Law no. 56/2023 was published on October 6, 2023, which approves measures in the field of housing (and to which we refer in case of omission of reference to the law to which the articles refer).
Under the terms of Article 10(1)(a) of the C.I.R.S., capital gains are gains which, not being considered business or professional income, capital income or property income, result from the onerous sale of rights in rem in immovable property.
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In turn, under the terms of paragraph 5 of the aforementioned article 10, gains from the transfer for consideration of real estate intended for the taxpayer's own permanent residence or that of their family are excluded from taxation, provided that the following conditions are cumulatively met:
a) The realization value, less the amortization of any loan taken out for the acquisition of the property, is reinvested in the acquisition of ownership of another property, of land for the construction of a property and or its construction, or in the extension or improvement of another property exclusively for the same purpose located in Portuguese territory or in the territory of another member state of the European Union or the European Economic Area, provided that, in the latter case, there is an exchange of information on tax matters;
b) The reinvestment referred to in the previous paragraph is made between 24 months before and 36 months after the date of realization;
c) The taxable person expresses the intention to reinvest, even partially, mentioning the respective amount in the tax return for the year of disposal;
e) The property transferred has been used as the taxpayer's own permanent home or that of their family, as proven by their tax address, for the 24 months prior to the date of transfer;
f) Taxpayers have not benefited, in the year in which the gains were made or in the three previous years, from this exclusion regime, without prejudice to proof by the taxpayer, made in the liquidation procedure, that non-compliance with this condition was due to exceptional circumstances.
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Consequently, and in accordance with paragraph 6 of the aforementioned article 10, this benefit will not apply if,
a) In the case of reinvestment in the purchase of another property, the purchaser does not use the property for their own or their family's residence until twelve months after the reinvestment;
b) In all other cases, the purchaser does not request the registration of the property or the alterations in the land registry 48 months after the date of the realization, and must use the property as their home or that of their household by the end of the fifth year following the realization;
d) Properties that have benefited from non-refundable support granted by the State or other public entities for the acquisition, construction, reconstruction or carrying out of conservation works worth more than 30% of the property's taxable value for IMI purposes, are sold before 10 years have elapsed from the date of their acquisition, the signing of the declaration proving receipt of the work or the payment of the last expense relating to the non-refundable public support which, under the terms of the law or regulations, are not subject to encumbrances or special regimes that limit or condition their sale.
e) The taxable person or their household has not fixed their tax residence on the property.
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Another case of exclusion from taxation of the respective capital gains will occur if, in accordance with no. 7 of the aforementioned article 10 of the C.I.R.S., if the taxpayer or their spouse or common-law partner, at the time of the transfer of the property, is retired or is at least 65 years old, within six months they reinvest in one of the following products: i) Life financial insurance contract; ii) Individual membership of an open pension fund; or iii) Contribution to the public capitalization scheme, and these are aimed exclusively at providing the purchaser or their spouse or life partner with a regular periodic benefit over a period of 10 years or more, of a maximum annual amount equal to 7.5 % of the amount invested.
Now,
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Law no. 56/2023, of October 6, brought into force a “transitional tax regime”, according to which the following situations are now applicable with regard to the matter in question:
I
Gains from the onerous transfer of land for construction or residential property that is not intended for the taxpayer's own permanent residence or that of their family are now excluded from IRS taxation, provided that, within three months of the realization, the realization value, deducted from the amortization of any loan taken out to purchase the property, is applied to the amortization of the outstanding principal on a mortgage loan for the taxpayer's own permanent residence, and provided that the transfers are made between January 1, 2022 and December 31, 2024.
- cfr. a) and b) of no. 1 and no. 4 of art. 50.
II
Under the terms of Article 50(6), the reinvestment period provided for in Article 10(5)(b) of the Personal Income Tax Code is suspended for a period of two years, with effect from January 1, 2020.
[i.e. that the reinvestment of the realization value is made between 24 months before and 36 months after the date of realization]
- cfr. no. 6 of art. 50.
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