# capital gains tax



## spice

Hi everyone im new to this . Hope someone out there can help me. I live in Portugal but have decided to put my house up for sale as my husband is back in the uk working, i want to move to France as it will be easier for him to come home for weekends, not sure i will cope with the weather but i will have to see. Anyway i have been told by the agent i will have to pay 20% capital gains tax, now i dont mind paying that on the profit but he says its on the whole amount which along with his fees is going to knock a big hole in the budget. Can anyone tell me if this is correct.


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## silvers

If you are re-investing the money into your new home within the EU, then your agent is talking through his hat, (I cleaned that up) if not, as I understand it, it is on the gain not the whole.


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## silvers

Capital Gains Tax

As mentioned above, a capital gain in Portugal is added to regular income and the appropriate income tax rates (stated above) are applied. In calculating a capital gain, account is taken of the rate of inflation from the date of purchase until the date of sale.

When the proceeds of the sale are re-invested in the purchase of other permanent assets (another Portuguese property or shares, etc.), only 20% of capital gains tax need be paid in the current year. The balance of 80% of the profit is deferred to the following years. On the sale of real estate that is the vendor's primary residence, 50% of the gain is added to the regular income for income tax purposes. If the proceeds are invested in the purchase of alternative real estate for a residence within a short period as defined in law (currently two years), the capital gain is exempt from tax.

For non-residents on a sale of the property Portuguese capital gains tax (CGT) is payable at 25% of the gain.

Under the double tax treaty with Portugal, if you are tax resident in a country that has entered into such an agreement with Portugal, the agreement allows you to credit any capital gains tax paid in Portugal against any capital gains tax payable in your tax domiciled country.


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## silvers

CGT (mais valias) can be explained as follows:
As a RESIDENT you are exempt from CGT when you sell your residence (not second home) and buy another residence.
You must check you are registered at financas as a resident.
CGT is taxed as part of your personal income, and is declared on the next IRS return after you sell (sell now, declared in Jan/Feb 2007.) Also on your IRS you declare the new property you have bought, and the effect this has on your CGT.
If your new property has a lower price than the property you sold, you will pay a proportional amount of CGT. If more expensive, or equal, you will pay no CGT.
So, to answer your questions. No, you will not have to pay CGT at point of sale. It is calculated by taking the original price you declared, multiplied by the coeeficient of inflation for that year, then ading on purchase costs (SISA etc.). This gives the base value. Subtract this from the price you are selling for and thendivide the result by 2. This is the taxable amount, which is then charged at personal IRS rates (ie top rate now 42%).
This will only concern you if the new property is cheaper than the old one (as above).
Hope that is clear(ish). If not, post some figures and I will show you using numbers.!
PS any decent lawyer will organise this for you
PPS these comments do not apply to non-residents, the rules are different


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## spice

spice said:


> Hi everyone im new to this . Hope someone out there can help me. I live in Portugal but have decided to put my house up for sale as my husband is back in the uk working, i want to move to France as it will be easier for him to come home for weekends, not sure i will cope with the weather but i will have to see. Anyway i have been told by the agent i will have to pay 20% capital gains tax, now i dont mind paying that on the profit but he says its on the whole amount which along with his fees is going to knock a big hole in the budget. Can anyone tell me if this is correct.


Thank you for your help. I think i need to find a good solicitor, not easy in this area, i live in the alentejo so if anyone knows of good solicitor maybe you could let me know .Thanks again for info.


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## jeanpatou

silvers said:


> CGT (mais valias) can be explained as follows:
> As a RESIDENT you are exempt from CGT when you sell your residence (not second home) and buy another residence.
> You must check you are registered at financas as a resident.
> CGT is taxed as part of your personal income, and is declared on the next IRS return after you sell (sell now, declared in Jan/Feb 2007.) Also on your IRS you declare the new property you have bought, and the effect this has on your CGT.
> If your new property has a lower price than the property you sold, you will pay a proportional amount of CGT. If more expensive, or equal, you will pay no CGT.
> So, to answer your questions. No, you will not have to pay CGT at point of sale. It is calculated by taking the original price you declared, multiplied by the coeeficient of inflation for that year, then ading on purchase costs (SISA etc.). This gives the base value. Subtract this from the price you are selling for and thendivide the result by 2. This is the taxable amount, which is then charged at personal IRS rates (ie top rate now 42%).
> This will only concern you if the new property is cheaper than the old one (as above).
> Hope that is clear(ish). If not, post some figures and I will show you using numbers.!
> PS any decent lawyer will organise this for you
> PPS these comments do not apply to non-residents, the rules are different


Dear SILVERS,

I am none resident in Portugal so If I sell a farm land in Portugal I will have to pay a flat rate of 25% of the gain but can I deduct solicitor fees, escritura fees inflation rate since inheritated?


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## silvers

Hi Jean,
You only pay the CGT on the profit, any costs will not be part of any potential profit and will therefore be exempt from CGT. As I said before, any good lawyer will be able to sort this out for you more clearly.


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## jeanpatou

silvers said:


> Hi Jean,
> You only pay the CGT on the profit, any costs will not be part of any potential profit and will therefore be exempt from CGT. As I said before, any good lawyer will be able to sort this out for you more clearly.


thank you very much


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