# Portuguese Capital Gains



## Aden'Soph

Can anyone help ? This from the Portuguese Financas ...


a) that, within a period of 36 months counting from the date of completion of the transfer, the realisation value after deduction of the depreciation of a potential loan taken out
for the acquisition of a building is reinvested, in the purchase of another property, or of
a plot of land for the construction of a property, *or in the construction, extension or
conversion of another property intended exclusively for the same purpose,* provided that it is situated in Portuguese territory or in the territory of other EU Member State or in the European Economic Area provided that in the last-mentioned case there is tax information exchange;

Our question is ... does this apply to us moving BACK into what had been a second home in Portugal ? Having sold what had been our first home in Portugal. Can we modernise this second home (which we obviously already owned) or must we go off and buy something entirely new.

The law seems a bit unclear !


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## moggy666

Aden'Soph said:


> Can anyone help ? This from the Portuguese Financas ...
> 
> 
> a) that, within a period of 36 months counting from the date of completion of the transfer, the realisation value after deduction of the depreciation of a potential loan taken out
> for the acquisition of a building is reinvested, in the purchase of another property, or of
> a plot of land for the construction of a property, *or in the construction, extension or
> conversion of another property intended exclusively for the same purpose,* provided that it is situated in Portuguese territory or in the territory of other EU Member State or in the European Economic Area provided that in the last-mentioned case there is tax information exchange;
> 
> Our question is ... does this apply to us moving BACK into what had been a second home in Portugal ? Having sold what had been our first home in Portugal. Can we modernise this second home (which we obviously already owned) or must we go off and buy something entirely new.
> 
> The law seems a bit unclear !


WOW thats a revelation Portuguese law a bit unclear...... lol :eyebrows:

Derek is you man, he will be along shortly.

Along the same line a similar question from me. 

Got the house in Portugal a year ago also got a house in UK. We are currently renovating the house in PT and going to sell the UK house and retire when the PT house is finished.

Q: Do i have to pay Capital Gains Tax on anything i make on the UK house or can i claim it against the works to the PT house.

Moggy666

lane:


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## canoeman

No it does say you can invest gain into another property, providing that property is your *primary home* and within the EU or EEA, it doesn't bar you from previously owning that property, providing you can prove that the house sold was your primary home.

The important calculations are the cost to buy + allowable expenses - selling price - allowable expenses - improvements = gain, you then have 3 years to invest that gain in new property, which you would need to be able to substantiate. 
You should when you purchase goods or have work done on property to have your Fiscal No written or printed on receipt. Financas are increasingly insisted on this requirement. 

*A potential loan* means if you had a loan for say a kitchen or a mortgage on the property it does *not* mean you had to have one to qualify for exception.


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## canoeman

As your a UK Resident? moggy 666 then you don't have CGT on your primary UK home, when sold.
It's only if you sold your PT property while still being a UK resident that you would be liable to the UK for CGT on that sale.


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## siobhanwf

Thanks canoeman alwayas on the ball with financial information


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## telboyo

In 2006/7 I was a resident in Portugal. I was renting accommodation and owned no other property anywhere. I built a house which I subsequently sold in 2008.
I decided at that time to return to UK for a while before moving back to Portugal.
I informed the Inland revenue in Portugal that I intended to purchase a new property for myself to a specific value, that value being more than the capital gain on the house I had just built and sold.
The law had just been amended in Portugal that allowed me to make my reinvestment in the UK, and not Portugal as it had been up `til then.
I used a Portuguese tax person, who filed everything online.
Result was a huge bill for `MAIS VALIAS`. 
The reason given was that I needed to Reinvest ` THE WHOLE PROCEEDS of SALE` not just the capital gain.
The tax was calculated on the basis of the difference between the sale price, less estate agents bill (you MUST have the tax receipt for it to be counted) and the cost of the building (all builders VAT reciepts given) and the reinvestment value that I had told them I was going to reinvest. !!!!!!!!!!!!!!
I subsequently bought a house in UK for exactly what I said I would, sent all docs to my accountant in Portugal to prove that I had made the reinvestment, including stamp duty paid etc , copy of the UK deeds.
Her answer was ....The Portuguese revenue are not interested in any of those docs. They will make their own invetsigations as to your purchase in UK. !!!!!!
How??? They had no information on me other than my name. 
But my question is:
Should I have paid any tax at all in Portugal???


