Red Eric

The criteria are that it has to be your primary home and that the reinvestment is into another primary home within the EU / EEA.

You can't be a non-resident of PT and have your primary home here, so yes, it does apply only to PT residents although you have a window either side of the sale and reinvestment.

b) for sales effected after 1st Jan 2023

appman's sale was effected in 2021, and he contested the tax assessment then.

It isn't b), it's a) but on other points bar the last one agreed.

28% on half the gain as per a) should probably be regarded as all your Christmases come at once if you can get it. It only applied for a while when the previous regime was in dispute.

wellinever

Given a high gain, using 28% of 50% would be better than that given to a PT resident, so cant be real.

Red Eric

Regardless of the size of the gain, it would still be better than what many a resident could get even on the latest tax scales (they've been adjusted yet again this year).

Apparently discrimination in that direction would be perfectly fine, despite previous complaints about discrimination

appman999

I'll go with Red Erics general conclusion that a) applies now and glad we sold in 2021!!

The differing tax years are always a challenge.

If you sell your house in Jan 2023 you will need to declare the gain in your 2022/23 UK tax return but you won't have calculated the Portuguese tax paid until after April 2024!

The UK return does allow for provisional numbers so you could assume your foreign tax paid (although you won't pay it for another year at least?) and confirm in your 2023/4 return.

I wonder how residents with UK income deal with it. I assume you just enter the individual items for the calendar year involved(payslips/bank statements etc)?

I don't know if the Portuguese version allows the same provisional numbers?

ARCNET

I thought Red Eric’s conclusion was b) applies on sales wef 1st Jan 2023 and a) applied up to and including 31st Dec 2022.

appman999

You're quite right, senior moment, don't know my as from my bs.

appman999

Also given that sales in 2022 will be taxed in 2023 are they not covered by b) also?

wellinever

Anyone correct me if this is incorrect.
As far as a PT tax resident reinvesting in another main property, the calculation for CGT in PT would be as follows (fictitious figures)

Full sale value.(inc deduction for years owned)...e 400,000
Purchase price(inc IMT) ......................................e 150,000
Gain.............................................. .......................e.250,000

Reinvestment value ........................................... e 320,000
+ IMT/Stamp .......e 16, 200
+.Lawyer ...........e 1,500
Total reinvestment value e 337,700

Reinvestment is 84% of full sale value, meaning tax is tax on 16% of 50% of the original gain of e250,000 (250,000/2 =125,000 x 16% = 20,000)
So only e20,000 is taxable in PT.
Add all other income for the year of say e20,000, the total taxable amount is e40,000 (inc CGT)
Rate for income of e40,000 is 43.5%, giving e17,400 - e5,800(abater)
So a final tax bill including tax on income would be e11,600

ARCNET

I think it would still be a) because it is the law subsisting at the material time of making the gain that is determinative.

Red Eric

Just reading back I see I managed to mix up in one instance as well in post 61 ("It isn't b) it's a)" - should of course be the other way round).

Shouls be correctly inferrable from context but apologies for adding to the confusion.

Rooftile

Ok so as per my earlier question, how does one give account of ones UK annual income to PT, when they both have differing start and end dates for an annual return…..one can just make up a UK Jan-Dec income given the official UK tax return runs from April. Given this loophole that you can drive a coach and horse through and the PT authority know it, I still believe a) is appropriate. It might not be fair, but it stops the coach and horse!

ARCNET

This is only speculation, but perhaps the new IRS Code effective from 1st Jan 2023 is a) for residents and non-residents alike with the option for residents to opt for b).

Red Eric

Not correct.

The analysis from the Order of Chartered Accountants which I posted a link to earlier, and which I've since had a chance to have a closer read of, shows and explains very clearly what the changes and their effects are. With regard to the changes to the wording of the law, Page 10, section on englobamento (where there's an edit to what is exempted on the part of non-residents to remove the exemption from proceeds from the sale of property) and another to add that wherever the law obliges englobamento on the part of non-residents, all income, including that obtained outside of Portugal must be declared in order to determine the tax applicable under the same conditions which apply to residents. There's also a tweak to the capital gains section immediately following in this document, to remove "effected by residents" from one paragraph, which makes it applicable to all when it comes to property.

Then, on the following page, the commentary explains that in full ie that as of this taking effect, only 50% of gains from the sale of property are taxable, as opposed to the previous position where that possibility was only available to residents (not quite correct, since it was also available to EU / EEA residents, provided they agreed to be taxed on the gain under the same terms as residents). It goes on to explain that englobamento of gains becomes obligatory for non-residents and that this entails submitting details of worldwide income.

So there is no longer any option for anybody. Everybody gets treated the same.

wellinever

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So I guess tighter exchange of info from AT and HMRC (in case of Brits), helping to avoid non payment of CGT in UK on sale of second homes overseas

Red Eric

Well, one of the things I'd like to ask, never having sold a property here, is do you get all the proceeds there and then or is there some sort of retention to try to ensure compliance with reporting etc?

And if there's no retention, what is it that compels the foreign resident to comply (other than a burning desire to do the right thing, obviously)? I realise the tax authorities will be notified of the sale anyway, so they could chase up on residents - but what about the non-residents?