Capital gains tax on property in Portugal: the 2026 guide for non-residents

Selling Portuguese property carries a tax bill on both sides of the Channel. In Portugal, capital gains tax (mais-valias) applies to the profit. In the UK, HMRC expects a report too. The good news is that the Portuguese rules changed significantly in January 2023 – and the change is firmly in sellers’ favour.

Until that point, non-residents paid a flat 28% on the entire gain. Portuguese residents, by contrast, were taxed at progressive rates on only half of theirs. A sequence of European Court of Justice rulings found that gap discriminatory, and Portugal closed it through legislation. Non-residents now receive the same 50% exclusion as residents, cutting effective rates to somewhere between 6% and 24% for most sellers.

For UK owners in particular, a brand-new UK-Portugal double taxation treaty entered into force in January 2026. It changes the framework for claiming relief on Portuguese tax paid – and the detail matters.

How the rules changed for non-residents

Before 2023, Portugal ran a two-tier system. Residents paid progressive tax on 50% of their property gains. Non-residents paid 28% on 100%. The European Court of Justice ruled in Case C-388/19 MK v Autoridade Tributária (March 2021) that even offering resident treatment as an option didn’t fix the problem – the default rules had to change.

Portugal’s 2023 Finance Act did exactly that. The 50% exclusion and progressive rates now apply to all sellers, regardless of residency. The Portuguese Tax Authority confirmed the framework in Circular Letter No. 20255 in April 2023. This is statute law, not an administrative concession.

Several guides still quote 28% as the non-resident rate for Portuguese property sales. That rate was abolished for real estate in January 2023 and no longer applies.

The 50% exclusion: what it means in practice

Only 50% of the net capital gain is subject to tax. This isn’t an option you apply for – it’s applied automatically when the tax authority processes your return.

For rate-setting purposes, Portugal requires non-residents to declare their worldwide income from all sources on the Portuguese return. This income isn’t taxed by Portugal – it’s used solely to identify which progressive rate bracket your taxable gain falls into. A UK seller with substantial employment income will face a higher marginal rate on their Portuguese gain than someone with modest worldwide earnings.

Non-residents from jurisdictions on Portugal’s tax haven blacklist are treated differently, paying 35% on the full gain without any exclusion. The UK is not on that list.

2026 progressive IRS rates

The 2026 Portuguese State Budget adjusted the rate bands upward by 3.51% for inflation. The current brackets are:

Taxable income (€)	Marginal rate
Up to 8,342	12.50%
8,342–12,889	17.70%
12,889–19,365	22.50%
19,365–28,236	26.20%
28,236–39,791	33.00%
39,791–51,997	36.50%
51,997–65,706	43.10%
65,706–86,634	44.70%
Above 86,634	48.00%

A solidarity surcharge of 2.5% applies to worldwide taxable income between €80,000 and €250,000, rising to 5% above €250,000.

Because only 50% of the gain enters the calculation, the effective CGT rate on the full gain sits between roughly 6.25% and 24% – always equal to or better than the old 28% flat rate.

Costs you can deduct from the gain

Before the 50% exclusion is applied, you subtract allowable costs from the sale price to arrive at the net gain. Proper invoices – facturas bearing your NIF tax number and the property address – are essential. Without them, costs can’t be claimed.

Acquisition costs include: IMT (property transfer tax) paid on purchase, stamp duty (Imposto de Selo, typically 0.8%), notary and land registry fees, and legal fees directly tied to completing the purchase.

Disposal costs include: estate agent commission (typically 3–5% plus IVA; deductible for sales since July 2008), the mandatory energy performance certificate (certificado energético, usually €200 (£168) to €350 (£294)), and legal fees for the sale.

Improvement costs are deductible if the works were completed within the 12 years before the sale, genuinely increased the property’s value, and are backed by compliant invoices. Structural improvements and significant renovations typically qualify. Repainting, maintenance and decoration do not.

