Inheritance Tax
The Portuguese inheritance law provides for the payment of a tax rate of 10%, called Imposto de Selo, on the value of the assets located in the country, which can be real estate, movable assets – such as cars or boats, or also, copyrights, shares or works of art. In the case of real estate, Stamp Duty is calculated on the VPT (Valor Patrimonial Tributário) of the property. If the VTP is high, like 500.000,00€, the Stamp Duty can be of high value and force heirs to sell the properties inherited.
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Who are considered heirs?
Since 2009, the spouse or unmarried partner, descendants – children and grandchildren, and ascendants – parents and grandparents are exempt from Stamp Duty. This family group is called legitimate heirs. Although they do not have to pay inheritance tax, these family members have to declare the assets received to the IRS. This means that all other beneficiaries (e.g. siblings or nephews of the deceased person) have to pay Stamp Duty on the inheritance, set at 10% on the assets subject to taxation.
When there is no will determining otherwise, there is an order in which the heirs are called to the succession. And even in cases where there is a will, the legitimate heirs always have their share safeguarded.
And, so that there is no doubt as to what is meant by relatives, the law makes a hierarchy, establishing the order in which the heirs are found:
- Spouse and descendants;
- Spouse and ascendants;
- Siblings and their descendants;
- Other collaterals up to the fourth degree;
Status.
If there are no relatives who can be legitimate heirs, the inheritance is given to the State.
An important fact when talking about inheritances is that they are not always a synonym for wealth. Debts and taxes can also be part of the legacy left by the deceased person. The heirs can refuse or accept the inheritance, thus being free of these burdens.
What are inheritance powers in Portugal?
Any person in Portugal has the right to assign a portion of his/her assets to whomever he/she wishes, even if they are not related to him/her. However, Portuguese inheritance law does not allow you to distribute all your assets at will. A minimum of 50% of a deceased’s personal property is offered under forced inheritance to the lawful spouse, biological and/or adopted descendants.
The fact is that you can only freely dispose of 1/3 of your estate, leaving it to whomever you want in your will. This is known as the available share. The remaining 2/3 is the unavailable (or legitimate) share and must be divided among spouse, child, and ancestors (parents, grandparents, and great-grandparents). These relatives are always entitled to a share in the estate and cannot be disinherited, regardless of the testator’s will.
To find out whether or not there was a will at the time of death, one should request a certificate from the Institute of Registration and Notaries. This can be done online.
If the owner of the estate is in the process of divorce at the time of death, the spouse will not be included in the inheritance.
To what goods does Stamp Duty apply?
Stamp Duty applies to the following assets:
- Rustic and urban real estate
- Movable goods subject to registration (cars, motorcycles, boats, aircraft, rifles and pistols)
- Other movable goods (investment gold, works of art, copyrights, bank accounts, shares, among others)
To what goods does it not apply?
The law excludes from taxation a set of goods, namely:
- Goods for personal use, such as clothing, footwear and jewellery;
- Household goods, for example, house contents, excluding works of art
- Claims from life insurance;
- Pensions and subsidies paid by Social Security;
- Amounts invested in retirement savings funds (PPR), education savings funds (PPE), retirement/education savings funds (PPR/E), stock savings funds (PPA), pension funds or securities and real estate investment funds;
- Family allowance outstanding at the death of the holder;
- Donations made under the Patronage Act, e.g. to charitable or religious institutions;
- Donations of goods or monetary values up to the amount of 500 euros;
- Transfers in favor of IRC taxpayers, as is the case of a businessman.
How to declare inherited assets to the Tax Authority?
You should submit the Death Certificate to the Civil Registry within 48 hours and the Heirs’ Certification. Generally it’s the oldest heir’s obligation to deal with this procedure, which can be done at the National Registry or at the Inheritance Counter.
The family has three days to inform the Tax Authority of the death of their relative. They will need to present a death certificate and the identity document of the deceased and their respective heirs.
Also, if the heirs reach an agreement, the assets can be divided at the registry or at the inheritance table. If no agreement is reached, the matter will have to be settled litigiously.
How is stamp duty calculated?
To determine the taxable value of real estate, the Tax Authority will take into account the Taxable Asset Value. In the case of registered property without patrimonial value or with a value not updated by the IMI rules, the TA will use the value determined by evaluation or the declared value, whichever is greater.
As we have already mentioned, the inheritance is subject to Stamp Duty at a 10% rate, and to calculate the tax to be paid on the inheritance, the rate is multiplied by the taxable value of the total assets received.
In the case of a property, for example, the value corresponds to its taxable patrimonial value (VPT). Imagining a property with a taxable value of 500,000 euros, the amount of stamp duty to be paid would be 50,000 euros (500,000 euros x 10% = 20,000 euros). And in the case of other assets – how is the taxation?
What documents do I receive when I inherit a property?
- Caderneta Predial
- Permanent Certificate
- Licença de Utilização
- Energy Certificate
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