Government announces capital gains tax reduction for investors on 10%, 20% and 30%

Investors who hold securities, shares and bonds long term are to benefit from a tax exemption on a part of the capital gains that they make under a proposed government law.

The government plans to push forward with a number of tax measures aimed at boosting the capital markets and encourage savings by offering tax incentives to investors who hold their financial instruments medium and long term.

For example, the longer investors keep their investments, the less capital gains tax they will pay with tax exemptions on up to 30% on their gains.

The same will apply for capital gains resulting from cashing in unit shares and shares in collective investments.

The package also includes measures to support SMEs to float on the stock market, the setting up of a tax regime for Collective Investment Organisations geared towards investors providing properties at affordable rents, and tax regulations for new European retirement savings plans or RSPs.

In the case of long-term assets, the idea is that these will be exempt from paying capital gains on 10% when gains arise from assets held for a period greater than two years and less than five years.

Investors who hold onto their investments for between 5 years and 8 years will be exempt from paying capital gains on 20%. If investors hold on to their investments for over 8 years, then 30% of their capital gains will not be subject to tax.

There will be exceptions if transferable securities are issued by companies that are non-resident or have not established presence on Portuguese territory, meaning they are domiciled in Portugal for tax purposes, or in a region subject to a more favourable tax regime such as Madeira.

At present, capital gains are subject to tax at a flat rate of 28% on shares, bonds and securities. Only 50% of capital gains arising on the sale of shares held in micro and small companies not listed in the stock exchange will be subject to taxation.