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## canoeman

In 2008 you should have been entitled to rollover relief if you where a registered Resident.

It's the "profit" element that has to be reinvested or used for rollover.


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## telboyo

Hi
 Well thats what I was lead to believe.!! The net Capital Gain.
But thats not what happened.
I complained at the time, and was given the official calculations that applied.
As I said it was the relationship between the NET SALE VALUE and the reinvestment amount, NOT just a simple as long as you reinvest at least the capital gain. 
I became a full resident in 2005, and sold the property as a Portuguese resident.
My accountant told me that Capital Gains is different to Mais Valias. ???

I have always anticipated returnming to Portugal, but have now got caught up in the drop in value of the £ since I returned and this substantial tax that I paid would have helped a lot in making up this difference.
I have tried to tae this up with my accountant in POrtugal, but she seems very reluctant to take on the revenue !!



canoeman said:


> In 2008 you should have been entitled to rollover relief if you where a registered Resident.
> 
> It's the "profit" element that has to be reinvested or used for rollover.


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## canoeman

Well someones wrong, so maybe a new accountant, maybe she actually didn't supply or file correct information, but your probably way out of time to make any real sense of situation.


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## telboyo

Yes clearly there is one correct calculation.
But I think it extremely important that people should know what the rules are.
I actually ended up paying only a little less than I would have done if I had NOT been a resident (based on 20% CGT).
Yet oddly I am now neighbours in UK, with someone else who returned from Portugal at the same time as me, they were not residents, but did make capital gains on their only house........they have not been asked for a euro in tax !!!
This whole situation really needs someones full attention, as normal in Portugal
each different finances, camara, health authority, in fact any of the gov bodies never read from the same hymn book, they all have their own interpretation on the rules.
And as I now this can prove very costly to anyone that is just unlucky !!!
I well remember the time back in 2006, after having just bought a new car in Portugal, fully insured with Portuguese insurance, resident, all docs in perfect order, I took a friend to Faro airport. Dropped him off at the drop off point, and
was then apprehended by a lurking Policeman. He looked round the car, asked in I was Portuguese (he had heard me speaking English), wanted all my docs etc.
Proudly I opened my glove box, everything perfection, or was it ?????
He then asked me for something I had never heard of, I didnt understand what he wanted, and just shrugged my shoulders.
He opened the car, took my keys out from the dashboard, and demaned that I lock it up and fiollow him to the policetsation in the airport.
On arriving at the station, he opened up a pre bookmarked page !!, and in Portuguese with the help of a colleague, that I because I was using british driving license, I neeed a doc stamped by the Transport people confirming my Portuguese address.
I said I would get one even tho I nor anyone else had ever heard of such a doc at the time.
Not good enough, immediate fine of €80 he followed me to the cash point to get the cash, or my car would stay where it was !!!!!
Beware residents with UK driving license, driving Portuguese registered car!! 


UOTE=canoeman;558037]Well someones wrong, so maybe a new accountant, maybe she actually didn't supply or file correct information, but your probably way out of time to make any real sense of situation.[/QUOTE]


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## canoeman

What residents need to know is the current regulations regarding CGT which is now in line with the rest of EU.

Yes it's a nightmare when you've been caught out but it's important that residents & non residents understand CGT as it relates to them now. 

D/L sorry but registering or exchanging your UK licence with IMTT has been the law for a considerable time at least since 2006, as it has always been UK law that D/L has to be registered to a valid UK address, you cannot use a Portuguese address.

Of course if your on holiday and hired a car or a non resident then you don't need to register your licence.


