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IRS exemption limits to be extended

In order to benefit from the exemption, homeowners who buy a house will be only required to have lived in the previous one for a minimum period of one year.

Tuesday, 11 June 2024 - Fiscal

According to idealista, homeowners who sell their houses will have easier rules for benefitting from the IRS exemption on capital gains, due to the limits for obtaining this tax benefit being more flexible. At issue is a bill that the government will take to the Portuguese Parliament, which they will have to approve because it is a tax change.

As maintained by Público, to benefit from this exemption, homeowners buying a new house are only required to have lived in their previous one for a minimum of one year, instead of the two years in the previous limit. In addition, they will be able to benefit from this scheme several times.

This is one of the measures launched by the new government, which reverses some of the solutions implemented by António Costa’s government in response to the housing crisis.

In 2023, as part of the Mais Habitação (More Housing) package, the government imposed new restrictions on the tax regime that exempts capital gains from the IRS when selling a house and then buying a new one. As the publication points out, the current law establishes that when someone sells their house and reinvests the proceeds in the purchase of another property for their own permanent home, they can be exempt from the IRS on these capital gains, provided that the new home is purchased within three years and that the property sold has served as their own permanent home for at least two years. It is this latter deadline that will now change.

However, there will be exemptions within the scope of which owners can benefit from the new rule, states the newspaper, such as changes in the composition of the household, due to marriage, dissolution of the marriage, or increase in the number of dependents.

it should be noted that the law in force stipulates that only owners who have not benefitted from this regime in the year in which the gains were made or in the previous three years are entitled to exemption from the IRS on capital gains. This rule has now been repealed and there is no restriction on the number of times a property owner can benefit from this regime.

Long-term capital gains will pay less IRS

With regard to the subject of capital gains, in accordance with Jornal de Negócios, investors who, over an extended period, hold securities admitted to trading or shares in open-ended collective investment schemes – in contractual or corporate form – will benefit from an exclusion from taxation on the part of the capital gains they make. This may cover a maximum of 30 percent of the gains. The same will also apply to gains resulting from the redemption of units and shares in Collective Investment Schemes (OIC).

At stake is a government bill that aims to boost the capital market and encourage savings, with “incentives to hold financial instruments in the medium and long term”. The package also includes measures to support the entry of SMEs onto the stock market the creation of a tax regime for ICOs with a vocation for affordable rentals and tax rules for new European PPRs, writes the publication.



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