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I don’t ask for advice often, but…(CGT again)

I don’t ask for advice often, but…(CGT again)

Old Oct 4th 2023, 6:47 pm
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Default I don’t ask for advice often, but…(CGT again)

Hello, esteemed members of the forum i hope you’re all well.
I would really appreciate further clarity, I have avidly read & re-read all related searchable threads here on CGT as it relates to a sale of Pt property by non-residents living in the U.K

However being a layman of sorts i still don’t have certainty about the exact formula(s) applied. i am clear the ‘acquisition’ value will match the VPT on the Caderneta, which in our case will result in a high tax demand.
I know legislation on cgt recently has been shifting; i really need the latest advice even if actual legislation not yet on the books if poss..
a few bullet points below, please reply where possible and pls correct any errors in my thinking?

1- Myself + siblings inherited a property from our mother a long term Pt resident. Is it correct that as non residents we can currently elect to EITHER be taxed at a flat 28% on 100% of any gain OR we can request to be taxed like a resident taxpayer, eg, taxed on just 50% of any gain, at sliding ‘Income Tax’ scales which are published everywhere, with the proviso we declare our worldwide earnings for that calendar (Pt tax) year?
please confirm if an actual choice exists. Also please confirm if we can use the latter option eg taxed on 50% immediately, even if relevant legislation is not yet on statute book?
2- When i look at the table of the applicable tax rates, (am i right looking at what’s called ‘Income Tax’ ?) - my eye goes directly to the top end - i do expect each sibling to individually make a gain of around €90,000.
the highest tax bracket appears to be 48%, - 90k exceeds that threshold. could anyone in layman’s terms please outline what tax demand would arise from an individual gain of €90k?
sorry to sound daft but would we each pay 48% of the whole 90k gain eg €43,200? if that isn’t the case a detailed breakdown of the actual rates applied to the total sum would be so very useful … sorry to ask.
(i know our non-portuguese worldwide income is not actually taxed).
3- Lastly - please add whether there is any sum(s) excluded, or any other allowances not yet mentioned that could be used to offset or lower the tax demand ?
i know i ask much… but if anyone had time to weigh in before tomorrow Thursday 6pm it will make a discussion i’m due to have a lot less fraught with uncertainties.
many thanks all.
a long term london based lurker
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Old Oct 5th 2023, 6:53 am
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Default Re: I don’t ask for advice often, but…(CGT again)

Originally Posted by BBmatic
1- Myself + siblings inherited a property from our mother a long term Pt resident. Is it correct that as non residents we can currently elect to EITHER be taxed at a flat 28% on 100% of any gain OR we can request to be taxed like a resident taxpayer, eg, taxed on just 50% of any gain, at sliding ‘Income Tax’ scales which are published everywhere, with the proviso we declare our worldwide earnings for that calendar (Pt tax) year?
please confirm if an actual choice exists. Also please confirm if we can use the latter option eg taxed on 50% immediately, even if relevant legislation is not yet on statute book?
No, there's no longer a choice. Non-residents are now obligatorily treated in exactly the same manner as residents.

Originally Posted by BBmatic
2- When i look at the table of the applicable tax rates, (am i right looking at what’s called ‘Income Tax’ ?) - my eye goes directly to the top end - i do expect each sibling to individually make a gain of around €90,000.
the highest tax bracket appears to be 48%, - 90k exceeds that threshold. could anyone in layman’s terms please outline what tax demand would arise from an individual gain of €90k?
sorry to sound daft but would we each pay 48% of the whole 90k gain eg €43,200? if that isn’t the case a detailed breakdown of the actual rates applied to the total sum would be so very useful … sorry to ask.
(i know our non-portuguese worldwide income is not actually taxed).
If your total individual share is 90k, half of that is taxable and the rest is disregarded.

However, the taxable portion gets added to all your other worldwide income for the purpose of determining at which rates the tax is calculated. It's a progressive scale - you pay tax at the individual band rates for each portion of income. Probably easiest to explain if I hoik in the table of rates here :

By way of a simple example, ignoring all other income, your 45k would fall into the 7th band and you could calculate the tax due by summing 7,479 x 14.5% plus 3,804 x 21% and so on until you reach the last applicable band. The same result can be arrived at rather more simply by going straight to the 7th band, applying the 43.5% rate and deducting the figure in the rightmost column.

When it comes to simulating the actual calculation though, you'd have to add the capital gain to all your other income from whatever sources (some of which may have allowances to be taken into account), calculate the total tax as if resident in PT and then deduct that portion which applies to other income (which you could find by doing a separate calculation on that income alone)


Originally Posted by BBmatic
3- Lastly - please add whether there is any sum(s) excluded, or any other allowances not yet mentioned that could be used to offset or lower the tax demand?
You can deduct costs, should any of these apply, of the energy certificate, IMT, stamp duty, estate agent commission, solicitors costs, cost of the escritura and costs of any works to the property during the previous 12 years (duly evidenced with invoices).

Hope the above is of some assistance, at least in giving you a small steer to finding an approximate figure.

Bear in mind that I'm very much a layperson and not any kind of expert or advisor. I'm presuming you've got somebody lined up to do the actual declaration for you?