Items that are not deductible: annual IMI property tax, the additional wealth tax (AIMI), mortgage interest, furniture and financial charges. For a full breakdown of all costs when buying property in Portugal, including what you pay at each stage, see our dedicated buying costs guide.

The inflation coefficient: a relief many sellers overlook

For properties held at least 24 months, Article 50 of the Portuguese Income Tax Code allows the original purchase price to be adjusted upward for inflation using a monetary correction coefficient (coeficiente de desvalorização da moeda). This increases the recognised acquisition cost and reduces the taxable gain.

The coefficients are published annually by ministerial order (Portaria) based on INE inflation data. The Portuguese Tax Authority applies the adjustment automatically when processing your return – you don’t calculate it manually.

Purchase year	Approx. coefficient (2025 disposal)	Effect on a €200,000 purchase
2015	1.13	Recognised cost becomes €226,000
2010	1.19	Recognised cost becomes €238,000
2000	1.47	Recognised cost becomes €294,000
1995	1.79	Recognised cost becomes €358,000

On a property bought in the late 1990s or early 2000s, this adjustment can wipe out a substantial portion of the nominal gain. Many buyers we help who purchased during that period face a much smaller CGT bill than their headline profit might suggest.

The reinvestment exemption – and why non-residents mostly can’t use it

Portuguese tax residents who sell their permanent main residence can defer or eliminate the capital gain by reinvesting the proceeds in another primary home. The conditions are strict: the property sold must have been the taxpayer’s main residence for at least 12 months, reinvestment must happen within 24 months before or 36 months after the sale, and the new home must be in Portugal, the EU or the EEA.

For non-residents, this relief is generally unavailable. Tax specialists broadly agree it applies only to Portuguese tax residents. A Binding Opinion from the Portuguese Tax Authority published in November 2025 (Processo 28272) confirmed one narrow exception: a non-resident seller may qualify where their spouse or household uses the Portuguese property as their primary residence. This is a specific point – it’s worth raising with a Portuguese property lawyer if you think it could apply.

For UK residents specifically, reinvestment into UK property wouldn’t qualify in any case, as the UK is outside the EU and EEA. Reinvestment into Portuguese or other EU/EEA property would still meet the condition.

Worked example: what you’ll actually pay

Consider a non-resident UK buyer who purchased an Algarve property in 2015 for €200,000 (£168,000) and sells it in 2025 for €350,000 (£294,000), with €40,000 per year in worldwide income.

Step	Calculation	Result
Inflation-adjusted acquisition cost	€200,000 × 1.13	€226,000
Total deductible costs	IMT, agent, legal, energy cert, improvements	€40,461
Net gain	€350,000 – €226,000 – €40,461	€83,539
Taxable amount after 50% exclusion	€83,539 × 50%	€41,770
Portuguese CGT (worldwide income ~€82k → avg ~30%)	30% on €41,770	~€12,500

Under the pre-2023 rules, the same seller would have paid 28% on the full net gain of €83,539: a bill of €23,391. The new regime saves approximately €10,900 on this example. The saving grows with the size of the gain and the length of the holding period.

Filing your Portuguese tax return

The annual Portuguese tax return – Modelo 3 – must be filed electronically via the Portal das Finanças between 1 April and 30 June of the year following the sale. A property sold in 2025 must therefore be declared by 30 June 2026.

Capital gains on property acquired after 1 January 1989 go on Anexo G, which asks for the sale price, acquisition cost, transaction dates and all allowable deductions. Property acquired before 1 January 1989 is fully exempt but must still be declared on Anexo G1.

UK residents (and other non-EU/EEA nationals since Brexit) are generally required to appoint a fiscal representative (representante fiscal) in Portugal to handle correspondence with the tax authority. Tax is assessed after the return is processed and typically payable by the end of August. Where you need overseas documentation to support a double taxation credit claim, filing Modelo 49 extends the payment deadline to 31 December.

Late filing carries fines starting at €150 plus interest.

