The issue of alleged discrimination in the taxation regime of property gains obtained by non-residents in Portugal is not new and has been widely discussed in the courts because of the various disputes between taxable persons and the Tax and Customs Authority (“AT”).
Real estate capital gains, in the case of tax residents in Portugal, are only subject to taxation in what corresponds to 50% of the balance of the capital gain obtained, however, the same criteria was not adopted for non-residents who subject taxation to total capital gain obtained, in clear violation of European law as confirmed by the Portuguese tax courts.
Circulated Letter No. 20255, of April 14, 2023 clarifies the temporal application of the regime for taxation of real estate capital gains of non-resident taxable persons, due to the amendments carried out by the State Budget Law for 2022 and by the State Budget Law for 2023.
Until December 2022, for non-resident taxable persons, the balance of real estate capital gains was considered at only 50% of its value and taxed autonomously at the special rate of 28%.
However, as of January 2023, real estate capital gains are now compulsorily included (at 50% of their value) in the remaining income earned by non-residents, subject to the corresponding progressive IRS rates.