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## telboyo

hi
just looking around found this quote from gerrad associates (accountants) ref Portugal property tax. I trust they will not mind me quoting it here rather than linking to their web site:
`Capital Gains Tax

-Capital gains are classed as category G income and, in July 2010 a new law made all capital gains subject to a flat rate tax of 20%. Tax residents are granted a €500 per annum tax free limit. Tax is charged on 50% of the amount of capital gains from the sale by tax resident individuals of immovable property located in Portugal, or of intellectual or industrial property. Rates vary from 11.08% and 45.88%. The gain may be wholly or partially exempt if the property being sold is the taxpayer’s primary residence and the sale proceeds, reduced by any associated loans, are reinvested in the acquisition of further residential property in Portugal or another EEA country.--

The important words in there are `sale proceeds`.........not `gain`.
So thats where the calculation takes into account the amount of the reinvestment made, compared to the net `sale proceeds`.


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## canoeman

" The important words in there are `sale proceeds`.........not `gain`. "

Your misreading this, CGT is tax on the capital gain not "sale Proceeds" currently if you reinvest that "gain" into primary home purchase within EU/EEA there is no CGT. You do not have to invest original capital.


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## Hacker

May a property in Portugal owned via an off-shore company be declared a primary residence and enjoy roll-over relief within the EEA?


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## canoeman

Nope, afraid not, might be the time to bring property back into traditional ownership, given the changes that keep affecting offshore ownership or change the offshore company for a Portuguese nominee Company that would give you substantial tax savings but you need to get seriously good advice on best way forward .


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## Hacker

Thank you canoeman for your timely reply. "Seriously good advice" surely the best way to go but after reading diametrically opposed opinion in the local English language press choosing the right adviser will be difficult. Using a Portuguese nominee company is widely promoted but after the publication of an article detailing the savings and benefits of implementing that option a local Portuguese lawyer responded in the "Letters" of the paper stating that was not a tried and tested process and was therefor open to a challenge from the IRS.
Are you aware of any precedent in Portuguese law to support the Nominee company route?


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## canoeman

I can only quote a bit more information from the article I have written by a well respected Algarve based accountant, until you've posted 5 times afraid I can't give you a link

"A Portuguese nominee company may well prove to be the most appropriate vehicle for purchasing property in Portugal. This form of home ownership offers many of the advantages that property buyers once sought in offshore property companies but achieves these objectives in a compliant, mainstream fashion. This type of non-trading company can provide stability and attractive benefits, meeting diverse potential needs.

A fully compliant structure
In fact, although infrequently used in recent years, these small nominee companies have existed in Portuguese statute law since the 19th century and have been embraced in subsequent legislative reforms over the past 150 years. Therefore, they are fully compliant and are not subject to any of the punitive laws that have made offshore property companies a pariah: no deemed income assessment, no five per cent rates bill. In fact, the simplicity of this form of company makes this structure easy and inexpensive to run."


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## Hacker

canoeman said:


> I can only quote a bit more information from the article I have written by a well respected Algarve based accountant, until you've posted 5 times afraid I can't give you a link
> 
> "A Portuguese nominee company may well prove to be the most appropriate vehicle for purchasing property in Portugal. This form of home ownership offers many of the advantages that property buyers once sought in offshore property companies but achieves these objectives in a compliant, mainstream fashion. This type of non-trading company can provide stability and attractive benefits, meeting diverse potential needs.
> 
> A fully compliant structure
> In fact, although infrequently used in recent years, these small nominee companies have existed in Portuguese statute law since the 19th century and have been embraced in subsequent legislative reforms over the past 150 years. Therefore, they are fully compliant and are not subject to any of the punitive laws that have made offshore property companies a pariah: no deemed income assessment, no five per cent rates bill. In fact, the simplicity of this form of company makes this structure easy and inexpensive to run."


Thank you again for your help, I must achieve the 5 posts one way or another for I surely would like to talk to the contact.
If the Nominee Company is fully compliant does that bring it within the principal residence classification - or am I expecting too much?


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## canoeman

Maybe a little to much

"The resident advantage
Capital gains tax on the sale of a nominee company is only 10 per cent, as compared to 25 per cent that may be assessed to non-resident companies. Non-resident individuals also pay 25 per cent while residents typically pay close to a net of 20 per cent (50 per cent exclusion with the balance paid at margin rates of up to 42 per cent) if they are ineligible for rollover relief. 
(Non-Residents should check tax liabilities as defined in relevant Double Tax Treaties)."


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