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Treatment of Capital Gains from the Sale of Shares in Portugal
🧾How to Calculate Capital Gains
The capital gain is determined using the following formula:
Capital Gain = Sales Price – (Acquisition Price Adjusted by the Inflation Factor if Held for More than 24 Months) – Expenses with Acquisition and Sale
- Sales Price: The amount received from the sale of the shares.
- Acquisition Price: The original purchase price of the shares.
- Inflation Adjustment: If the shares were held for more than 24 months, the acquisition price is adjusted using an official inflation coefficient published by the tax authorities.
Deductible Expenses: Any costs directly related to the acquisition and sale, such as brokerage fees and transaction taxes, can be deducted from the capital gain.
💰 General Rule: Capital Gains Taxed at 28%
As a general rule, capital gains realized from the sale of shares by individuals are taxed at a flat rate of 28% under the IRS regime.
‼️Exception for Short-Term Capital Gains
Capital gains from assets held for less than 365 days are subject to a different tax treatment when the taxpayer’s taxable income liable to progressive rates — typically employment, self-employment, pension income, or property sales — equals or exceeds €83,696 (for 2025). In this case, the balance of short-term capital gains must be compulsorily aggregated with the taxpayer’s overall income and taxed at progressive rates (which vary from 13% to 48%).
Long-term capital gains, however, can still benefit from the 28% flat tax rate or applicable reductions.
🏬 Special Taxation Rules for Small and Micro Enterprises: 50% exclusion
When the shares sold belong to micro or small enterprises that are not listed on a regulated or unregulated stock exchange, only 50% of the gain is subject to taxation, resulting in an effective tax rate of 14%.
For tax purposes, micro and small enterprises are defined according to the criteria established in Decree-Law No. 372/2007, of November 6. A company qualifies as a micro or small enterprise based on its turnover, balance sheet total, and the number of employees. Specifically:
- Micro Enterprises: Companies that employ fewer than 10 people and have an annual turnover or balance sheet total not exceeding €2 million.
- Small Enterprises: Companies that employ fewer than 50 people and have an annual turnover or balance sheet total not exceeding €10 million.
Key Ruling: The Portuguese courts have confirmed that this tax regime applies to any company worldwide, as long as it meets the criteria for micro and small enterprises. Additionally, a recent binding ruling from the Portuguese tax authorities reinforces that investors can benefit from this favorable tax treatment even if the company is based outside of Portugal. Read the ruling here.
📈 Capital Gains from Securities Admitted to Trading
For securities admitted to trading on regulated markets or for units in open-ended collective investment undertakings (either contractual or corporate), special tax reductions apply based on the holding period of the assets:
- 10% of the capital gain is excluded from taxation if the assets have been held for more than 2 years but less than 5 years, resulting in an effective tax rate of 25.2%.
- 20% of the capital gain is excluded from taxation if the assets have been held for at least 5 years but less than 8 years, resulting in an effective tax rate of 22.4%.
- 30% of the capital gain is excluded from taxation if the assets have been held for 8 years or more, resulting in an effective tax rate of 19.6%.
This system encourages long-term investments by offering tax relief to investors who retain their securities for extended periods.
Final Considerations
The tax treatment of capital gains in Portugal provides different tax outcomes depending on the type of company whose shares are being sold and the duration of ownership. While the standard 28% rate applies, investors can benefit from partial exclusions depending on whether they hold shares in micro or small enterprises or publicly traded securities for extended periods.
📢 Expert Advice: Investors should always ensure compliance with tax regulations and consider consulting a tax professional for personalized guidance on capital gains taxation.
Need help navigating Portugal’s tax system? Step Inside Portugal is here to assist you! ✨
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