Capital gains & other taxes

[travelling-man]

We bought a house last year and did a fair bit renovation.

If I now buy a ruin, restore it and then sell the house we're in now and move into the other one, what taxes will I get hit with please?

[canoeman]

If you can sell or make a profit

Providing your a Resident and this is your Primary home and you reinvest proceeds within EU and within 3 years in another Primary home then you don't have a CGT liability.

If your a non Resident then you pay CGT at 25% on profit.

CGT calculation
A.Sales price - selling costs (you cannot claim for your lawyer if you use one to sell, estate agents commision is only accepted if they are registered and named in selling Escritura)
B. Purchase price (as Escritura) x inflation co-efficient + buying costs and capital improvements within last 5 years (correctly receipted, no backs of envelope)
A-B=net profit, if you don't rollover gain into another primary home your CGT liability is, as a Resident taxed on 50% of gain @25%

When you sell property here Resident or Non Resident you must make a tax return for the year of sale, details recorded in Anexo G, as a Resident you must show the reinvestment you intend to make otherwise you get taxed.

[travelling-man]

OK thanks!

[Aden'Soph]

OK ... lets try a variation to the original question. This team needs focus and has confused contablista's and Finanças types. Buy a house in 2004 and temporarily live in it 6 months as a main residence. Then buy another house in 2005, renovate it and live in this second house for 8 years as a Portuguese resident. Then sell the second (2005) house and move back into the first (2004) house in 2011. The question we need answered is - Can the costs of renovation of the first (2004) house in 2012 be offset against Portuguese CGT levied on the second (2005) house 'profit'? The CGT allows for 'alteration of a property' but the confusion is over whether this has to be a new house purchase or can apply to off-setting CGT using money spent renovating the already owned house. (We have recently spent 20,000+ euros (all IVA receipts) 'refurbishing' the 2004 house we now live in.)

[canoeman]

Where you a Resident when you bought first (2004) house? you first need to establish which is /was your primary Residence, my feeling is it's the second (2005), one of the criteria used is did you change your address with Financas to this second house, also helpful if you claimed the IMI relief for this property?? so you would be able to offset any CGT or profit against first, if that is now your Primary Residence.

"Rollover Relief is a tax break available to those who sell their principal residence and reinvest the proceeds directly into another. In practical terms, your principal residence is the one that you registered as your fiscal address with Finanças. "

Since 2009 you can also reinvest 2 years prior to sale and 3 years after (quite how that works baffles me) but it should then mean you can rollover gain into your new (2004) residence.

CGT tax is a tax on any profit you might have made but the wording on reinvestment is slightly ambiguous but does say "the realisation value after deductions" is reinvested, which means you must reinvest total proceeds not just the CG, so any under-investment you would pay CGT pro rata, so it's important to get declaration on Anexo G correct.

Your other problem is time and what you put on IRS returns

If you sold 2010 any roll over should have been declared IRS 2010 filed 2011
or
If you sold 2011 any roll over should have been declared IRS 2011 filed 2012
or
If you haven't filed then you should be able to backtrack but might well be fined for not filing at correct time.