Supreme Court halts tax on undivided estates, but Tax Authority digs in

The sale of inherited property is sparking a standoff: while the Supreme Court sets aside the taxation of capital gains on undivided estates, the Tax Authority insists that personal income tax may still be due.

The sale of properties held in undivided estates continues to generate tax uncertainty. Rulings by the Supreme Administrative Court have ruled out the taxation of capital gains under personal income tax (IRS), while the Portuguese Tax and Customs Authority (AT) maintains the opposite position — warning of the risk of a tax charge in certain transactions. The issue takes on further relevance at a time when the Government is preparing to approve a legislative package aimed at speeding up the sale of homes locked in undivided estates.

Insights provided by Pedro José Santos, Lawyer and Head of the Tax Department at RSN Advogados.