capital gains tax

[margaret cheetham]

we purchased an appartment 3 years ago for 80 thousand uero and sold it for 100 thousand we are now being asked to pay 12.389.00 tax any one know if this is correct.Margaret Cheetham

[bife73]

Yes but what was the official purchase price?? A few years ago to reduce the cost of purchase TAX a lot of lawyers & estate agents under declared the purchase price!! So if you for instance only declared 50,000 when you sold you showed a false profit

[widge]

Doesn't sound right that's an effective rate of 62%. Insufficient information to comment further, speak to an accountant.

[margaret cheetham]

we purchased an appartment 3 years ago for 80 thousand uero and sold it for 100 thousand we are now being asked to pay 12.389.00 tax any one know if this is correct.Margaret Cheetham

from to bif 73 mamy thanks for reply. on checking papers fro m notary i find the when buying property it shows purchased 80000 property 40000 furniture 40000 on selling property it shows sold 100000 property 90000 funiture 10000 i cannot understand how two lawers can alter the prices with a reduction of 30000 any it now shows we made a profit of 47611 and tax on this is 12389 can advize what i can do many thank colin cheetham

[bife73]

Speek to a lawyer, but I'm guessing at this point...not a lot....

[fmm]

This happens quite a lot as it means you pay slightly less tax when purchasing, but get stuck with a whole LOAD of tax when you sell. Lawyers are meant to advise you of this when you are buying, but I suspect that some of them don't bother. It also meant that your orignal seller when you purchased the property probably got out of a load of tax that he should have paid.

[biffa]

Not much good speaking to a lawyer Margaret - you need an accountant/tax advisor if anything but from what you say it looks like there is little that you can do now to alter the situation.

[margaret cheetham]

many thanks for replies received and good advice,being new to this forum i have found out more information than any lawyer has told me,yes you are right about the figures in the notary they where not in my favour.i own a villa on Vale do Milho which is for sale via A Santos web site.when i sell this i will use a lawyer in Faro i do not trust the ones in Laoa area any more,i now look at the forum site every day and find it very interesting many thanks Colin and Margaret Cheetham

[tbbr]

Do find this difficult to understand, having purchased both an apartment and plot of land, the " purchase " price is clearly set out in all the documentation and the notarised documents.

Under declaration still happens as it appears to be advantageous to both buyer and seller.
But no one should be surprised when selling to discover that capital gains tax is based on the " registered " price.

[MPH]

I have found this topic very interesting, I feel very sorry for you Margaret and Colin.
I nearly bought a Villa on VDM a few years ago, but it fell through at the last minute for the very same problems that you are now suffering. I found out that the Lawyer I had employed was proposing to undervalue the property by some 150K euros, and had agreed with the Seller, without consulting me, that I would pay 150K euros for the furniture!!! This was at the time when the Portugese Government was just starting to clamp down on us "foreigners avoiding paying tax" in Portugal by making offshore ownership very expensive. The Lawyer and Seller, then came up with the suggestion that I should pay 50K euros for the furniture and 100K euros in cash (probably in a brown paper envelope). Needless to say, I decided to pull out of the purchase because of the illegality and the long term Capital Gains Tax liability.
Reading about the current climate in Portugal with the Tourist Property Licences etc, I now feel I had a very lucky escape even though it cost me about £3K in wasted fees at the time.
I just cannot believe what I have been reading on CVO web site, where is the level European playing field, people coming to the UK don't have all these problems. I am actually starting to think that the English way of House selling and buying is far superior to most other countries.

[wizzo]

Maybe I'm getting confused with another issue but if you buy another property in Portugal within 2 years does it not remove the capital gains tax liability?

[bife73]

If your are a resident & re-invest all of the profit yes...as a tourist I'm not sure.

[biffa]

The 2 year rollover tax relief spoken of is only available to tax residents. No relief whatsoever for non-residents who pay 25% on the gain less a few allowable deductions.

[roy4eyes]

Biffa - can you clarify whether the roll-over is available to people who are tax resident or people with residencia.

I have been given several different opinions on this.

Thanks

Roy

[biffa]

Certainly it is tax residence that is important. The 2 are linked really as if you hold residençia here you would presumably be tax resident as well due to being here over 183 days in the year. I do realise that there are people with residençia who are not tax residents and probably vice versa.

Certainly to claim the rollover relief one should be able to show the filing of a tax return in the year the sale occurs (ie in respect of previous year), being registered at the tax authority at the address that has been disposed of and also ideally holding residençia as well. Lack of the last point would not spoil the relief though I believe.