Portugal - Real estate capital gains obtained by non-residents: clarifications

However, while in the case of residents the amount subject to taxation corresponded to 50% of the net capital gain obtained, the same criterion was not adopted for non-residents whose capital gains were fully subject to taxation, in clear breach of European law as confirmed by the Portuguese tax courts, without clarifying, however, whether, even if considered at only 50%, they should continue to be taxed at 28% or be taxed according to the progressive IRS rates applicable to residents.

In the meantime, these rules have been amended by the State Budget laws for 2022 and 2023, imposing their compulsory aggregation as from 2023.

Following these law changes and as a result of the aforementioned case law, the Portuguese Tax Authority has clarified the tax framework of the real estate capital gains obtained by non-residents through Circular Letter no. 20255, of 14 April 2023, as follows:

• Until 31/12/2022, net real estate capital gains are considered at only 50% of their value and taxed autonomously at the special rate of 28%;
• As from 01/01/2023, real estate capital gains will have to be compulsorily aggregated (at 50% of their value) with the other income obtained by non-residents, and will be subject to the corresponding progressive rates of IRS.