PORTUGAL Law and Practice Contributed by: Tânia de Almeida Ferreira, João Pedro Albuquerque, Filipe Gomes da Silva and Pedro Neves, CCA Law Firm
3.4 Capital Gains In Portugal, capital gains correspond to the gains arising from the disposal for consideration of certain assets or rights and are essentially divided into two main categories: immovable property capital gains and securities (or movable) capital gains. The former generally result from the disposal of immovable property, while the latter arise from the transfer of shareholdings, securities or other financial instruments. Immovable Property Immovable property capital gains realised by (resident and non-resident) individuals or non-resident legal entities are calculated as the difference between: (i) sale value; and (ii) acquisition value, increased by: (a) expenses related to improvements carried out during the 12 years preceding the disposal; and (b) costs inherent to the acquisition and sale of the property. The acquisition value may be adjusted by the appli - cable inflation (currency devaluation) coefficients, pro - vided that at least 24 months have elapsed since the acquisition date. For individuals, 50% of the resulting gains is included in taxable income and subject to the progressive PIT rates, ranging from 13% to 48%, with an additional solidarity surcharge of 2.5% or 5% applying where taxable income exceeds EUR80,000. A full exemp - tion may apply under the rollover regime, subject to the fulfilment of the relevant statutory requirements. For non-resident legal entities without a PE in Portu - gal, immovable property capital gains are generally subject to CIT at a flat rate of 25%, unless reduced under an applicable DTT. Capital gains realised by resident legal entities from the disposal of immovable property are calculated as the difference between: (i) sale value; and (ii) acquisi - tion value, the latter being reduced by tax-deducti - ble depreciation, impairment losses and other value adjustments, and updated by the applicable inflation (currency devaluation) coefficients where at least two years have elapsed since the acquisition date.
dends distributed by a Portuguese company subject to, and not exempt from, Portuguese CIT, provided that a qualified participation is held (10% of the share capital or voting rights for an uninterrupted period of at least one year) and the qualified parent company requirement is met. The exemption is conditional upon compliance with EU anti-abuse provisions and benefi - cial ownership requirements, as well as the submis - sion of the relevant supporting documentation by the shareholder. Where the exemption does not apply, the 25% with - holding tax rate may be reduced under an applicable DTT, subject to the submission of Form 21-RFI and a valid tax residence certificate. Interest & Royalties Under domestic law, interest paid to resident individu - als is generally subject to withholding tax at a final rate of 28%, unless the taxpayer opts for aggregation, in which case the income is taxed at the applicable progressive PIT rates. Royalties are taxed under the general Personal Income Tax (PIT) provisions at pro - gressive rates and may be subject to withholding tax on account of the final liability. As a general rule, interest and royalties paid to resident legal entities are subject to withholding tax at 25%, operating as a payment on account of the final CIT liability, unless the special tax consolidation regime applies (in which case no withholding tax applies). Interest and royalties paid to non-residents are, as a rule, subject to withholding tax at a domestic rate of 25% (legal entities) or 28% (individuals). These rates may be reduced under an applicable DTT or, in the case of qualifying associated EU companies, reduced to 0% under the Interest & Royalties Direc - tive, provided that the relevant conditions are met. The application of a reduced rate or exemption is conditional upon the non-resident recipient providing the Portuguese payer with the required documenta - tion (including Form 21-RFI, where applicable) and satisfying the beneficial ownership and anti-abuse requirements.
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