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No CGT in Portugal?

No CGT in Portugal?

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Old Jun 28th 2018, 11:12 am
  #1  
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Default No CGT in Portugal?

With all the if's, and's, and but's, I find tax rules very confusing.
However, there seems to be one rule without qualifications: if you sell your UK home, you will NEVER have
to pay CGT in Portugal.
Have I understood this correctly?
If so, then you could have the following scenario: you move to Portugal, and six months later you sell your UK
home and just pay CGT in the UK - is this right?
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Old Jun 28th 2018, 2:54 pm
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Default Re: No CGT in Portugal?

I have often discussed CGT here and you are correct. Immovable property in the UK when sold is taxed in the UK. Movable property can only be taxed in PT if you are resident here as it is a residence based tax. This is great for immovable property as your tax will be much less than here in PT but not great for movable property as CGT in PT is a flat 28% with no exclusions. UK has an exclusion of £11 100.00.
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Old Jun 29th 2018, 7:03 am
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Default Re: No CGT in Portugal?

Originally Posted by Ukkram
... CGT in PT is a flat 28% with no exclusions.
There is an exclusion. If you have owned your PT property since before 1989 and it is your primary residence, there is no CGT.
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Old Jun 29th 2018, 8:27 am
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Default Re: No CGT in Portugal?

Originally Posted by Sunseeker1st
There is an exclusion. If you have owned your PT property since before 1989 and it is your primary residence, there is no CGT.
In tax terms the word "exclusion" means the amount that can be deducted from earnings prior to the tax calculation.The amount of exclusion in the UK is £11 100.00 so that is the amount that the system deducts from your gains before tax. (this could be an outdated amount as the website had no date)
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Old Jun 29th 2018, 1:03 pm
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Default Re: No CGT in Portugal?

Where is it coming from that a resident of Portugal doesn't pay Portuguese CGT on a property sold in the UK?

From what I can gather, both countries would have a claim although the 2nd claimer would be obliged by the DTT to credit the amount paid to the first. That's what it says here and in several other sources anyway, although I haven't done exhaustive research :
If you are resident in Portugal, you are liable to tax on gains made on worldwide property and shares (if acquired from January 1989 onwards).Only 50% of the gain is liable to tax for residents. Inflation relief is available after two years. The gains are added to your other income for the year and taxed at the income tax scale rates, up to 48% in 2018.

If the property was your main home and all proceeds are reinvested in another main home in Portugal or the EU/European Economic Area (where there is tax information exchange treaty in place) within 36 months after the sale or 24 months before, the gain is exempt. You have to live in the new property within six months of the end of the three-year limit. This could affect British expatriates returning to the UK after Brexit.

If you own residential property in the UK, you are also liable to tax there even though you are not UK resident. The net gain arising after April 6, 2015 is added to any other UK-source gains and taxed at 18% or 28% (depending on your UK tax bracket) with a £11,700 allowance in 2018/19). Under the UK/Portugal double tax treaty, a credit will be given for the UK tax paid, although you will pay whichever amount is the larger. Such gains may be exempt in the UK if you meet the conditions for private residence relief.
How much capital gains tax will you pay in Portugal? Portugal Resident

If that is indeed the case, the NHR regime might be of assistance in reducing or eliminating tax which would otherwise be due to the PT authorities.
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Old Jun 29th 2018, 7:11 pm
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Default Re: No CGT in Portugal?

That link pretty much confirms what I have said. Fixed property is taxed in the country it is situated. If you have NHR status then no further tax in PT.
Movable property such as securities, stocks and bonds are a different kettle of fish. These are only taxable in PT at a horrendous flat rate of 28%. So if you live off this income then PT is not the place to be. Other EU countries taxes are far lower from 0%.
A capital loss can only be carried over for 2 years when most countries allow 5 years. This sucks.
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Old Jun 29th 2018, 8:33 pm
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Default Re: No CGT in Portugal?

OK, my apologies if I've got anything wrong.

