Capital Gains

news: Capital Gains

PORTUGAL, once again, has one of the most favourable Capital Gains Tax (CGT) treatments within the European Union. In 2001, the Revenue experimented with change, dropping total exemption after one year to assessment as high as 30 per cent.

Unfortunately, this deviation coincided with a major downturn in World Equity Markets and contributed to a catastrophic collapse in investor confidence in the Portuguese Security Markets. The current return to tax exemption corrects what proved to be an untenable position for a small, peripheral country. Coupled with the recent abolition of Inheritance Tax, this attractive CGT approach contributes to Portugal’s developing status as a quasi tax haven within Europe.

What constitutes a

Capital Gain?

Capital Gains are derived from the sale of property or rights:

• real estate (to be explained in the next article)

• termination of property rights

• shares in partnerships

• stocks

• other securities and funds

• literary rights

• winnings from gambling

Are there any exemptions?

Yes.The following are exempt from CGT:

• housing purchased prior to January 1 1989

• lots for construction acquired by gift or inheritance prior to June 8 1965, as well as rural property

• shares in partnerships acquired before January 1 1989

• bonds and debentures

• shares held for more than 12 months acquired before December 31 2000.

• stocks, shares, and other securities acquired after January 1 2001 if the gain was less than 997.60 euros (although this amount is to be taken into consideration in determining tax rate).

How is the tax calculated?

In respect of Capital Gains derived from the sale of securities purchased after January 1 2001, the following table applies:

Gains are calculated as the net of profits and losses. Net losses may be carried forward up to five years on income within the same income category.

Next week: Capital Gains on Real Estate

• Dennis Swing Greene is an International Fiscal Consultant for euroFINESCO s.a., with offices in the Algarve and in Lisbon. Appointments may be scheduled in Guia (Albufeira) telephone: 289 561 333, or in Lisbon (Chiado) telephone: 213 424 210.