Capital Gains Tax on Property Sale in Portugal
Mais-valias: how to calculate, reduce, and avoid — complete 2025 guide
What You Need to Know
When selling property in Portugal at a profit, capital gains tax (mais-valias) applies. The tax amount depends on many factors: ownership period, usage purpose, and documented expenses. Understanding the mechanics allows legal optimization — sometimes significantly.
Key principle: the more documented expenses — the lower the tax.
How Mais-valias is Calculated
Basic Formula
Capital Gain = Sale Price - (Purchase Price × Inflation Coef.) - Expenses
Sale Price
Amount stated in the purchase agreement
Purchase Price × Inflation Coefficient
Inflation adjustment (if owned more than 24 months)
Expenses
Documented costs for purchase, improvement, and sale
For Individuals (Residents)
50%
of capital gains is added to annual income
This amount is taxed at progressive IRS rates (from 13% to 48%). Effectively, at the maximum 48% rate, you pay 24% of the full gain.
Important: no flat 28% rate
Unlike securities and cryptocurrency, for real estate residents cannot choose a flat 28% rate. Only englobamento (adding to total income) applies.
Progressive IRS Scale 2025
| Income (€) | Rate |
|---|---|
| Up to 7,703 | 13% |
| 7,703 – 12,003 | 16.5% |
| 12,003 – 18,738 | 22% |
| 18,738 – 30,504 | 25% |
| 30,504 – 40,000 | 32% |
| 40,000 – 83,696 | 37% |
| Above 83,696 | 48% |
For Legal Entities (IRC)
Corporate Income Tax
For legal entities, capital gains are included in total company profit and taxed at standard IRC rates. The "50%" rule and reinvestment exemption don't apply.
IRC Rates 2025
| Category | Rate |
|---|---|
| SME (first €50,000 profit) | 16% |
| Standard rate (above €50,000) | 20% |
| SME in inland areas (first €50,000) | 12.5% |
| SME in Azores/Madeira (first €50,000) | 8.75% |
SME — Small and Medium Enterprises (Pequenas e Médias Empresas). Rates will decrease: by 2028 — 15% for SMEs and 17% standard.
Deductible Expenses
What Reduces Your Tax Base
All documented expenses from the last 12 years are deducted from capital gains. This is the key optimization tool.
Purchase Expenses
- • IMT (transfer tax)
- • Stamp Duty
- • Notary fees
- • Land registry
- • Lawyer fees
- • Agent commission (if buyer paid)
Improvement Expenses
- • Major renovation
- • Reconstruction
- • Engineering systems replacement
- • Construction work
- • AC, heating installation
- • Window, door replacement
Sale Expenses
- • Agent commission
- • Lawyer fees
- • Energy certificate
- • Notary costs
NOT Deductible
- • Furniture and appliances
- • Routine maintenance (painting, minor repairs)
- • Utility bills
- • IMI (annual tax)
- • Insurance
Professional Practice
Experienced property owners in Portugal prepare for sale in advance. A year before selling, they find ways to document improvement expenses:
- • Order work from companies with invoices (not private contractors for cash)
- • Process all payments through bank
- • Keep all receipts and contracts
- • Photograph "before" and "after"
Reinvestment Exemption
If you sell your primary residence and reinvest the proceeds in purchasing a new primary residence in Portugal or EU — you can get full or partial tax exemption.
Reinvestment Period
24 months before or 36 months after sale
Condition: Primary Residence
Both old and new property must be your primary residence
Full Exemption
If you reinvest all sale proceeds
Partial Exemption
Proportional to reinvested amount
Example: Sold apartment for €300,000, capital gain €100,000. Bought new one for €250,000. Exemption = €100,000 × (€250,000 / €300,000) = €83,333. Tax paid only on €16,667.
Inflation Coefficient
Purchase Price Adjustment
If you owned the property for more than 24 months, the purchase price is adjusted for inflation. This reduces the tax base.
| Purchase Year | Coefficient | Effect |
|---|---|---|
| 2023 | 1.04 | +4% to purchase price |
| 2020 | 1.08 | +8% to purchase price |
| 2015 | 1.12 | +12% to purchase price |
| 2010 | 1.18 | +18% to purchase price |
| 2005 | 1.28 | +28% to purchase price |
Coefficients are published annually in Portaria. Current values — on Portal das Finanças website.
Special Cases
Properties Acquired Before 1989
Full capital gains tax exemption for property acquired before IRS introduction (January 1, 1989).
Properties with Government Subsidy
If government subsidy over 30% was used at purchase, selling within 10 years means 100% of gains are taxed (not 50%).
Retirees Over 65
Exemption when reinvesting in life insurance contract or pension fund (within 6 months after sale).
Comparison: Individuals vs Companies
| Aspect | Individual | Company (SME) |
|---|---|---|
| Tax Base | 50% of gains | 100% of gains |
| Rate | 13-48% (progressive) | 16% (up to €50k) / 20% |
| Reinvestment Exemption | Yes | No |
| Inflation Coefficient | Yes | No |
| Expense Deduction | 12 years | Through depreciation |
Planning to Sell?
We'll help you calculate expected tax, determine optimal strategy, and prepare documentation to minimize tax burden.
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