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Sale of houses to the State - IRS capital gains exemption

Sales associated with offshore companies or resulting from preemptive rights are excluded from exemptions.

To put more houses on the market, the Government of António Costa designed a series of measures in Mais Habitação. And one of them has to do with the IRS exemption on capital gains resulting from the sale of houses to the State, municipalities and Autonomous Regions. The idea is to increase the number of public housing units and place them on the affordable rental market.

“Gains arising from the onerous disposal, to the State, the Autonomous Regions or local authorities, of residential properties are exempt from IRS and IRC taxation”, reads in the Proposal for Law n.º 71/XV/1.ª , which will be debated in Parliament on the 19th of May. It should be noted that under current taxation, 50% of the capital gain is subject to progressive IRS rates.

However, the Mais Housing bill provides for two exceptions to the IRS exemption on capital gains on the sale of homes to the State, namely to:

  • gains made by residents with tax domicile in a country, territory or region subject to a more favorable tax regime (such as offshore companies), included in the list approved by ordinance of the member of the Government responsible for the area of finance;

  • “gains arising from onerous disposals through the exercise of preemptive rights”. This can happen, for example, when the property is located in an urban regeneration area and the council can exercise the preemptive right.

It is also important to remember that income exempt from paying IRS on capital gains is “must be included for the purpose of determining the rate to be applied to other income”, the diploma also mentions.

The exemption of capital gains on the sale of houses to the State aims to “encourage the acquisition of ready-to-live-in properties by the State”, and results in a reduction of the tax burden by 100%, reads in the explanatory document of Mais Habitação .

Exemption from capital gains to amortize credit and buy another home

In addition to this case, the Government also wants to apply the capital gains exemption on the sale of houses (other than own housing) for the purpose of amortizing credit for own and permanent housing of the owner or descendants.

Still in this field, António Costa wants to increase the number of families that benefit from the IRS exemption on capital gains, temporarily suspending the 36-month period between the sale of the house and the reinvestment in another. That is, families will have more time to sell their own home and invest the earnings in buying another permanent home.

It should be noted that, however, to benefit from IRS exemption on capital gains, families must ensure that, before the sale, the house will have been “own and permanent residence of the taxable person or his household, proven through of the respective tax domicile, in the 24 months prior to the date of transfer”, states the document.

On the other hand, those who have already done so in the year in which the gains were obtained and in the three previous years cannot benefit from the capital gains exemption, even if it is proven that this occurred due to “exceptional circumstances”.

See the article in full here.

Source: Idealista


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