However, I must have read the OP's post and your reply incorrectly because I still can't see where the bit regarding CGT for a PT resident on the sale of a UK fixed property was said. It appears to me that the OP asked whether CGT on a UK property would always be exclusively taxed in the UK, to which he thought the answer was Yes and you confirmed it.

The information on the link I posted seems to directly contradict that and you now appear to be confirming that as well and also confirming my additional suggestion about NHR.

I know the situation with regard to other capital gains may be different and you have your own gripes about that but that's all irrelevant to the OP's question.
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Old Jun 30th 2018, 6:56 am
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Default Re: No CGT in Portugal?

Most DTT's state that immovable property can only be taxed in the country it is situated in but unfortunately the UK/PT treaty states that it "may" be taxed in the UK. This is confusing but as the sale goes through the government deeds office it will get flagged by the tax office and they would want their bit. This is a dilemma as PT will never know about the sale but UK would so who do you volunteer the information to?

Having NHR status will give you 100% relief in PT but then UK may add interest and penalties down the line. Eventually you may have to pay the tax to UK. Not having NHR status and paying the tax in PT will give you some cardiac event as the tax is so much higher than UK tax.

I personally would pay the UK tax and be done with it.
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Old Jun 30th 2018, 7:45 am
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Default Re: No CGT in Portugal?

As far as I'm aware, there's an ever-increasing amount of international cooperation in the form of information exchange on tax matters.

I'm not going to plough through all of this (and it wouldn't be within my capabilities to assess from it the likelihood of detection in the event of failure to declare to the relevant authorities) but here's a brief excerpt from the European Commission's website :
One of the benefits of the Internal Market is that EU citizens and businesses have the freedom to move, operate and invest across national borders. But since direct taxation is not harmonised across the EU, this freedom can mean that some taxpayers manage to avoid or evade tax in their country of residence which usually, according to the bilateral tax treaties, has the right to impose tax on worldwide income and assets, even if the income or asset is taxed in the other country. Naturally no double taxation should exist either, and there are agreements in place to avoid this, but the correct amount of taxes must be paid in each relevant country.

Tax authorities in the EU have therefore agreed to cooperate more closely so as to be able to apply their taxes correctly to their taxpayers and combat tax fraud and tax evasion.
Administrative cooperation in direct taxation between the Competent Authorities of the EU Member States helps to ensure that all taxpayers pay their fair share of the tax burden, irrespective of where they work, retire, hold a bank account and invest or do business. This is based upon Council Directive 2011/16/EU which establishes all the necessary procedures, and provides the structure for a secure platform for the cooperation.​
Further reading / links for the incurably inquisitive here : Administrative cooperation in (direct) taxation in the EU

Something to be aware of perhaps, if, rather than use the legitimate means available to reduce or eliminate a potential liability, one were to be tempted to ...er... "forget" about one's obligations or assume that paying to one authority eliminates the need to declare to the other
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Old Jun 30th 2018, 12:42 pm
  #10  
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Default Re: No CGT in Portugal?

It appears to me that the OP asked whether CGT on a UK property would always be exclusively taxed in the UK
Yes, that was my intention.
One of the sources was:
https://www.belionpartners.com/portu...nt-regime.html
which says:

While capital gains from the alienation of real estate may under the double taxation treaty be taxed in the country in which the property is located and will therefore be exempt in Portugal...
I had got the impression that this was true under all cases, but have just noticed that this Belion Partners document is specifically for NHR status.
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Old Jul 1st 2018, 4:42 pm
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Default Re: No CGT in Portugal?

Caveat to Ukkram’s comment re movable property

28% tax is levied on the gain. However, if the gain is held within a tax-compiant insurance-based bond, then, after 5 years only (only!!) 80% of the gain is taxable, falling to 40% being taxable after 8 years, bringing the effective rates of tax to 22.4% and 11.2% respectively.

Since bond charges are high, though, these tax benefis might be outweighed by those increased costs.
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