenses you have incurred with the property, such as the energy certificate, taxes paid on the purchase, commission of the real estate agent, improvement works, etc.
In view of the above, the Tax Law Department of Belzuz Abogados, S.L.P. - Sucursal em Portugal demonstrates its total availability to support and advise you in completing your IRS tax return in Portugal to obtain the best tax efficiency in your specific case, providing all the necessary information.
Beatriz Pereira
Fiscal and Tax Law department | (Portugal)
Belzuz Advogados SLP
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