wellinever

Capital gain from the sale of a property in Portugal for a non resident is 28%.
As a resident of the UK the capital gain there is either 18 or 28% depending on level of the gain, but a max of 28%.
So in theory if the full 28% is paid in Portugal then UK tax would be covered by DTA.
But if one became a resident of Portugal before the sale of a property and claimed roll over relief and reinvested all of the sale proceeds back in the UK (I assume we can still do that during the transition period?) thus reducing any tax paid in Portugal, what would be the situation regarding any Tax to pay in the UK?

Red Eric

On the first line, that's not quite correct. Non residents who reside elsewhere in the EU can opt to declare worldwide income and pay tax on half the gain at scale rates as opposed to paying the 28% on the full gain.

On the second half, it presumably depends on whether the property is your primary residence in both cases. That might take a bit more than a Câmara-issued registration certificate to establish at the PT end.

wellinever

Even better if you dont need to become a Portuguese resident and can still claim roll over relief (reinvestment and pay scale rates)
But another option I am thinking about could be to reinvest 100% of the sale value in Portugal. That would not trigger any capital gain. Then sell that immediately at the purchase price or less and pay no capital gain in Portugal.
Does that sound like a plan? I suspect that UK would not be involved in that all??
Then there would be no capital gain in Portugal

RichardHenshall

Wouldn't you be likely to have a meaningful capital loss through this last strategy as a result of transaction costs?

You also have the problem of severing your ties with the UK sufficiently that you don't get trapped by UK tax anyway. If you're UK tax-resident it's the UK's rules that apply to the calculation for UK CGT.

Red Eric

Slight flaw in the logic there.

You could hardly claim it is (or was) your primary home in order to get the rollover relief unless you're fully resident (and tax resident) at some point.

wellinever

Capital loss is of course a possibility, paying capital gain in the first place is a certainty, so yes its a risk, but depends on the amount of CGT needed to pay in Portugal. (signficant in real terms)
Yes as far as residency is concerned to become a resident for a short while is just a case of applying for it.

I guess my real question is how the UK tax authority would look at the reinvestment part.
I could of course, if a Tax resident of Portugal, declare the Portuguese house as my main home.
That way there would be no UK tax liability?

Diddion

Apologies for deletions. Thank you to Richard for both pointing out to me that I had mis read the question (thinking that the property was in the U.K.) and for doing so privately, rather than publicly.

I still have one point to make, which is if you purchase property in the U.K. as an expat, you face a stamp duty surcharge on that purchase.

RichardHenshall

You may only need to be Portuguese (tax-)resident for a short(ish) time but I think you do need to avoid being a UK (tax-)resident for at least as long. The 'just applying' for residency only applies for 2020. Can you sever ties to the UK fast enough? Will you end up with other Portuguese taxes that you might have avoided by staying in the UK?

Even if a Portuguese tax resident, you would also need to check if there are any claw-back provisions, designed to prevent that course of action being successful in avoiding the tax.

Red Eric

So just to recap, the plan would be to move in to a property you've owned for some time as a non-resident, inform the tax authorities in both jurisdictions that you have designated it your primary home, sell it and re-invest the proceeds either in Portugal for a subsequent quick resale or in the UK in another property to add to the one that's already there and was your primary home before you decided Portugal was the place for you? And then claim for return of the withheld CGT. All in the space of what, 11 months?

Hmmmm…….let me think.

No, no - I don't believe the authorities in either country would want to look too hard at that one

wellinever

Not quite correct. I built a new house and its just finalised so its not yet registered with the council as a house.
So all of this is looking at options to try to decide on best way forward.
`Blue sky thinking` I think is what its called, just teasing out what options open or not.
Yes I could go to the usual Algarve accountants, but I never find them to be open to blue sky thinking, and want to have investigated the options before going to them with a proposal or 2.
So any bright ideas/thoughts/experiences/knowledge would be apprciated.

TonyJ1

Roll over relief only applies for primary residences.

TonyJ1

If you became resident and then sold immediately, the tax authority would reject the roll over relief on the basis of a tax scheme - would need to give it at least 2 tax years for it to work - can then claim that it was not a tax scheme / tax saving plan

TonyJ1

If you sell within a period of 2 years after it becomes your primary residence - likely to be assessed under normal rules. Up to you then to prove otherwise - a tall order in this case.

wellinever

What about putting the asset into a Nominee Portuguese company, valued at the value of the house??
Then sell the shares at same value. Asset stays in the nominee company
Bit like the old method of owing property in Portugal, but this time a Portuguese compnay not offshore.

wellinever

If that doesnt work well, then it seems to me the way is to take out Portuguese tax residency and actual residency, therefore Portuguese home would be primary dwelling, for both Portugal and UK. Make the reinvestment (all or part,) all in the UK (yes it would attract extra stamp duty). Pay the tax in Portugall based on reinvestment value in € (would be higher now with better exchange rate) and be exempt from UK CGT on grounds of gain is from Primary property.
ALl this needs to be done before Dec 2020. AFter sale return to UK and take out residency there.
Selling main home in the UK after that would again be tax free based on main home.