Taxation can be a complex entity in any country but even more so when you consider receiving a taxable income or a capital gain from a country where you are not tax resident.

For example, capital gain in Portugal is added to regular income and the appropriate income tax rates are applied. In calculating a capital gain, account is taken of the rate of inflation from the date of purchase until the date of sale.

When the proceeds of the sale are re-invested in the purchase of other permanent assets (another Portuguese property or shares, etc.), only 20% of capital gains tax need be paid in the current year. The balance of 80% of the profit is deferred to the following years. On the sale of real estate that is the vendor's primary residence, 50% of the gain is added to the regular income for income tax purposes. If the proceeds are invested in the purchase of alternative real estate for a residence within a short period as defined in law (currently two years), the capital gain is exempt from tax.

For non-residents, on a sale of the property Portuguese capital gains tax (CGT) is payable at 25% of the gain.

Under the double tax treaty with Portugal, if you are tax resident in a country that has entered into such an agreement with Portugal, the agreement allows you to credit any capital gains tax paid in Portugal against any capital gains tax payable in your tax domiciled country.

Of course each individuals circumstances are different and this is where we are able to provide help and advise.