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- Tax, Live in Portugal
Capital Gains on Property in Portugal: Deductible Expenses, the 50% Rule and Inflation Coefficients
🧮 The Formula
Gain = Sale value – (Acquisition value × inflation coefficient) – Deductible expenses
Taxable gain = 50% of the gain (for residents and non-residents), added to your other income at progressive rates.
💶 Step 1: Sale Value
The price in the deed — or the VPT used for IMT and Stamp Duty, if higher. If the VPT is higher than the real price, you can ask to prove the actual price through a specific procedure.
🏠 Step 2: Acquisition Value
- Bought: the price paid (or the VPT used for IMT, if higher)
- Inherited or received as a gift: the value used for Stamp Duty (usually the VPT) — see our article on gratuitous acquisitions
- Built by you: the VPT of the new building, or the land plus documented construction costs
📈 Step 3: Inflation Coefficients
If you’ve owned the property for more than 24 months, the acquisition value is multiplied by a currency devaluation coefficient (coeficiente de desvalorização da moeda), published every year by ministerial order.
- The coefficient depends on the year of acquisition — the older the purchase, the higher the coefficient
- It applies to the acquisition value, not to expenses
- It doesn’t apply to properties owned for 24 months or less
Example: bought in 2010 for €150,000; if the coefficient for 2010 is 1.30, the updated acquisition value is €195,000.
🧾 Step 4: Deductible Expenses
Improvement works (encargos com a valorização) carried out in the last 12 years, with invoices in your name — for example:
- Renovations, extensions, new kitchens or bathrooms
- Structural works, roofs, new windows
Expenses necessary for the purchase and sale, such as:
- IMT and Stamp Duty paid on the purchase
- Notary, land registry and lawyer fees
- Real estate agent’s commission on the sale
- Energy certificate for the sale
Not deductible: mortgage interest, IMI, condominium fees, furniture, and works without proper invoices.
📉 Step 5: The 50% Rule
Only 50% of the gain is taxable, and it’s always aggregated with your other income for the year. Properties acquired before 1 January 1989 are not taxed at all.
Watch out: if the property was used in a local accommodation (AL) business and moved to your private assets less than three years before the sale, the 50% exclusion doesn’t apply.
➖ Losses on Property Sales (Article 55)
If you sell at a loss:
- 50% of the loss can be offset against other category G gains of the same year
- If you aggregate your category G income, the remaining negative balance can be carried forward for five years and deducted from future category G gains
- Losses can’t be used against other categories (such as salary or rents)
📋 Full Example
- Sale value: €350,000
- Acquisition (2010): €150,000 × 1.30 = €195,000
- Works (last 12 years): €30,000
- Purchase and sale expenses: €25,000
- Gain: €350,000 – €195,000 – €30,000 – €25,000 = €100,000
- Taxable (50%): €50,000, added to your other income
💡 Practical Tips
- Keep every invoice for works — they’re the most valuable deduction.
- Check the coefficient for your year of purchase.
- Selling your permanent home? Consider the reinvestment exemption.
- Plan the year of sale — lower income that year means a lower rate on the gain.
🚀 Final Considerations
The taxable gain on a property sale is often much lower than the difference between buying and selling prices. Inflation coefficients, expenses and the 50% rule all work in your favour — as long as you have the documents.
📢 Expert Advice: Start collecting invoices for works and purchase expenses long before you sell. Without them, the gain — and the tax — will be higher.
Selling a property in Portugal? Step Inside Portugal’s tax team can calculate your capital gain and declare it correctly — find out more about our tax services here. ✨
This article is for general information only and doesn’t constitute tax advice. The coefficients are updated every year.
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