T07E - Capital Gains Tax
Category : Taxation
T07E - Capital Gains Tax
Note: These guidelines are intended only as a summary. Tax laws and regulations change frequently and sometimes unexpectedly. It is strongly recommended that you seek professional advice.
The sale of a property located in Portugal, whether the seller is a resident or non-resident, must be declared to the tax office in Portugal. Selling a permanent home in Portugal has a specific legislation and the Capital Gain may be exempt of taxes if the amount of sale is reinvested in another permanent home in any EU/EEA, country. The sale of shares - whether from Portuguese or foreign companies - must be declared in Portugal only if the seller is a Portuguese tax resident. Non‑residents normally do not declare these gains in Portugal.
Double Taxation Treaties: Portugal has double taxation agreements with many countries, which may impact where the tax is ultimately paid. You should check the specific treaty between Portugal and your country of residence.
Tax Declaration: Non-residents must report the property sale in their Portuguese tax return (Annex G) for the year following the sale, considering their worldwide income to determine the correct tax rate on the Portuguese gain.
Those who are registered as residents in Portugal or with income arising in Portugal are required to submit form Annex G (Capital Gains Tax/Mais Valias), along with their general tax return forms in April/May, in the fiscal year following the one in which the income arose, for any of the following forms of Capital Gain:
Transfer of any kind of property
Transfer of stocks or shares
Transfer of rights of parts in commercial, industrial or scientific sector
Transfer of contractual positions or other rights related to contracts for purchasing real estate
Transfer in derivative financial instruments, with the exception of expected gains in swap of interests
Onerous transfer of Loans, Additional and Accessory Capital on Companies.
Literary rights and winnings from gambling
The gains arising from the following situations are exempt of this tax:
Shares in partnerships acquired before 01/01/1989
Housing purchased prior to 01/01/1989 (this might change, when property has been used for holiday lets – see Bulletin H13)
Construction plots acquired by gift or inheritance prior to 08/06/1965 as well as rural property
Government bonds and debentures
When the sale is exempt of tax it needs to be declared anyway. In this situation Annex G1 needs to be submitted.
Capital Gain on real estate
For residents of Portugal, 50% of the Capital Gain is free of tax. The Income tax rate will be calculated on the other 50% and according to the full Income of the year and it will be accumulative.
Capital Gains are worked out by taking the sale price and subtracting what you originally paid for the property, including all the taxes and notary fees you paid at the time. If you used a properly registered estate agent to sell the property, the commission you paid them can also be deducted, as long as it’s mentioned in the Deed of Sale.
Because money loses value over time, Portugal uses “currency devaluation coefficients” to update the original purchase price to today’s value. These coefficients apply when more than twelve months have passed between buying and selling the property. This ensures a fair comparison: the real value of the property when you bought it and its real value when you sold it. After all, €1,000 today isn’t worth the same as €1,000 was in 2010 due to inflation.
Latest coefficient tables, Ordinance from November 2025, you will find HERE
Any major improvements made on the property up to 12 years prior to the sale, can also be deducted from the Capital Gain but must be properly documented (official invoices).
New rules
Decree-Law No. 57/2024 brings into force the new rules on the exemption of capital gains on the purchase and sale of houses. This legislation came into force on 11th of September 2024 but does not have retroactive effects.
Therefore, two tax regimes will be in force simultaneously: one for consumers who sold their permanent home before 10th of September and another regime for those who sell it after that date. The date of sale of the house is decisive to which tax regime it applies.
Until 10th of September 2024 the old regime applies in which the minimum period between the sale of the permanent home and the purchase of a new home for the same purpose is 24 months. Families can only benefit from the IRS exemption on capital gains from the sale of the home if they have not done so in the previous three years.
From 11th of September 2024 the new tax regime of exemption from IRS on capital gains will apply. The period between the purchase and sale of the same permanent residence (proven by the respective tax domicile) will be 12 months and the family does not have to worry about whether they have already benefited from the capital gains, because they can use this regime more than once as the criterion that excluded those who “in the year in which the gains were obtained and had already benefited from this regime in the three previous years” was eliminated.
Meaning that anyone who sells the house before 10th of September will have to have lived in it for two years, otherwise they will not be able to benefit from the regime. However, anyone who sold the house on 11th of September or later will only have to have lived in the property for one year to avoid paying IRS on real estate capital gains.
Exceptional circumstances shall be considered, namely, changes in the composition of the respective household due to marriage or de facto union, dissolution of marriage or de facto union, or an increase in the number of dependents.
If you sold before 10 September 2024, you must follow the old rules, even if you file your IRS return in 2026.
If you sold on or after 11 September 2024, you follow the new rules, even if you file in 2026.
- The law remains in force and unchanged as of January 2026
Selling a permanent home with a Capital Gain, doesn´t mean that Income Tax has to be paid. If the money of the sale will be fully reinvested within 36 months after the sale or has been reinvested 24 months prior to the sale no tax needs to be paid. If there is a mortgage, the amount paid of the mortgage reduces the amount to reinvest, but the mortgage must have been taken out to acquire the property, to qualify.
According to the Tax Authority the amount reinvested corresponds only to the purchase price of the new home – not including additional charges such as IMT, the Stamp or real estate commissions. Capital gains used to pay taxes are not considered reinvestment.
