Costs & Taxes
Selling your house in Portugal requires careful planning, particularly regarding expenses and taxes. As you prepare to sell your property, establishing the asking price is just the first step. It's crucial to also consider the additional costs and expenses associated with the sale, including taxes.
Many sellers overlook the tax implications, but understanding the tax obligations is essential for a smooth transaction. At Lagos Homes, we understand the intricacies of selling property in Portugal, and we're here to guide you through the process effortlessly.
COSTS INVOLVED
Selling Your Property in Portugal
Before diving into the sale process, it's crucial to calculate the expenses associated with selling a house in Portugal. Not all proceeds from the sale will be pure profit, so it's essential to budget accordingly. Here are some expenses to consider:
Property Preparation
This may include any necessary work to be done before selling the house, such as painting, plumbing repairs, addressing humidity issues, and other maintenance tasks.
Legal Expenses
Contracts, legal fees, and notary services are all part of the legal process involved in selling a property and come with associated costs.
Documentation
Gathering all necessary documents for the sale incurs associated costs. These documents are essential for legal compliance and a smooth transaction process.
Taxes
Various taxes are associated with the sale of a property in Portugal, including IRS (income tax) and Capital Gains Tax. Understanding these tax obligations is crucial for financial planning and compliance.
Capital Gains Tax in Portugal
Capital gains tax applies to the profit made from the sale of real estate and investments in Portugal. Portuguese residents are subject to IRS income tax on 50% of their gains when selling a property since 2021. The same applies to the sale of inherited properties. This taxable amount is combined with other income to determine the applicable IRS rate.
Capital Gains Tax for Non-Residents
Non-residents selling property in Portugal are also liable for capital gains tax. The tax rate differs based on residency status:
Residents within the European Union: Capital gains are taxed at 50% of the profit, subject to marginal tax rates (ranging from 14.5% to 48%), plus a solidarity tax of 5%. Income earned abroad is taken into account to determine the tax rates.
Residents outside the European Union: Non-EU residents, including UK expats not residing in Portugal, are taxed at the full capital gains rate of 100%, at a flat rate of 28%.
Ways to Avoid Capital Gains Tax
There are exceptions to paying capital gains tax in Portugal under certain circumstances:
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Reinvestment: If the proceeds from the sale are reinvested in another permanent home within 36 months after the sale or 24 months before the sale.
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Property Acquisition Before 1989: Properties acquired before 1989 are exempt from capital gains tax.
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Retirement Investment: Individuals over 65 years of age or retired can invest capital gains in life insurance, pension funds, or public capitalization regimes within six months after the sale.
Navigating the complexities of selling property in Portugal is best done with the assistance of a reputable real estate agency. They can provide expert guidance on tax obligations, help determine exact amounts and deadlines, and offer valuable experience in working with international clients.
For more details, also check out our guide to the costs, taxes and expenses associated with buying property in Portugal.
