Capital Gains Tax in Portugal in 2025 Explained
Understanding capital gains tax (CGT) is essential to accurately assess your financial outcome. This is particularly important for foreign investors, homeowners and expatriates, whose tax obligations can differ significantly from those of residents. Portugal’s tax system has evolved in recent years, aligning the rules for residents and non-residents more closely, but it still offers specific exemptions and reliefs that can impact your overall tax liability.
This guide breaks down the essentials of CGT in Portugal for 2025, highlighting key considerations for both residents and non-residents.
What Is Capital Gains Tax?
Capital gains tax is levied on the profit made from selling an asset, such as real estate. In Portugal, the taxable gain is calculated by subtracting the acquisition cost and eligible expenses (like improvement costs and transaction fees) from the sale price. For properties held for more than 24 months, an inflation adjustment may apply, reducing the taxable gain. Source: tytle.io
CGT for Portuguese Tax Residents
- Taxable Amount: Only 50% of the capital gain is subject to taxation.
- Tax Rates: The taxable portion is added to your other income and taxed at progressive rates ranging from 14.5% to 48%.
- Exemptions: If the property sold is your primary residence and you reinvest the proceeds into another primary residence within Portugal or the EU/EEA within 36 months, you may qualify for a full exemption. Source: PwC Tax Summaries
CGT for Non-Residents
As of January 1, 2023, non-residents are subject to the same CGT rules as residents:
- Taxable Amount: 50% of the capital gain is taxable.
- Tax Rates: The taxable portion is subject to Portugal’s progressive income tax rates, ranging from 14.5% to 48%.
- Global Income Consideration: The applicable tax rate is determined based on your worldwide income, even if not taxed in Portugal. PwC Tax Summaries
Prior to 1 January 2023, non-residents faced a flat 28% on the whole gain; this discriminatory difference was ruled illegal by EU and Portuguese courts
Strategies to Reduce Your CGT Liability
1. Reinvestment Relief: As mentioned, reinvesting proceeds from the sale of your primary residence into another qualifying home within the EU/EEA can exempt you from CGT.
2. Inflation Relief: For properties held for more than two years, an inflation adjustment factor can reduce the taxable gain.
3. Deductible Expenses: Costs related to property improvements and transaction fees can be deducted from the capital gain, lowering your tax liability.
4. Double Taxation Agreements (DTAs): Portugal has DTAs with many countries, which can prevent double taxation and may offer tax credits or exemptions. Madeira Corporate Services
Key Takeaways
- Both residents and non-residents are taxed on 50% of the capital gain from property sales.
- Progressive tax rates apply, ranging from 14.5% to 48%, based on your total income.
- Various reliefs and exemptions are available, especially for primary residences and reinvestments.
- Proper documentation and understanding of deductible expenses can significantly reduce your CGT liability.
Considering selling property in Portugal? Contact B&P Real Estate for expert guidance on navigating the capital gains tax landscape and maximising your investment returns or reach out to a Portuguese accountant for more detailed information.
