The Tax Authority has taxed all the capital gains calculated from the sale of a property by non-residents in Portugal (and residents of other countries of the European Union), not applying the exclusion of 50% of the balance of the capital gains (as happens with residents).
This situation has led to multiple EU-resident citizens having appealed to court to challenge the settlement of the IRS, invoking that the inclusion in the taxable income of all the surplus value resulting from the sale of the property sick of a legal error, since it should have been considered only 50% of the respective amount, by application of Article 43(1) and (2) of the IRS Code.
It should be noted that, in the current Law, the balance determined between real estate capital gains and losses, when earned by residents in Portuguese territory, is subject to mandatory encompassing, being, as such, taxed at the progressive rates provided for in Article 68(1) of the Natural Persons Tax Code ("IRS"), by 50% of its value, pursuant to the provisions of paragraph 2 (b) of the 43rd of the IRS Code and, when earned by non-residents in Portuguese territory, it is taxed, in its entirety, at the autonomous rate of 28%, in accordance with the provisions of Article 72(1)(a) of the IRS Code, without prejudice to residents of another Member State of the European Union or the European Economic Area (with exchange of information on tax matters) to be able to opt for the encompassing of income, under the same conditions that are applicable to residents, considering for the purpose of determining the rate all income, including those obtained outside this territory.
Now, the case law has been considering that the legal framework in force is not in accordance with Articles 63 and 65 of the Treaty on the Functioning of the European Union ("TFEU") because it constitutes negative discrimination likely to restrict the movement of capital, with emphasis on the Judgment on the standardization of jurisprudence of the Supreme Administrative Court ("STA") of 09.12.2020, delivered under Case Nº 75/20.6BALSB, as well as for the Decision of the Court of Justice of the European Union ("CJEU") of 18.03.2021, rendered under Case C-388/19 (Case MK).
As, in accordance with Article 68(4)(b) of the General Tax Law ("LGT"), the tax administration must review the generic guidelines when, among other factors, there is a judgment of standardization of jurisprudence delivered by the STA, it has decided, by order of SEAAF No. 177/2021-XXII, of 04/06/2021, that, in pending administrative procedures and judicial proceedings, in the current regulatory framework and until the necessary legislative change is implemented, the provisions of paragraph 2 of Article 43 of the CIRS must be applied, on a case-by-case basis to non-resident taxable persons, maintaining autonomous taxation at the special rate of 28%.
That is, the taxation of only 50% of the capital gains resulting from the sale of real estate by non-residents and provided that they are residents of the European Union will be applied, as is the case with residents in Portugal.