Last edited by Red Eric; Oct 5th 2023 at 6:55 am.
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Old Oct 5th 2023, 1:07 pm
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Default Re: I don’t ask for advice often, but…(CGT again)

Hi Red Eric,
I've been out this morning or I would have replied earlier - thanks for going to the trouble. I feel bad because my maths illiteracy is quite profound. (good with words but genuinely blind with numbers).
For example I have a web page constantly open that I can type numbers into and discover percentages, but when I read your breakdown above, my brain genuinely freezes up.
However, I CAN understand that different parts of the 'gain' are taxed at different rates, on a sliding scale, with each portion of the 'gain' being taxed at a different rate. The thing is, I have not been able to perform the maths even to the most basic standard. I must admit, my brain is full of so many things relating to a meeting later, I just can't do it.
Is there any way (sorry to ask yet more) you could do the most basic reading / estimate based on this basic fact:
The property is now owned by 3 siblings, all non-resident.
The VPT on the property is €76,000
The likely selling price of the property is €826,000 meaning €750,000 will be the gain, obviously this is easily divisible by 3.
There are NO costs to reclaim at all, except estate agency costs of selling, this figure is unknown but I am stating "€30,000" to create a baseline for any estimate.
In the calendar year of the sale, my ONLY other earnings in the UK & worldwide will be £11,000.
I am trying to get a realistic, albeit very basic idea of how much tax I will be liable to pay in Portugal, based on that scenario.
If there was any way to also provide the same basic estimate for someone earning £49,000 (UK & worldwide) in that calendar year, just so I also know what my sibling likely to be looking at, it would really save my day.
Red Eric, you might not even see this thread before 6pm but if there's anyone out there better with numbers could do a back-of-napkin calculation for me I would be SO grateful.
As things stand, I had estimated in the region of €50,000 each, (give or take) but now I think that number could be very wrong?
Again apologies... but my numbers problem is real.
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Old Oct 5th 2023, 1:19 pm
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Default Re: I don’t ask for advice often, but…(CGT again)

I have just realised how badly worded my OP was.
I should have made the number illiteracy clear, and simplified the major factors. Sorry again, all.
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Old Oct 5th 2023, 2:19 pm
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Default Re: I don’t ask for advice often, but…(CGT again)

Originally Posted by BBmatic
Hi Red Eric,
I've been out this morning or I would have replied earlier - thanks for going to the trouble. I feel bad because my maths illiteracy is quite profound. (good with words but genuinely blind with numbers).
For example I have a web page constantly open that I can type numbers into and discover percentages, but when I read your breakdown above, my brain genuinely freezes up.
However, I CAN understand that different parts of the 'gain' are taxed at different rates, on a sliding scale, with each portion of the 'gain' being taxed at a different rate. The thing is, I have not been able to perform the maths even to the most basic standard. I must admit, my brain is full of so many things relating to a meeting later, I just can't do it.
Is there any way (sorry to ask yet more) you could do the most basic reading / estimate based on this basic fact:
The property is now owned by 3 siblings, all non-resident.
The VPT on the property is €76,000
The likely selling price of the property is €826,000 meaning €750,000 will be the gain, obviously this is easily divisible by 3.
There are NO costs to reclaim at all, except estate agency costs of selling, this figure is unknown but I am stating "€30,000" to create a baseline for any estimate.
In the calendar year of the sale, my ONLY other earnings in the UK & worldwide will be £11,000.
I am trying to get a realistic, albeit very basic idea of how much tax I will be liable to pay in Portugal, based on that scenario.
If there was any way to also provide the same basic estimate for someone earning £49,000 (UK & worldwide) in that calendar year, just so I also know what my sibling likely to be looking at, it would really save my day.
Red Eric, you might not even see this thread before 6pm but if there's anyone out there better with numbers could do a back-of-napkin calculation for me I would be SO grateful.
As things stand, I had estimated in the region of €50,000 each, (give or take) but now I think that number could be very wrong?
Again apologies... but my numbers problem is real.

Based on a gain per sibling of €240,000 (i.e. €250,000 less €10,000 expenses), your €50,000 estimate for PT CGT is very much in the ball park. Given that the level of gain already takes each taxpayer into the highest band, the CGT payable in Portugal would be (€120,000 x 48%) - €8,932.68 = €48,667.32


Last edited by ARCNET; Oct 5th 2023 at 2:37 pm.
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Old Oct 5th 2023, 2:44 pm
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Default Re: I don’t ask for advice often, but…(CGT again)

Hi,
thanks so much for your reply! (i can’t see your forum name in this window on my phone, apologies) but very grateful as i am now monitoring this thread like a hawk.
In case anyone sees a major miscalculation there and can spare a moment to add something, please do, even if it’s tomorrow / later this week.
big thanks all 🙏
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Old Oct 5th 2023, 2:56 pm
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Default Re: I don’t ask for advice often, but…(CGT again)

is there no accounting for age of property here?
might that apply in this situation?
or is it period held by seller?
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Old Oct 5th 2023, 3:03 pm
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Default Re: I don’t ask for advice often, but…(CGT again)

i like a busy thread generally so i’ll pitch in more - i think mother & Portuguese husband bought place around 1993. unsure of exact structure of ownership from start, assume joint.
Husband died around 1999 at which point it must have passed to mother.
from reading other threads i think 2 different VPT values might apply, but that’s possibly out of the scope of the more informal advice we can expect on a forum.
The most stupid thing i did with my OP (it’s a crowded field) was not use the exact figures but (for some reason) 90k euros! i was trying to get a baseline calc, and (weirdly) focussed on staying north of the 78k -ish threshold so it was clear we were all in that higher bracket…
sorry Eric, in particular.

