On 24th January 2019, the EU Commission sent a legal opinion to Portugal, requesting the alteration of the taxation of capital gains earned in Portugal by non-residents.

Regarding certain capital gains, of which the best example is the sale of immoveable assets, Portugal taxes only 50% of the gain made in Portugal, at the applicable tax rate, in the case of residents.

Regarding non-residents, Portugal taxes the gain made in Portugal, in its entirety, usually at a fixed rate of 28%. In order for non-residents to benefit from the same tax treatment as residents, they need to expressly make an election. If they do not, then the general regime applies.

According to the Commission’s legal opinion, this is a differentiated treatment between residents and non-residents which, in practice, may lead to a heavier tax burden for non-residents in Portugal, which violates the principle of freedom of Movement of Capitals contained in Article 63 of the EU Treaty.

The Commission alerts to the fact that the lack of a satisfactory reply within 2 months may lead the Commission to submit this matter to the European Courts of Justice.