looking for advice about sellin house.

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Jemima Copping
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looking for advice about sellin house.

Post by Jemima Copping »

Hi, I have a house in PT which we bought 10 years ago, did some renovations and have been using as a holiday home for ourselves. We live in the UK, and now want to sell the house.
I know that I have to pay tax on the sale, but don't know how much we will have to pay.
I found a website recently that says the tax is 28% on the whole value of the house.I'm sure that it last year it was 25%. Can anyone point me in the direction of a website which has the correct information about this? I've been trying to find out on Pure Portugal FB page with no success. Everyone seems to have a different story!
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Casscat
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Post by Casscat »

You could try the free tax download here (see sidebar to right) but it may not cover your particular point. https://www.blevinsfranks.com/where-we-are/portugal
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Moliere
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Post by Moliere »

Blevins Franks aren't going to tell you anything for free!

Here's the details you need:

Capital gains realized by nonresidents on the sale of Portuguese property are taxed at a flat rate of 28%. The taxable gain is computed by deducting the following from the selling price: the acquisition cost adjusted for depreciation and increased by the official inflation coefficient, costs of transferring ownership, and improvement costs incurred in the last fiveyears prior to the sale.

For capital gains realized from fixed assets such as real property, only 50% of the capital gains will be taxable if the capital gains are reinvested in fixed assets such as real property during the year the sale occurred, the previous year, or within two years after the sale.

Nonresidents are required to appoint a local representative in Portugal for tax purposes. The appointment must be in writing and must show the representative’s express acceptance. Non-compliance with this obligation incurs a fine of up to €5,000. The representative fulfills all the tax obligations of the nonresident such as filing the income tax returns and paying the tax liability.

For further details see:
http://www.globalpropertyguide.com/Euro ... -and-Costs

Mols
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Casscat
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Post by Casscat »

Moliere wrote:Blevins Franks aren't going to tell you anything for free!
Um, yes they are. I work for Blevins Franks but in Spain. Jemima can phone the office closest to her property and have a chat, which will be free. I have conversations almost every day with people who have simple queries about Spain and taxation but who are not by any stretch potential clients of my office and am happy to give them the info they require or point them in the right direction. This is how you build a solid reputation - by being accessible and informative and not 'on the make'.
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Moliere
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Post by Moliere »

Sorry, Casscat, I wasn't being offensive, I merely meant that the website did not give specific information relating to this enquiry.
In fact I have had discussions with BF myself in the past, and it's fair to say you can cover some distance before incurring costs, just I rather think Jemima didn't want to go down that route.

Mols
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RichardHenshall
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Post by RichardHenshall »

Blevins Franks wrote:Non-residents

Non-residents pay tax on 100% of the gain from the sale of a property in Portugal at 28%. An EU resident may choose to be taxed as a Portugal resident, but you will have to declare your worldwide income to calculate the marginal rate of tax that will apply to the gain.

For UK residents, the gain would also be taxable in the UK, but under the double tax treaty, any tax paid in Portugal can be credited against the tax due in the UK.
Moliere's link isn't accurate as, for instance, it isn't necessary for an EU resident to have a Fiscal Representative and the reduction for reinvestment only applies to Portuguese residents (as it's for principal dwellings and it can't be one if you're non-resident). The allowable improvement expenditure is, I believe, changing to include expenditure in the final 10 years of ownership but it must be properly documented with your Fiscal Number on the invoices etc.
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Moliere
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Post by Moliere »

RichardHenshall wrote:
Moliere's link isn't accurate as, for instance, it isn't necessary for an EU resident to have a Fiscal Representative and the reduction for reinvestment only applies to Portuguese residents (as it's for principal dwellings and it can't be one if you're non-resident). The allowable improvement expenditure is, I believe, changing to include expenditure in the final 10 years of ownership but it must be properly documented with your Fiscal Number on the invoices etc.
Well, it just shows that even the professionals can't agree, especially on the details. Fortunately there does seem to be a consensus (so far!) on the main facts.

Moliere
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Jemima Copping
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Post by Jemima Copping »

I'm getting confused here! Since the UK is still in the EU, are you saying Richard that I don't need to have a fiscal representative? If not, how do I go about calculating the tax?
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RichardHenshall
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Post by RichardHenshall »

Portuguese tax is, like the UK, a self-assessment system. If you can't cope without assistance, use an accountant or other competent person to provide the assistance. Either way the law doesn't require you to have a fiscal representative any more as that requirement was dropped in 2011.
Jemima Copping
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Post by Jemima Copping »

RichardHenshall wrote:Portuguese tax is, like the UK, a self-assessment system. If you can't cope without assistance, use an accountant or other competent person to provide the assistance. Either way the law doesn't require you to have a fiscal representative any more as that requirement was dropped in 2011.
Thank you Richard.
Better to be mutton dressed as lamb than mutton dressed as mutton!
Jemima Copping
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Post by Jemima Copping »

Thanks also to Moliere and Casscat.
Better to be mutton dressed as lamb than mutton dressed as mutton!
Jemima Copping
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Post by Jemima Copping »

[quote="RichardHenshall"][quote="Blevins Franks"]Non-residents

Non-residents pay tax on 100% of the gain from the sale of a property in Portugal at 28%. An EU resident may choose to be taxed as a Portugal resident, but you will have to declare your worldwide income to calculate the marginal rate of tax that will apply to the gain.

Again, after rereading, I am a trifle confused. Does this mean that , since the UK is still in the EU, I can choose to be taxed as though I was a resident of Portugal even though I am resident in UK? And is there much difference in the percentage?
Better to be mutton dressed as lamb than mutton dressed as mutton!
RichardHenshall
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Post by RichardHenshall »

I'm afraid that I am no expert but I think the idea is that you can choose to be taxed in Portugal on your Portuguese income and gains as if you were a Portuguese resident (though whether you get the allowances that a PT resident gets is an unknown). However you have to declare all your worldwide income so the Portuguese authorities can establish what your marginal rate of tax would be if you were PT resident. Since only you knows your circumstances, only you or your professional adviser might be able to estimate what that marginal rate might be.

Perhaps the first thing that needs to be estimated is the capital gain (in euros) that you expect to achieve on the sale so that you can determine what might be at stake. It may take more effort and professional assistance than the saving (if there even is one) would justify.

Remember that you will also have to declare the gain for UK CGT as well, though the Portuguese tax paid will be deducted from the UK liability. Even if you save in Portugal, you may just end up paying it in the UK anyway. The gain in the UK will be worked out using the Sterling values and different allowances and costs may be allowed. You might even make a profit in one jurisdiction and a loss in the other.
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