When you sell a property in Portugal for more than you paid, the profit is subject to capital gains tax — known locally as mais-valias. How much you pay depends on your residency status, how you used the property and which costs you can deduct. This guide explains the essentials.
What counts as a capital gain
The taxable gain is, broadly, the sale price minus the original purchase price, with adjustments. From the gain you can deduct certain costs, and the purchase price is updated for inflation using an official coefficient once you have owned the property for more than two years.
Costs you can deduct
Reducing the taxable gain legitimately depends on keeping good records. Deductible items typically include:
- The IMT (property transfer tax) and stamp duty paid when you bought;
- Notary, registration and legal fees from the purchase;
- Estate agent commission on the sale;
- Documented improvement works carried out in the years before the sale.
Keep every invoice — without documentation, these deductions cannot be claimed.
Capital gains tax for residents
For Portuguese tax residents, only 50% of the gain on a property is added to your other income and taxed at the progressive IRS income-tax rates. The rate you ultimately pay therefore depends on your total income for the year.
Capital gains tax for non-residents
Following changes prompted by European case law, non-residents selling Portuguese property are now generally taxed in a comparable way to residents — with 50% of the gain assessed at progressive rates — rather than under the old flat-rate treatment. Because this area has changed, non-residents should always confirm the current rules for their year of sale.
The main-home reinvestment exemption
One of the most valuable reliefs applies to your main, permanent home. If you sell your primary residence and reinvest the proceeds into another primary residence — in Portugal or elsewhere in the EU/EEA — within the legal time window (broadly, from 24 months before to 36 months after the sale), the gain can be fully or partially exempt. Strict conditions apply, including actually living in the new property.
Other situations to be aware of
- Older properties — gains on homes bought before 1 January 1989 are generally exempt.
- Inherited property — the acquisition value is based on the value used for stamp-duty purposes at the time of inheritance.
- Reporting — the gain is declared in your annual IRS tax return for the year of the sale.
Plan the sale in advance
Capital gains tax can be a significant cost, but careful timing, full documentation of your costs and correct use of the reinvestment exemption can reduce it substantially. Because the rules — particularly for non-residents — change periodically, get advice from a Portuguese accountant or tax lawyer before you sign anything.
