riv

I bought a house in Algarve in 2018.

Although the house is fine, I have decided I would like to change for one a bit closer to the sea, and on the right ( south ) side of the 125 main road.

My understanding is that if I sell the existing house ( which will probably fetch about 50 grand more than I paid for it ) there would in principle be a hefty capital gains tax to pay, BUT that there is an exemption if you then purchase a new house / flat, ie you reinvest, as it were, the gain into a new property ?

First of all, is that a correct understanding ?

Secondly, what happens , tax wise, if you do it the other way around ?

Thus, if I see a place I really like now, and ( to avoid losing it ) purchase prior to selling the 'old' house ( so for a while I would be in ownership of two properties ) , what happens to the gain on selling the 'old' house ? Is it just taxed and one has lost the exemption ?
Or what ?

Alan PT

This should explain: https://www.eurofinesco.com/mdocs-po...-reinvestment/

riv

The link does not work for me I am afraid.
I get this message

## Sorry you can't see this Memphis Documents file you don't have the proper permission ##

perhaps you could summarise ?

RichardHenshall

riv , you need to be resident in Portugal to get this rollover concession. If you're resident elsewhere the property is treated as a second home and is taxed in full by the Portuguese and you also have to declare the gain (and possibly pay more tax) in the country where you are resident.

EU.flag

That option will depend on where are you tax domicile, its only available to residents whose property is main residence. CG tax is 28%.

2nd question you asked, possibly, if sale money is used to clear mortgage on new property within 3y, you'll need accountant advice.

Alan PT

Oops, looks like their links are broken, sorry. You can navigate to the doc in their library https://www.eurofinesco.com/library/ (under CGT and Real Estate)

I can't cut and paste it as they made it a PDF image to stop people doing that Very briefly, up to 24 months before is possible, but subject to several qualifications (and as others have already said it's only for principal residence)

wellinever

Its a potential minefield if you are British, depending on your situation.
Residency in PT is pretty simple, by comparison, as far as I see it..ie Your have a bit of paper that says you are Resident.
Considering you need to be n PT for 6 months of the year then if you own your own home, then the PT AT considers it as your main home
PT Tax residency auto follows becoming a Resident in PT.
Prob is, if you have any ties or visit the UK for any length of time (well >90 days in a year), have a property there, the HMRC could well consdier you are Tax resident there as well, and then the PT house is considered as a second home, and by law you have to inform the HMRC of the sale and the gain !!!
And of course as a second home it is subject to CGT in UK and there is no allowance for reinvestment in anotehr proiperty to avoid that tax.
I am in the same position at the moment, have a house in both UK and PT, dont wanna sell the UK house, but want to sell the PT house and reinvest about 75% of the sale value, thus paying tax on 50% of 25% of the gain.tax not so bad then....but if I would have to inform HMRC of the sale, they would take much more in Tax, leaving me with less money.
I did ask one advice from a number of accountants in UK, and get mixed replies, some say I would not need to inform UK, others say they need £5-7 to give full advice !!!!!
I have asked this similar question on another post, I am guessing that the UK would consider me as a UK resident, question was .....how to get the PT house registered as my main home, and therefore free of UK CGT............there is any concern is about taking any gain back to the UK within 6 years of leaving !!! But thats another story

EU.flag

If you are UK tax domicile, you must report sale/purchase within 30 day and pay taxes. Applies to any property anywhere in world.

You can switch from UK home to PT home and make PT home main residence for tax purpose. However, that doesnt free PT home from UK CGT, its calculated on how many days home was residence.
Also, if within 2y of buying 2nd home you did not make written election to UK tax office, declaring which home is main residence, you lose right to make election in future at any time, on those two properties.

ARCNET

I don't believe that is correct. The 30 day rule (60 days on completions on or after 27 October 2021) only applies to UK residential property https://www.gov.uk/capital-gains-tax...ital-gains-tax

wellinever

So what is the mechanism for doing that?