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It is clear that the viability of the entire deal can vary depending on the tax laws that apply to it.
If you are investing or interested in real estate investments in Portugal and you are not one of its residents, you should be familiar with the process of applying for a tax refund from the sale of real estate properties.
Important! In Portugal filing reports and income tax returns for the past year can usually be done from May to the end of June of the current year. Following the Corona epidemic, the government has not yet published all the filing dates for 2021, and therefore, as of today, the last filing date is as it was in 2021, June 30, 2022. Updates should be followed on the IRS website.
The Portuguese real estate magazine Idealista presented a detailed legal explanation from the law firm Belzuz regarding capital gains tax refunds on the profit from the sale of real estate assets for non-residents on a legal basis. We bring you the basics.
Capital gains on the sale of a property are one of the issues that raise most doubts for those who want to go ahead with the process of selling a house in Portugal.
In the case of non-Portuguese taxpayers in the country, taxable profits/income are also controversial, because until now the Portuguese Tax and Customs Authority has applied 100% tax on real estate of capital gains when it should be only 50%. But there is a way to get a refund of Income-tax.
In Portugal, the Supreme Court has determined that the capital gains tax of a non-Portuguese resident on the sale of a property should be 50% of the capital gain amount, as opposed to the 100% required to date by the Portuguese Tax and Customs Authority.
In 2020, following several rulings in the same direction, the Supreme Administrative Court, standardized jurisprudence, in the sense that article 43, no. 2 of the IRS Code which provides that only 50% of the capital gain is taxed, by being applicable only to residents, is incompatible with the European Union rules, restricting the movement of capital and, therefore, assessments that do not apply this rule to non-residents should be annulled as illegal.
How to get an IRS tax refund in Portugal
Therefore, non-resident taxpayers in Portugal, “who have sold property located in Portugal, must submit the IRS declaration in Portugal corresponding to the year 2020 until 30th June 2021, whether they have calculated a capital loss or capital gain. In the latter case, where the sale of a property in Portugal results in a capital gain, they will be faced with an IRS assessment that will consider the total capital gain for taxation purposes.
Following that assessment, the taxpayer has at their disposal judicial and arbitration means that allows them to challenge the assessment and request the reimbursement of the difference that would correspond to them if the Portuguese Tax and Customs Authority had considered only half of that amount.
Read more articles on real estate in Portugal in the “Business & Real Estate” category.
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