Capital Gains (Mais-Valias) and Completing IRS Annex G

What Are Capital Gains? (Mais-Valias)

Capital Gains (Mais-Valias) refer to the profit obtained when selling a property for a higher price than the one paid at purchase.

The Portuguese State taxes this profit through Personal Income Tax — IRS (Imposto sobre o Rendimento das Pessoas Singulares), and as a general rule, only 50% of the gain is subject to taxation.

What Is Anexo G?

Anexo G is the specific form within the annual Portuguese income tax return (Declaração de IRS) where you must report the sale of a property.

This is where the Portuguese Tax Authority (Autoridade Tributária e Aduaneira, commonly known as Finanças) calculates whether you generated a capital gain (mais-valia) or a capital loss (menos-valia).

How Is the Taxable Gain Calculated?

The taxable profit is not simply the difference between purchase and sale price. Several expenses may be deducted to reduce the taxable amount:

Sale Price (Valor de Realização)

minus

Purchase Price (Valor de Aquisição), adjusted for inflation if more than 2 years have passed.

minus

Purchase Costs

• IMT — Imposto Municipal sobre as Transmissões Onerosas de Imóveis (Property Transfer Tax)

• Imposto do Selo (Stamp Duty) paid at purchase

minus

Selling Costs

• Real estate agency commission (supported by invoice — fatura)

minus

Property Improvements (Benfeitorias)

• Improvement works carried out within the last 12 years

• Must be supported by invoices including your Portuguese tax number (NIF — Número de Identificação Fiscal) and the property address

minus

Deed and Registration Costs

• Notary deed (Escritura) and property registry fees (Registos)

Main Tax Exemptions

You may not need to pay Capital Gains Tax if one of the following applies:

Reinvestment (Reinvestimento)

If you sell your Primary Residence — Habitação Própria e Permanente (HPP) and reinvest the proceeds into another HPP in Portugal or within the European Union.
You have 36 months to complete the reinvestment.

Older Properties

If the property was purchased before 1 January 1989, it is exempt from Capital Gains Tax.
The sale must still be declared under Anexo G1, although no tax is due.

Mortgage Repayment Exception

(Temporary rule applicable in 2023–2024, subject to confirmation for 2025/2026)

Tax exemption may apply if the sale proceeds from your HPP are used to repay a housing loan (crédito habitação) secured against:

• another property owned by you, or

• a property owned by your descendants.

How to Complete Anexo G (Table 4 — Quadro 4)

You will need to report:

• Year and Month of Sale — date of the final deed (Escritura)

• Sale Value (Valor de Realização) — selling price

• Year and Month of Purchase — acquisition date

• Purchase Value (Valor de Aquisição) — original purchase price

• Expenses and Charges (Despesas e Encargos) — total of agency commission, purchase taxes, registration costs, and qualifying improvement works

How Much Tax Is Paid?

Capital gains are added to your annual taxable income under the IRS aggregation system (englobamento).

Only 50% of the net gain is taxed, at the income tax rate corresponding to your IRS tax bracket.

Example:
If your real profit is €20,000, Finanças will add €10,000 to your annual income to calculate the tax due.

Golden Tip: Keep All Invoices (Faturas com NIF)

Never discard invoices related to property improvements (new kitchen, windows, renovations, etc.).

They are the only accepted proof allowing you to demonstrate investment in the property and significantly reduce the amount of Capital Gains Tax payable.