Short-term Capital Gains taxation in Portugal - new rules
Until now, the capital gains from the sale of shares and other movable property were, in most cases, subject to a 28% flat tax rate (or 35% if from listed tax havens).
Starting January 1st, 2023, the Portuguese taxation of short-term capital gains from the sale of shares and other movable property is expected to change significantly.
What are the new rules for the taxation of Portuguese capital gains?
Capital gains from the sale of shares and other movable property will be mandatorily aggregated with the taxpayer's remaining income and taxable at the progressive personal income tax rates if, cumulatively:
- the underlying assets were held for less than one year prior to the sale, and
- the taxpayer's total taxable income, including those capital gains, equals or exceeds € 75,009.
The progressive personal income tax rates go up to 48% (plus surtaxes at the rate of 2.5% for taxable income higher than €80,000 and 5% for taxable income above €250,000).
Capital gains that do not fall, cumulatively, within the requirements above will not have their taxation rules changed, and the same flat 28% rate will continue to apply in most cases.
Non-habitual residents in Portugal - Capital gains taxation
Taxpayers who benefit from the Non-Habitual Resident (NHR) regime should pay particular attention, as capital gains from the sale of shares and other movable property are not, in most cases, exempt from taxation in Portugal under the NHR regime.
There have been calls to abolish this measure even before it entered into force, but so far, the Government has not given any sign of intention of change or flexibilisation. This measure is therefore expected to impact the Portuguese capital market, with investors adopting defensive measures such as the freeze of transactions to reach the 1-year holding threshold.
If you feel these changes may impact you, NEWCO is available to assist you in assessing and addressing this new landscape.