Gains
This topic is frequently discussed, usually by sellers.
But, after all, for tax purposes what are capital gains.
This tax was developed by the government to tax the profit made from the sale of real estate.
Bear in mind that all properties acquired before January 1, 1989 are exempt from this tax.
To do so, we will have to break down certain concepts:
VPT (Tax Equity Value) is the value resulting from the application of the formula
VPT=VC x H x CA x CL x CQ x CV
VC – Base value of built buildings
A – Area corrected by the adjustment coefficient
CA – Coefficient of Affectation
CL – Location Coefficient
CQ – Quality and comfort coefficient
CV – Oldness Coefficient
Of these coefficients, only the CV can be changed by the taxpayer, if it is in his/her interest. The CV reflects the depreciation of the property’s condition according to its age.
The rest result from the direct application of values and factors determined by law.
So, we focus on the CV, which can reduce the VPT according to the years of the property, with the consequent reduction of the IMI payment.
| Years | Oldness Coefficient |
| Less than 2 | 1,00 |
| 2 to 8 | 0,90 |
| 9 to 15 | 0,85 |
| 16 to 25 | 0,80 |
| 26 to 40 | 0,75 |
| 41 to 50 | 0,65 |
| 51 to 60 | 0,55 |
| More than 60 | 0,40 |
The application of this factor is not direct and automatic by the Tax Authority, and the taxpayer must deliver the respective model for its update. However, it is recommended that you carry out the simulation in the “Portal das Finanças” of the new VPT in advance, as it may not be interesting to update this coefficient because, at the same time, other coefficients or values with opposite increases may cancel out the reduction in the VPT.
Then the calculation of the Capital Gain = Realization Value – [Corrected Acquisition Value – Purchase costs – Expenses with works up to 12 years old – Costs with the sale]
Note: For the purposes of the acquisition value, the highest value between the VPT and the value that served as the basis for the settlement of the IMT prevails.
Example:
A house was sold for €120,000, having been acquired for €85,000, with 1 VPT of €55,000, where the IMT and IS in the amount of €1,000 were paid on the acquisition, had proven works of €5,000 and the real estate commission of 5,000€.
Capital gain = €120,000 – €85,000 – €1,000- €5,000 – €5,000 = €24,000
Not subject to 50%: €12,000
Subject 50%: €12,000
This means that the seller will have to declare in his IRS declaration, in the following year, the capital gain of €12,000, in category G, being taxed, in the IRS, according to the tax rate corresponding to his income bracket.
Note: Gains obtained from the onerous transfer of property are excluded from taxation if destined for own and permanent housing, between the previous 24 months and the 36 subsequent months, counting from the date of realization, that is, in the acquisition of another permanent housing.
This is a common mistake, wrongly saying reinvest capital gains.
So, what amount should be reinvested?
The realization value deducted from the amortization of the loan contracted for the acquisition of the property sold must be reinvested.
