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Like many other countries, Portugal imposes a capital gains tax, but it only applies to gains made on property and investments.

Personal items are not taxable, and there is no capital gains tax on inherited or gifted property or assets. They are subject to stamp duty instead (with exemptions for close family and non-Portuguese assets).

This article looks at how capital gains tax affects residents, non-residents and those approved under the non-habitual residents (NHR) regime.

Residents

If you are resident in Portugal, you are potentially liable to tax on gains made on worldwide property and shares (if acquired from January 1989 onwards). So UK real estate and any other foreign property would be liable to tax in Portugal.

Only 50% of the gain is liable to tax for residents. The gains are added to your other income for the year and taxed at the income tax scale rates, up to 48% in 2018. Inflation relief is available after two years.

The gain is exempt if you are selling property that was your main home and all proceeds are reinvested in another main home in Portugal or the EU/EEA (European Economic Area), if you meet the conditions. This could affect British expatriates returning to the UK after Brexit.

Second and holiday homes are always liable to capital gains tax.

If you own residential UK property, you are also liable to tax there even though you are not UK resident.

Shares, securities and bonds are taxed at a flat rate of 28%. Gains on shares in a blacklisted jurisdiction are taxed at 35%. Capital gains on UK shares are only taxed in the country of residence, so in Portugal in this case.

There are ways to reduce your tax liability depending on how the gains on your assets are calculated, but you should take advice from an expert in tax on how this works.

Any questions? Ask our advisers for help

Non-habitual residents

Under the non-habitual residents (NHR) scheme, a gain is exempt in Portugal if it may be taxed (under tax treaty rules) in the country of source.

So, because of the terms of the UK/Portugal double tax treaty, gains made on the sale of UK shares are not exempt for NHR residents.

In contrast, UK property gains are exempt from Portuguese tax under the NHR regime. They would, however, be added to your overall taxable income which could increase your overall income tax rate in Portugal.

Download our free Guide to Taxes in Portugal

Non-residents

Non-resident individuals pay tax on 100% of the gain from the sale of a property in Portugal at 28%. Non-resident companies are subject to local corporation tax at 21% plus municipal surcharges.

EU residents, and residents of an EEA country which has a tax treaty with Portugal may choose to be taxed as a Portugal resident. Note however that you will have to declare your worldwide income to calculate the marginal rate of tax applicable to the gain.

For UK residents, the gain would also be taxable in the UK, but tax paid in Portugal can be credited against that due in the UK.

Life insurance

Investments held within a life insurance policy in Portugal are not liable to capital gains tax but you will be taxed on the gain element of any withdrawal or if you cash it in. You do not have to pay tax on the proceeds if you sell or assign the policy. In fact, certain types of policies can offer significant tax benefits in Portugal. Speak to a specialist wealth manager about which ones may help you and how.

If you are looking to avoid capital gains tax, a good adviser can help you find tax-efficient, compliant ways of managing your assets so that you do not pay more tax than you need to – there can be capital gains tax advantages to living in Portugal. Always seek professional guidance before making any changes to your investments and tax planning.

Contact your local adviser for personalised advice

Tax rates, scope and reliefs may change. Any statements concerning taxation are based upon our understanding of current taxation laws and practices which are subject to change. Tax information has been summarised; individuals should seek personalised advice.