Capital gains tax on selling property in Portugal

When you sell a property in Portugal for more than it cost you, the gain is taxed as income (IRS). But the sum is not simply "sale price minus purchase price": the law adjusts the purchase price for inflation, lets you deduct several costs and only taxes half of the gain. If you reinvest in another home, you may pay nothing.

How the gain is calculated

Gain = sale value − (purchase value × coefficient) − expenses

• Sale value: the price in the deed, or the property's tax value (VPT) if that is higher.
• Purchase value: the value IMT was charged on when you bought. For a property received as a gift or inheritance, it is the value stamp duty was charged on.
• Inflation coefficient: corrects the purchase value for inflation when more than 24 months have passed between buying and selling. It is published every year, usually in November, for that year's sales.
• Expenses: the costs of buying (IMT, stamp duty, deed and registration), the costs of selling (estate agent's commission, energy certificate) and improvement works carried out in the previous 12 years, as long as the invoices carry your Portuguese tax number (NIF).

Only 50% of the gain is then added to your other income for the year and taxed at the normal progressive IRS rates. Property bought before 1 January 1989 is not subject to capital gains tax.

Example

A flat bought in 2016 for €150,000, with €4,500 in IMT, stamp duty and deed costs, and €10,000 of works in 2020, invoiced. It is sold in 2026 for €300,000, paying the estate agent 5% plus VAT (€18,450) and €200 for the energy certificate. We used the 2025 coefficient for 2016, 1.19; the 2026 one is published at the end of the year and is usually slightly higher.

Added to your other income, this €44,175 can mean €10,000 to €20,000 of tax, depending on your bracket. Without the invoices for the works and the agent, the gain would be almost €30,000 higher: keep every receipt from the day you buy.

If you are not tax resident in Portugal

Portugal taxes gains on Portuguese property wherever the seller lives. Since 2023, non-residents are also taxed on only 50% of the gain, at the progressive rates, instead of the old flat 28% on the whole gain. The rate is set by reference to all your income, including income earned outside Portugal, so you will need to show it.

• You must file a Portuguese tax return (Modelo 3 with Annex G) in the year after the sale, between April and June. This requires a NIF and, if you live outside the EU or EEA, usually a fiscal representative.
• Your home country may tax the gain too. Under most double taxation treaties it gives a credit for the tax paid in Portugal. Check with an adviser there.
• The reinvestment exemption below rarely applies, because the property sold must have been your tax address in Portugal for the 12 months before the sale. A holiday home owned from abroad does not qualify.

Avoiding the tax: reinvesting in another permanent home

The gain on selling your permanent home is exempt if you reinvest the money in another home to live in. The conditions:

• The home you sell was your tax address for the 12 months before the sale.
• You reinvest between 24 months before and 36 months after the sale, so the new home can be bought before the old one is sold.
• The new home is in Portugal, another EU country or the EEA, and becomes your permanent home within 12 months of the reinvestment. Buying land and building, or extending or improving another permanent home, also counts.
• You declare the intention to reinvest on the tax return for the year of the sale, and the reinvestments in the following years.

How much you have to reinvest

Not the gain, but the sale value minus what you still owed the bank on the loan used to buy the home you sold. In the example, with €90,000 of mortgage outstanding, you would need to reinvest €210,000. The full price of the new home counts, even if you buy it with a new mortgage.

If you reinvest only part of it, the exemption is proportional. Reinvesting €157,500 (75% of €210,000) exempts 75% of the gain; the remaining €22,087.50 follows the normal rule, and half of it, €11,043.75, is taxed.

If the purchase of the new home falls through

Since 2026, if you signed the contract to buy (or build) the new home in time and the other party defaults, the reinvestment period is suspended while a court case is pending. You must tell the Tax Authority on the return for the year in which the 36 months would end.

New: reinvesting in homes to let

For sales between 2026 and 2029, a gain reinvested in homes in Portugal let as housing is also exempt, as long as the monthly rent stays within the limits of Decree-Law 97/2026 (2.5 times the minimum wage, €2,300 in 2026). This route also works when the property sold was not your permanent home, such as a second home. The law does not limit it to residents, but confirm with an adviser before relying on it from abroad.

You lose the exemption if the lease is not signed within 6 months, if the rent goes over the limit, if the home is not let for the minimum period, or if you sell or give it away within 5 years. The gain is then taxed in the year the condition failed.

Aged 65 or retired

If you sell your permanent home and you or your spouse are 65 or over, or retired, you can exclude the gain by putting the money, within 6 months, into an insurance contract or pension fund that pays a regular annuity, or into the public capitalisation scheme. Not every product qualifies: check with the provider that it meets the conditions in the IRS Code.

How it is declared

The sale goes on Annex G of the tax return for the following year, filed between April and June, even when the gain is exempt. A property sold in 2026 is declared in the return filed in 2027.

* General information and an illustrative example. The final amount is the one in the IRS assessment. For reinvestment, inherited property, several owners or sellers living abroad, speak to an accountant.

Sources

• IRS Code, articles 10 (paragraphs 5 to 10 and 27 to 31, as amended by Decree-Law 97/2026), 43, 44, 45, 50, 51 and 72
• Law 24-D/2022 of 30 December (State Budget 2023: 50% rule for non-residents)
• Decree-Law 97/2026 of 20 May
• Portaria 382/2025/1 of 11 November (inflation coefficients)