UK owners: what you owe HMRC

Selling Portuguese property while UK-resident triggers a UK CGT obligation too. You must report the disposal via Self Assessment, using SA108 (Capital Gains Summary) and SA106 (Foreign pages, for claiming Foreign Tax Credit Relief). The deadline is 31 January following the end of the UK tax year – a sale completing in 2025/26 must be reported by 31 January 2027.

The 60-day CGT reporting rule that applies to UK residential property disposals does not apply to overseas property. There is no immediate post-completion reporting window.

Current UK CGT rates on residential property (from 6 April 2025) are 18% within the basic-rate band and 24% above it. The annual exempt amount is just £3,000. For UK CGT purposes, both the acquisition cost and sale proceeds must be converted to sterling at the spot exchange rate on the date of each transaction. Currency movements between purchase and sale can create additional taxable gains, or reduce them – worth discussing with a currency specialist before you complete.

A new UK-Portugal Double Taxation Convention, signed in September 2025, entered into force on 20 January 2026, replacing the 1968 treaty. Both countries retain the right to tax gains on Portuguese property (Article 13(1)). Under Article 21, UK sellers can offset Portuguese tax paid against their UK CGT liability. The credit is capped at the lower of the Portuguese tax paid or the UK CGT due – it prevents double taxation, but doesn’t reduce the total bill below whichever country’s rate is higher.

In practice, because Portugal’s effective rate after the 50% exclusion often falls below the UK’s 24% higher rate, most higher-rate UK taxpayers will owe a top-up to HMRC after crediting their Portuguese payment.

What should I do next?

If a sale is on the horizon – or you’re trying to understand your position before committing to buy – three steps are worth taking now.

Gather your purchase documents. The original escritura, IMT receipt and invoices for any works in the past 12 years should be located and copied. Improvement invoices generally can’t be reconstructed after the fact.

Get cross-border tax advice before you fix a completion date. The inflation coefficient, your worldwide income, the 50% exclusion and your UK self-assessment position all interact. A specialist will model your total bill across both countries and may identify planning options worth taking. Our guide to the legal requirements of buying property in Portugal covers the broader legal and tax framework.

Plan your currency conversion. The exchange rate on the day you transfer your proceeds will directly affect what you receive in sterling. Many sellers use a forward contract to lock in a rate ahead of completion. Speak to Smart Currency Exchange before you agree a completion date.

Browse property for sale in Portugal to explore what’s on the market, or read our guide to investing in Portuguese property if you’re thinking about a buy-to-let.

Summary

Capital gains tax on Portuguese property has become considerably fairer for non-residents since January 2023. Only 50% of the net gain is now taxed, at progressive rates – cutting effective rates to between roughly 6% and 24%, compared with a flat 28% on the full gain under the old rules.

The inflation coefficient reduces the taxable gain further on long-held properties, and documented costs including agent fees, legal fees and qualifying improvements all come off the top. UK sellers face a second filing obligation in the UK under the new 2026 double taxation treaty, with credit relief preventing double payment but not eliminating all UK tax.

Before any sale: locate your improvement invoices, take cross-border tax advice, and plan how you’ll convert the proceeds.

Frequently asked questions

Sources

1. Código do IRS, Article 43(2) – 50% exclusion; Article 50 – monetary correction coefficients – Portal das Finanças
2. CJEU Case C-388/19 MK v Autoridade Tributária e Aduaneira (March 2021) – EUR-Lex
3. CJEU Case C-443/06 Hollmann v Fazenda Pública (October 2007) – EUR-Lex
4. Portuguese Tax Authority Circular Letter No. 20255 (14 April 2023) – Portal das Finanças
5. 2026 Portuguese State Budget – IRS rate bands – PwC Portugal
6. The Double Taxation Relief and International Tax Enforcement (Portuguese Republic) Order 2025 – legislation.gov.uk
7. Self Assessment: Capital gains summary (SA108) – GOV.UK
8. Portugal – individual income determination – PwC Tax Summaries