Taxation of capital gains obtained from the sale of real estate by non-residents in Portugal

Obtaining capital gains from the sale of a property located in Portugal, residents are taxed at progressive rates between 14.5% and 48% and non-residents are subject to autonomous taxation at a special rate of 28%, unless the taxable person, resident in another Member State of the European Union (EU) or the European Economic Area (EEA), when there is an exchange of information in tax matters, choose to tax at the rates applicable to residents, in which case, for the purposes of determining the referred rates, the income obtained by the taxpayer, on a worldwide basis, is considered under the same conditions applicable to resident taxpayers.

50% of real estate gains obtained by residents in Portugal are excluded from taxation under the terms of article 43 of the IRS Code, but this possibility has been forbidden to non-residents.

Disagreeing with the limitation of that exclusion from taxation only to residents, many non-residents have claimed that that rule is discriminatory, initiating lawsuits in court against the payment of tax on the total value obtained.

As a result of the cases presented, there have been several judicial decisions in favor of non-residents, forcing the Tax Authorities to correct the assessments, limiting taxation to 50% of the capital gains obtained, including for residents in countries outside the European Union (EU) or the European Economic Area (EEA).