The CCA – Law tax specialists answer your questions about the tax framework for properties in tourist resorts. All the information published here is generic and merely indicative and, in no case, exempts you from consulting a tax specialist on your specific topic.

1) For tax purposes, may I establish my first home in a property located in a tourist resort?

To be a tax resident in Portugal, you must comply with one of the following requirements:

– to remain in Portugal for more than 183 days on a consecutive or interspersed basis in any 12 months, starting or ending in the year in question; or

– having remained for a shorter time, to have housing in Portugal in a condition that suggests the current intention to maintain and occupy it as a habitual residence.

Registration as a resident in Portugal must be carried out with the tax authority, providing proof that you have an address in Portugal that, strictly speaking, may be in your own or leased property, whether part of a tourist resort or not.

Therefore, in theory, you could establish a tax residence in a tourist resort, but it is necessary to consider the type of documentary evidence.

In practice, the Tax Authority has always accepted purchase and sale agreements or lease agreements as proof of address. However, it does not always accept other types of agreements (e.g. gratuitous loan agreements). We should point out that, in any case, the term of the agreement must always be for at least six months.

Another essential element to consider is that the property in question can only be the habitual and permanent residence of a single person or family unit.

2) For the Non-Habitual Residents Regime, may I establish tax residence in a property located in a tourist resort?

A non-habitual resident must, first and foremost, be a tax resident in Portugal. Therefore the comments referred to in the previous answer are applicable here.

3) How are capital gains and losses resulting from the sale of a property located in a tourist resort treated in the case of:

– a foreign customer without tax residence in Portugal – tax resident in the EU and outside the EU?

The capital gain (the difference between the sale price and the purchase price) is taxed at 28%. In certain situations, one could argue that only 50% of this capital gain should be subject to taxation. The charges defrayed on the valuation of the property, demonstrably carried out in the last 12 (twelve) years, and any necessary expenses effectively incurred that are inherent in the acquisition and disposal may be deducted from the calculation of the capital gain.

– a foreign customer with Tax Residence in Portugal?

Assuming that the customer will not have their own permanent home at this property, 50% of the capital gain (difference between the sale price and the purchase price) is not subject to personal income tax (IRS). The remaining 50% is taxed at marginal rates ranging between 14.5% and 48%. The charges defrayed on the valuation of the property, demonstrably carried out in the last 12 (twelve) years, and any necessary expenses effectively incurred that are inherent in the acquisition and disposal may be deducted from the calculation of the capital gain.

Suppose the customer has their tax residence in a property located in a tourist resort. In that case, they may benefit from the reinvestment regime that provides for the non-taxation of the capital gain arising from the sale of the property where their own permanent home was registered, if:

– the realisation value (i.e. sale price of the property), deducting the repayment of any loan taken out for the acquisition of the property, is reinvested in the acquisition of ownership of another property, of land for the construction of the property or its construction, or reinvested in the extension or improvement of another property exclusively for the same purpose, located in Portuguese territory or the territory of another Member State of the European Union or the European Economic Area; provided that, in the latter case, there is an exchange of information on tax matters.

– the reinvestment is made between the 24 months beforehand and the 36 months afterwards, calculated from the date of the realisation/disposal; and the

– taxpayer expresses the intention to reinvest, even if partially, the capital gain, stating the respective amount in the income statement for the year of disposal.

However, we believe that the Tax Authority may question this situation as the property is at a tourist resort, and its primary purpose is not housing but services.

4) How is a tourist resort registered within the tax authorities?

The allocation for tax purposes is services, not residential.

5) How many days do I need to live in Portugal for the purpose of establishing tax residence?

Residents in Portuguese territory are people who, in the year to which the income relates:

a) Have remained there more than 183 days, in consecutive or interspersed fashion, in any period of 12 (twelve) months starting or ending in the year in question; or

b) Having stayed for less time, they have, on any day of the period referred to in the previous sub-paragraph, housing there in such conditions that assume a current intention of maintaining and occupying it as habitual residence.

Hence, according to paragraph b), if you have a home in Portugal that is your habitual residence, you can qualify as a resident in Portugal even if you remain there for less than 183 days.

The CCA – Law Firm tax specialists answer your questions about the tax framework for properties in tourist resorts. All the information published here is generic and merely indicative and, in no case, exempts you from consulting a tax specialist on your specific topic.

6) How are days of tax residence calculated? Are they continuous? Are they consecutive or interspersed? As a total, do they constitute a period?

Total days in any 12 months beginning or ending in the relevant year.

7) When establishing tax residence in Portugal, but being tax resident outside the EU, is it necessary to pay taxes in the country of origin, i.e. is there double taxation?

Tax paid at origin can usually be deducted from any tax paid in the country of residence within certain limits.