These updates are set to shape the real estate landscape, particularly for those buying or selling luxury properties in the Algarve.

Key Updates to Capital Gains Tax Exemptions

For homeowners who purchased property in the last year and are considering selling, a significant opportunity has arisen. The most noteworthy change is the reduction of the minimum holding period required to qualify for a capital gains tax exemption. Previously set at 24 months, the holding period has now been shortened to just 12 months. This move makes tax exemptions more accessible to a broader range of property owners, easing the tax burden and facilitating quicker transitions in the market.

On May 27th, the Government passed a legislative amendment enabling this change, which was officially approved by Parliament on June 21st. The updated rule is expected to apply retroactively from December 31, 2023. This amendment is part of a larger effort to streamline the tax system, encourage housing mobility, revitalize urban areas, and attract more foreign investment.

Breakdown of the Major Changes

- Shortened Holding Period: The time homeowners must own a property to benefit from capital gains tax exemptions has been halved from 24 months to 12 months. This is contingent upon reinvesting the proceeds into another primary residence within three years. This adjustment is especially beneficial for those wishing to upgrade or relocate within a shorter timeframe.

- Unlimited Exemptions: The previous restriction, which allowed capital gains tax exemptions only once every three years, has been eliminated. Property owners can now enjoy these tax benefits with each qualifying sale, offering greater flexibility in managing luxury property portfolios.

- Revised Capital Gains Calculations: Changes are also expected in how capital gains are calculated, focusing on the monetary devaluation coefficient. These updates aim to reflect property value more accurately, ensuring a fairer tax structure for homeowners.

The Impact on Portugal's Luxury Real Estate Market

These revisions are poised to have a significant impact on the high-end real estate market in Portugal, particularly in sought-after regions like the Algarve. By lowering barriers for reinvestment and making it easier for property owners to move, these tax reforms will likely bring a fresh wave of activity to the market. Additionally, initiatives such as IMT and IS exemptions for individuals under 35 are making property ownership more attainable for younger buyers, further driving growth.