Portugal's taxation of real estate capital gains made by non-residents has been brought in line to comply with European Union law.
The country's 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.
Until 31 December 2022, net real estate capital gains were considered at only 50% of their value and taxed autonomously at the special rate of 28%, but as 1 January 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.
Portugal-based law firm Garrigues said in a briefing note on 19 April: "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."
