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In 2024, inheritance tax regulations for foreign property owners in Portugal are characterized by several key aspects. This guide provides essential information to help you understand and navigate the current regulations, highlighting exemptions, taxable assets, inheritance rules, and estate planning options.
Although inheritance tax has been abolished in Portugal, a stamp duty (Imposto do Selo) of 10% applies to inheritances. This stamp duty only concerns properties located in Portugal, such as real estate and other local assets. Properties and assets located abroad are not subject to this tax in Portugal, which can be a significant advantage for foreign property owners.
Legitimate heirs, including spouses, children, grandchildren, parents, and grandparents, are exempt from the stamp duty on inheritances. This means that these direct heirs will not pay the 10% stamp duty on inherited properties in Portugal. This exemption aims to ease the tax burden on families and facilitate the transfer of wealth among close relatives.
The inheritance tax in Portugal applies exclusively to assets located within Portuguese territory. Real estate, bank accounts, and other assets situated in Portugal are subject to stamp duty, while assets located abroad are not. This provides some flexibility for foreign property owners with assets distributed across multiple countries.
Portuguese law imposes restrictions on the distribution of assets for residents. A fixed portion of the inheritance, usually at least 50%, must be passed on to direct heirs, i.e., spouses and children. This forced heirship rule aims to protect the interests of close family members but can be circumvented if the deceased has drafted a will stipulating that the inheritance law of their home country applies to their estate.
Foreign nationals have the option to draft a will in Portugal and choose the inheritance law of their home country to govern their estate. This option allows them to bypass the Portuguese forced heirship rule and distribute assets according to the deceased’s wishes. Specialized legal advice is recommended to ensure that the will complies with both local and international laws.
In the event of selling inherited property in Portugal, the heir must pay capital gains tax. The rate and terms of this tax vary depending on the duration of property ownership and its value. Consulting a tax expert is important to understand the exact implications and optimize the tax management of the sale.
Foreign property owners must also consider the tax implications in their home country. For instance, UK nationals may be subject to UK inheritance tax on their worldwide assets, even after residing in Portugal for several years. To avoid double taxation, specific measures may be necessary. Appropriate legal and tax advice is essential to navigate these international complexities and ensure compliance with various tax jurisdictions.
Moving to Portugal as a foreign owner offers many advantages, but understanding the specifics of inheritance tax is crucial for effective estate planning. By taking into account exemptions, inheritance rules, and planning options, you can ensure a smooth transition and optimize the management of your wealth.
