Decree-Law 57/2024 was published on 10th September. In addition to repealing the measures penalising local accommodation, it also amended the IRS Code regarding the conditions for exclusion from taxation of capital gains from the onerous transfer of real estate intended for each taxpayer’s own permanent residence.
The “Mais habitação” programme, published in October of last year, introduced more restrictive measures to the exclusion from taxation in this area, including the requirement that the property sold and subject to capital gains must have been the tax residence of the taxpayer or their household for the 2 years prior to the date of sale, as well as the requirement that in the year in which the capital gains were obtained, or in the previous three years, the taxpayer must not have benefited from the same exclusion regime.
In order to introduce IRS measures to facilitate geographical mobility, the XXIV Constitutional Government approved an amendment to this same article of the IRS Code, expanding the exclusion from taxation for this type of gain by changing two of its conditions.
Firstly, Decree-Law 57/2024 halved the time that the property transferred and subject to capital gains has been the taxpayer’s own permanent home (Article 10(5)(e) of the IRS Code) and, additionally, revoked the limitation on the benefit of this same tax exclusion in previous years (Article 10(5)(f)).
Thus, IRS taxpayers may benefit from the tax exclusion for capital gains on the transfer of property for consideration, provided that, cumulatively:
- The value of the sale is reinvested in the acquisition of another property, land for the construction of a property and/or its construction, or in the extension or improvement of another property;
- The object of the reinvestment is also intended for the taxpayer’s own permanent home or that of his family;
- The property is located in Portugal or in another EU member state or in the European Economic Area;
- The reinvestment is made between 24 months before and 36 months after the date of sale of the property on which the capital gains were made;
- The taxable person expresses the intention to reinvest, even partially, with an indication of the respective amount, in the tax return for the year of the sale;
- The property sold has been the taxpayer’s own permanent home or that of their family, as proven by their tax address, for the 12 months prior to its transfer or reinvestment, if earlier, under the terms listed above.
It is important to note that this Decree-Law, in addition to the measures mentioned above, allows taxpayers to benefit from this exclusion from taxation, even if they have not completed the 12-month period, through the creation of Article 10(23) of the IRS Code, if exceptional circumstances have been observed, namely changes in the composition of the respective household due to marriage or de facto union, dissolution of the same, or an increase in the number of dependents.
