Bytor

As the title suggests we're thinking of selling our apartment after 5 happy years of ownership. We reside in the UK, the apartment is located on the Algarve.

I've trawled the forums to try and get an idea of what taxes and fees would be applicable when selling. I'm still not 100% sure of the total amounts payable, even after my research, so has anybody recently sold their property and knows the current applicable taxes and fees that need to be paid?

Thanks in advance.

wellinever

simple
If you are a non resident of Portugal you will pay 28% capital gain on the difference between buy price and selling price.
As a UK tax resident you will also pay capital gain , as it is a second home, Amount of capital gain charge in UK depends on the amount of the gain, but either 20% or 40%.
Of course in uk you can claim I think it is £10K as tax free. Also any tax paid in Portugal is taken into account in the UK. (double taxation agreement). There are bits and pieces that make small difference , like how long you have owned the house, when they give you an allowance for the number of years but its very small. Your biggest concern will be when sterling rises to €1.30 in about 12 months after Brexit. (just my opinion). Fees for lawyer depend on value but prob a bout €750, again nothing compared to exchange rate variation.

Bytor

Thanks for your reply wellinever.

azulp

In addition to the adjustment for inflation (which will reduce the amount of tax due), you can use certain expenses to reduce your capital gains tax bill, as long as you have correct invoices with your fiscal number on. Estate agents fees are deductible, in most cases (weirdly) lawyers fees are not.

RoystonB

That is interesting, and you can see why the Portuguese do not sell their houses to down size. You have purchased a house in 1990 for 40,000 and want to sell it today for 250,000 and pay tax on 210,000 @ 15% to 20%. Although I believe that if you a resident and sell your house for 250,000 and pay 300,000 for the next house you do not have to pay tax. Fingers crossed.

liveaboard

that would be if you're selling a primary residence and buying another primary residence in Europe, within a certain time frame [12 months I think].
You're talking big money here, and it's worth consulting an international tax adviser before sale.
Your tax liabilities can be complex, and there could be considerable savings by doing things one way over another.

azulp

At the moment you can claim the reinvestment for 24 months before you sell, and 36 months after you sold. But this tends to change each year, so be careful! As liveaboard has said, this is only for your primary residence. Any competent accountant can deal with the IRS declaration, it is not too complicated.

Bytor

Thank you for the continued input.

I wrote a mail asking my initial questions to the solicitor who I used for the purchase of our apartment.

She has recently replied with the following,

1. The gain profit is taxed at 28%

2. The purchase price can be rectified using the inflation rate, which is 1, 02 to the year of 2014.

3. You can offset the estate agent comission and the taxes paid when you purchased the property ( also costs with repairs to the property).

4. Fees for the sale are €2000.00

5. There are no other fees, costs or taxes.

6. You will be taxed for the Portuguese government ( you have to check the situation in the UK ).

Would anyone be kind enough to explain point 2 in layman's terms and secondly, with point 5, does HMRC also take a chunk of my money too? If so, at what percentage?

Loafing Along

Your point 2 : The government makes an index adjustment for inflation for each year of ownership so "increasing" the purchase value to bring it up todate with current economic conditions.

Your question about UK tax potential has been answerd in a previous post by Wellinever...

azulp

The current coefficient can be found if you Google

coeficientes-de-desvalorizacao-da-moeda

I can't post URLs yet, sorry

Loafing Along

https://dre.pt/application/file/a/117350291

There you go.......... just scroll down and you will see the %age change by year..

chislenko

Sorry if this is a daft question but I presume any sales tax is only on difference between purchase and sale price, i.e. any profit made not the whole sale value if not reinvesting in Portugal.

We are also thinking of selling in the next couple of years but the current market value of ours is less in Euros (luckily the exchange rate was a lot better then) than when we purchased in the height of the boom in 2005. As it was a new build then I recall paying some sort of tax at the time.

azulp

This is quite an interesting point.
Logically, if you reinvest the profit, then this should be free of capital gains tax.
However, the tax office has, in certain cases, decided that when you are reinvesting the total amount received for the sale of your property has to be reinvested. If not, then you are partially taxed on the amount not reinvested.
This is illogical.

​​​​​​If you are going to go this route then it's advisable to speak to a good accountant. The rules change regularly, and different tax offices interpret them differently.

Red Eric

From what I've read, the rule is completely consistent : when there's a possibility of exemption from CGT and the reinvestment is only partial the tax is calculated and applied proportionally. Makes perfect sense to me that every euro of a sale where a gain has been made is considered part capital and part profit.

Not that it appears relevant to anyone on this thread

azulp

The issue is that the tax due, by definition, is due on the profit.
So if you have sold for 300k, and made 100k profit, and purchased a new property for 100k, then you have reinvested the profit, and should have no tax to pay.
But the tax office sees this as a partial reinvestment.
Clearly this is not correct. The original 200k you used when you first purchased the property you sold have been ignored in this calculation.
Please note this is based on actual scenarios that I have experienced.
But as the rules are applied differently in different tax offices it really pays to have good professional advice.