Selling a property in Portugal can have tax implications. If you sell your Portuguese property at a profit, you may be liable to pay tax on the realized capital gain in Portugal. How much you ultimately pay depends on several factors, including your purchase price, selling price, costs incurred, the period of ownership, your tax residency, and whether you qualify for a full or partial exemption.
In this article, you will read everything you need to know about capital gains tax in Portugal (2026 update). We discuss how the capital gain is calculated, which costs you can potentially deduct, how the rules differ for Portuguese residents and non-residents, and when reinvesting can lead to a full or partial exemption.
We also cover the Portuguese IRS tax rates for 2026, inflation correction, renovation costs, tax filing via Modelo 3 and Anexo G, special rules for people over 65, and the reinvestment options introduced in 2026 for rental properties.
Do you want to know in advance how much tax you can expect to pay when selling your Portuguese property? Then it is important to have the calculation done before you sell.
When calculating the capital gain, it is incorrect to simply use the following calculation: “Selling price – original purchase price = taxable profit”.
The Portuguese tax legislation actually takes into account, among other things:
The fiscal calculation of the capital gain can therefore turn out to be significantly lower than the simplistic calculation of “selling price minus purchase price”.
A simplified representation of the calculation is:
Sale value minus − adjusted purchase value − permitted costs and expenses − permitted costs for value-adding works = taxable capital gain
If you have owned a property for more than 24 months, the original purchase value can be adjusted using an official monetary correction coefficient. This means that for the calculation, the tax authorities do not necessarily use the exact same purchase value as the amount you paid years ago.
When calculating the adjusted purchase value, the purchase value may be adjusted using the annually determined correction coefficient. The Portuguese tax authorities determine this correction based on coefficients set each year. It is therefore not simply a matter of applying the consumer price inflation percentage.
An adjusted purchase value generally results in a lower taxable capital gain, and therefore less tax to pay, because the original purchase amount becomes higher due to this correction.
This is one of the most important parts of the calculation. For the calculation of the capital gain, the Portuguese tax authorities allow certain costs incurred during the purchase, sale, and renovation/remodeling to be deducted from the selling price.
Think of, for example:
Did you renovate or make improvements to your property in Portugal before selling it? Then certain renovation and improvement costs can reduce the taxable capital gain.
The Portuguese tax authorities state that costs for adding value to the sold real estate that were provably incurred in the last 12 years can be included. However, these must be costs that can be classified for tax purposes as value-adding costs. Not every expense in or around a home is automatically deductible. Examples of works that may be relevant:
Loose furniture, decoration, or personal purchases cannot be included to reduce the capital gain. It is crucial that the costs were actually paid and are well-documented. "Well-documented" means at the very least that there must be an invoice clearly stating your name, address, and Portuguese fiscal number (NIF). Therefore, always keep the original invoices, proof of payment, and contracts.
Subsequently, for most private real estate sales, 50% of the positive capital gain is taken into account for the IRS (income tax). However, exceptions exist, for example for certain properties for which substantial non-repayable government subsidies were received and which are sold within ten years.
Please note: The tax treatment may vary depending on your personal situation, tax residency, ownership structure, and the way the property was acquired. This article provides general information and does not constitute individual tax advice.
A capital gain is the profit made from the sale of a property and is calculated as the difference between the purchase and selling price, minus deductible costs and potentially an adjustment to the purchase price. This profit is taxable in Portugal, with different rules applying to residents and non-residents.
Properties purchased before 1989: exempt.
For purchases after 1989: 50% of the profit is added to your annual income.
Progressive IRS rates for 2026: 12.50% to 48%.
Highest rate applies to annual income above €86,634. After 2 years of ownership, an inflation correction is applied to the purchase price, adjusting the purchase value for inflation and thereby lowering the basis for capital gains tax.
Exemption through reinvestment (Note: only for residents!)
Reinvest the proceeds from the sale of your primary residence into a new primary residence.
Within 36 months after or 24 months before the sale.
The property must be located in Portugal, the EU, or the EEA.
Full exemption applies only if the entire selling price is reinvested.
For retirees or people aged 65+.
Investment in life insurance or a pension fund within 6 months.
Annual withdrawal ≤ 7.5% of the fund.
Since January 1, 2023:
Profit: €100,000, foreign income: €90,000. Total taxable: €140,000 (= 50,000 + 90,000; even though you do not pay tax on your foreign income in Portugal, this income is taken into account to determine which tax bracket you fall into for this calculation). → Tax rate: 48% due to income being higher than the highest bracket of €81,000. → Tax: €24,000. (Old rule: 28% of €100,000 capital gain = €28,000, meaning the new regulation is more favorable for non-residents than the old rule).
From 2024 onwards, the same regime applies to both residents and non-residents regarding the calculation of capital gains tax: 50% of the capital gain is taxed under the IRS. Rates: 12.50% to 48%. With a good strategy, you can in some cases limit or completely avoid the tax through reinvestment or cost deductions.
Questions? We are happy to help you!
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