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Changes to Portuguese real estate gains
In Judgement passed on 26 October 2006, the EU Court of Justice decided
that the Portuguese State had failed to fulfill its obligations under
Articles 18 EC, 39 EC and 43 EC, and under Articles 28 and 31 of the
European Economic Area Agreement of 2 May 1992;
This Judgement was in respect to the fact that Portugal made entitlement
to exemption from tax on capital gains arising from the transfer for
valuable consideration of real property intended for the taxable person's
own and permanent residence or for that of a member of his family, subject
to the condition that the gains realised should be reinvested in the
purchase of real property situated in Portuguese territory.
Accordingly the Portuguese State will now alter Article 10 (5) of the
individual tax code (IRS) to allow capital gains made on the disposal of
real estate owned by the tax payer and intended for permanent habitation
by him and his family to be reinvested either in Portugal OR in any other
EU Member State within 24 months of the gain arising provided that the
reinvestment is in respect of property for permanent habitation, in land
for construction of a property for permanent habitation or in the
construction, enlargement or improvement of an existing property for
permanent habitation by the tax payer and family. This change has yet to
be published officially and is anticipated to become be effective as from
the tax year 2008.
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