Last edited by BBmatic; Oct 5th 2023 at 3:17 pm.
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Old Oct 5th 2023, 3:13 pm
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Default Re: I don’t ask for advice often, but…(CGT again)

Originally Posted by Red Eric
You can deduct costs, should any of these apply, of the energy certificate, IMT, stamp duty, estate agent commission, solicitors costs, cost of the escritura and costs of any works to the property during the previous 12 years (duly evidenced with invoices).

Hope the above is of some assistance, at least in giving you a small steer to finding an approximate figure.

Bear in mind that I'm very much a layperson and not any kind of expert or advisor. I'm presuming you've got somebody lined up to do the actual declaration for you?
I'm afraid you are not allowed solictor's fees as an allowable cost.

It seemed illogical to me when I was advised this when doing my CGT so I included them anyway.

It was refused by AT and I raised a gracious complaint against it, but it was again denied.

You could try the tax court but the benefit isn't worth the cost and risk.
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Old Oct 5th 2023, 3:20 pm
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Default Re: I don’t ask for advice often, but…(CGT again)

Originally Posted by appman999
I'm afraid you are not allowed solictor's fees as an allowable cost.

It seemed illogical to me when I was advised this when doing my CGT so I included them anyway.

It was refused by AT and I raised a gracious complaint against it, but it was again denied.

You could try the tax court but the benefit isn't worth the cost and risk.
I understand AT only allow Notary fees on the basis that they are necessary to effect the Deed whereas the services of a solicitor is optional and therefore in the eyes of AT unnecessary and consequently not tax deductible. I also understand that Estate Agent's fees are only allowable if they are declared in the Deed.
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Old Oct 5th 2023, 3:20 pm
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Default Re: I don’t ask for advice often, but…(CGT again)

Originally Posted by ARCNET

Based on a gain per sibling of €240,000 (i.e. €250,000 less €10,000 expenses), your €50,000 estimate for PT CGT is very much in the ball park. Given that the level of gain already takes each taxpayer into the highest band, the CGT payable in Portugal would be (€120,000 x 48%) - €8,932.68 = €48,667.32

Don't forget that you'll also need to include this on your UK tax return (assuming you are UK tax resident) but your liability is likely to be a lot less than this Portuguese payment so under the Double Tax Agreement there will be no liability.
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Old Oct 5th 2023, 3:42 pm
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Default Re: I don’t ask for advice often, but…(CGT again)

Originally Posted by appman999
Don't forget that you'll also need to include this on your UK tax return (assuming you are UK tax resident) but your liability is likely to be a lot less than this Portuguese payment so under the Double Tax Agreement there will be no liability.
I agree but, principally, the reason why there is likely to be no UK liability is because there will be no or very little gain under UK rules since the acquisition value is taken to be the value at the time of the previous owner's passing which presumably will be somewhere near the selling price.
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Old Oct 5th 2023, 5:06 pm
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Default Re: I don’t ask for advice often, but…(CGT again)

Arcnet, Re: your closing comment about the u.k. baseline cost to use, i assume if there’s been no official valuations yet, one would need to get (in Portugal) a backdated valuation at the date of death? Does anyone know if U.K. accepts eg a sample of (backdated) Portuguese estate agents valuations?
As there could easily end up being a 2 years gap between mothers death and a sale
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Old Oct 5th 2023, 5:42 pm
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Default Re: I don’t ask for advice often, but…(CGT again)

Originally Posted by BBmatic
Arcnet, Re: your closing comment about the u.k. baseline cost to use, i assume if there’s been no official valuations yet, one would need to get (in Portugal) a backdated valuation at the date of death? Does anyone know if U.K. accepts eg a sample of (backdated) Portuguese estate agents valuations?
As there could easily end up being a 2 years gap between mothers death and a sale
Yes, there is no particular method of valuing property. The valuation just needs to be honest and stand scrutiny if challenged.
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Old Oct 5th 2023, 7:33 pm
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Default Re: I don’t ask for advice often, but…(CGT again)

Originally Posted by ARCNET
I understand AT only allow Notary fees on the basis that they are necessary to effect the Deed whereas the services of a solicitor is optional and therefore in the eyes of AT unnecessary and consequently not tax deductible. I also understand that Estate Agent's fees are only allowable if they are declared in the Deed.
I understand but still think a solicitor is just as necessary as an estate agent (and a bit cheaper!)

I didn't realise the second point but luckily the estate agent was mentioned in the deed and that was worth a few euroes.
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