More advice on Capital Gains on the sale of Property needed
Nov 24th 2018, 12:00 pm
#1
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More advice on Capital Gains on the sale of Property needed
We sold an apartment last year making a profit of only €10500 gross. We bought the property in 2009 and nearly three quarters of amount went in estate agents fees before any notary costs or any allowance for repairs/improvements or allowance for the time we had had the property and depreciation of it’s true value. We then bought another property. We are non residents. We were told by our Portuguese accountant last year that we had no tax to pay but have received a letter from the Portuguese IRS that appears to indicate we might now owe tax having earlier sent us a zero calculation. We are awaiting our accountant’s view but we wondered what others think.
Nov 24th 2018, 1:28 pm
#2
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Re: More advice on Capital Gains on the sale of Property needed
If the properties were / are not your primary home, then there will be no relief from CGT via rollover of proceeds into the new property.
As far as I know, the only room for any manoeuvre open to you under those circumstances are to declare all the deductible expenses and to compare the paying of the flat rate tax (28% of 100% of the deemed gain) against the paying of scale rates on half the gain, for which you'd need to declare your worldwide income in order for that calculation to be made. When precisely that decision has to be made or whether it can subsequently be reversed is unclear to me at present.
As far as I know, the only room for any manoeuvre open to you under those circumstances are to declare all the deductible expenses and to compare the paying of the flat rate tax (28% of 100% of the deemed gain) against the paying of scale rates on half the gain, for which you'd need to declare your worldwide income in order for that calculation to be made. When precisely that decision has to be made or whether it can subsequently be reversed is unclear to me at present.
Nov 26th 2018, 10:42 am
#3
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Re: More advice on Capital Gains on the sale of Property needed
hi
Yes, as has been said of here before, people are often not aware of Tax implications when selling a property in Portugal.
From what you say, as a non resident you are liable for CGT of simple 28% on the gain,regardless of it being a main or secondary home, less a coefficient for owning for 10 years.
(not sure what that is), unless as Red says that you claim rollover in another main home, but that sounds unlikely in your case.
Well at least the exchange rate you would have got in 2009 was about the same as returning € to £ today.
I am sure others will be able to give more info to you.
Of course you are also liable for Capital gain in the UK, also 28%, fortunately you get £10,000 a year free of tax, so in your case none would be due, but you should still declare that sale to UK Inland Rev.
Yes, as has been said of here before, people are often not aware of Tax implications when selling a property in Portugal.
From what you say, as a non resident you are liable for CGT of simple 28% on the gain,regardless of it being a main or secondary home, less a coefficient for owning for 10 years.
(not sure what that is), unless as Red says that you claim rollover in another main home, but that sounds unlikely in your case.
Well at least the exchange rate you would have got in 2009 was about the same as returning € to £ today.
I am sure others will be able to give more info to you.
Of course you are also liable for Capital gain in the UK, also 28%, fortunately you get £10,000 a year free of tax, so in your case none would be due, but you should still declare that sale to UK Inland Rev.
Nov 26th 2018, 1:01 pm
#4
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Re: More advice on Capital Gains on the sale of Property needed
Non-residents
Non-resident individuals pay tax on 100% of the gain from the sale of a property in Portugal at 28%. Non-resident companies are subject to local corporation tax at 21% plus municipal surcharges.
EU residents, and residents of an EEA country which has a tax treaty with Portugal may choose to be taxed as a Portugal resident. Note however that you will have to declare your worldwide income to calculate the marginal rate of tax applicable to the gain.
For UK residents, the gain would also be taxable in the UK, but tax paid in Portugal can be credited against that due in the UK.
Non-resident individuals pay tax on 100% of the gain from the sale of a property in Portugal at 28%. Non-resident companies are subject to local corporation tax at 21% plus municipal surcharges.
EU residents, and residents of an EEA country which has a tax treaty with Portugal may choose to be taxed as a Portugal resident. Note however that you will have to declare your worldwide income to calculate the marginal rate of tax applicable to the gain.
For UK residents, the gain would also be taxable in the UK, but tax paid in Portugal can be credited against that due in the UK.
At current rates, with the top rate of tax being 48%, it would always be financially advantageous to declare one's entire income and be taxed on the gain at scale rates. The actual amount of this saving would depend on the scale point(s) at which it was taxed, though and that's dependent on the amount of other income. The other income isn't subject to PT tax, of course.
Nov 26th 2018, 7:49 pm
#5
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Re: More advice on Capital Gains on the sale of Property needed
Thanks for your comments. I have found an error on the return our accountant did for us which I think is what has caused this second letter to come from the Portuguese IRS. So we have emailed our accountant as we are not in Portugal at the moment. Given our profit was so limited and estate agent and notary fees high, plus some tapering if that is allowed as we bought so long ago we are not expecting much tax if any. Just want to get it right.