The reinvestment must be in another permanent home. It can be in another EU country, or country that belongs to the European Economic Area (EEA), which mainly includes all EU plus Norway, Iceland and Liechtenstein. If the reinvestment is not total, the Capital Gain will be taxed proportionally.
The new home has to be registered as the permanent home within 12 months after the purchase.
The intention of reinvestment in permanent new housing, should be reported in the Model 3 IRS declaration.
Selling a second home does NOT have the benefit of the reinvestment**
** Extraordinary exemption:
The sale of land for construction or secondary housing during the years 2022, 2023 and 2024 is exempt from the payment of capital gains, as long as the sellers use the value obtained from the sale to repay the outstanding capital in housing credit contracts in the following three months.
To be exempt from capital gains, the amortisation can be done of a credit contract for the owner's own permanent home who sold the secondary home or in the permanent home of their descendants (children or grandchildren); it is necessary for this loan to already exist at the time of the sale of the property.
This last measure will make it possible to relieve families of the costs incurred with bank loans, without penalising them with capital gains tax arising from the sale of secondary homes carried out between 1st of January 2022 and 31st of December 2024.
If you sold during the eligible period, you can still claim the exemption when filing your 2025 or 2026 IRS return.
Clarify any doubts about the extraordinary exemption from capital gains with your accountant.
Selling house to the Portuguese State
The Mais Habitação law also provides for an exemption from capital gains taxation for owners who sell houses to the State. Please contact your accountant if you are interested in selling your house to the State and to check if and how you can make use of this exemption.
Capital Gain on real estate for non-residents
The taxation at the flat rate of 28% of Capital Gain from the sale of real estate earned by non-residents has been revoked in the Portuguese State Budget of 2023. Non-Residents therefore also enjoy 50% of the Capital Gain free of taxes if they sell a property after 1st of January 2023, the other 50% will be taxed as personal income at marginal rates.
Non‑residents may qualify for the reinvestment exemption if the household actually lived in the property as its permanent residence (binding ruling Processo 28272). Check with your accountant if you think this applies to you.
Expenses to deduct
The expenses that can be offset against the Capital Gain are the following:
Real Estate Commission on the sale
Major Improvements made to the property on the 12 years prior to the sale
Legal Fees, Notary Fees and Transfer tax on the purchase of the property that is being sold.
Capital Gains on shares and other movable property
Since 2023, the Portuguese taxation of short-term Capital Gains from the sale of shares and other movable property has changed significantly.
Capital Gains from the sale of shares and other movable property will be mandatorily aggregated with the taxpayer's remaining income and taxable at the progressive personal income tax rates if, cumulatively:
the underlying assets were held for less than one year prior to the sale, and
the taxpayer's total taxable income, including those Capital Gains, equals or exceeds the last tax bracket.
Capital Gains that do not fall, cumulatively, within the requirements above will not have their taxation rules changed, and the same flat 28% rate will continue to apply in most cases.
The sale of properties by Companies, are subject to the rules of the Corporate Tax Code. The situation of the sale of properties held by an offshore entity or any other form of non-resident company should be reported on the company’s IRC declaration.
Reinvestment scheme for retired taxpayers or 65 years of age or older
Taxpayers in retirement or aged 65 years or older can benefit from the total or partial exclusion of taxation of the gains even if they don’t reinvest the sale value in the acquisition, construction or expansion of another permanent house. In such cases the taxpayers must reinvest within 6 months in:
1) Life insurance contract (Seguro de Vida)
2) Individual membership in an open pension fund (Fundo de Pensões Aberto) or
3) Contribution to the public capitalisation regime (Regime Público de Capitalização) or
4) Pan-European Individual Savings Product (PEPP)
The taxable person or the respective spouse, on the date of the transfer of the property, is evidently in a state of retirement or is at least 65 years of age.
The acquisition of the life insurance financial insurance contract, the individual adhesion to an open pension fund or the contribution to the public capitalization regime is made within the six months following the date of realisation.
If the investment is made through the acquisition of a life insurance contract or individual adhesion to an open pension fund, these are intended exclusively to provide the acquirer or his or her spouse with a regular periodic payment during a period 10 years or more, with a maximum annual amount equal to 7.5% of the amount invested.
If the regular payment of the benefits is not fulfilled or their value exceeds the amount above, the tax exclusion will no longer apply and the discharge of the tax will be made by reference to the year in which the period for reinvestment is concluded.
Like the existing regime for reinvestment in own and permanent new housing, these taxpayers should also report in their Model 3 IRS declarations the intention and subsequent implementation of the reinvestment.
Houses in Local Lodging (Alojamento Local):
In 2021 Portugal changed the way Capital Gains are handled for properties used in Alojamento Local (AL). Now, Capital Gains are only calculated when the property is actually sold to someone else. Simply moving the property in or out of AL activity no longer triggers a tax calculation.
Because of this, the timing of the sale can make a big difference to how much tax you end up paying.
If you run an AL activity, the income from the service is taxed under Category B (business income), while any Capital Gains from selling the property are taxed under Category G.
If a property has been out of AL for 3 years, it may stop being treated as a business asset. This can reduce or eliminate the AL‑specific capital‑gains calculations when you sell. Meaning that if you cancel the AL license and wait 3 years, Finanças may treat the property as a normal residential property again, meaning only the standard 50% capital‑gains rule applies, with no AL penalties.
It is strongly recommended that you seek professional advice of an accountant to assist you with this.
Source OE2024/2025/2026
Finanças CIRS
DECO
Idealista
