Portugal Wants 48% of Our Property Profits! Our Strategy to Pay 0% Tax Legally - Tax Escape Plan!
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- Опубліковано 5 вер 2023
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Our Rich Journey - If you've been following our journey, then you know that we recently sold one of our homes here in the Silver Coast of Portugal and moved back to Lisbon. We made a significant profit on the home. But, we've got to talk about taxes! In this video, I share my communications with my Portuguese accountant as he details the various options I have regarding the capital gains taxes on my property. Check out the video to hear about his three-year strategy for avoiding taxes!
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Just one thing, i dont think you got all the information that you need, i could be wrong, but when you file the IRS for the year you have to declare the sale, its then that you say that you are going to reinvest the money, then you have 3 years to invest, but heres the catch, if you dont reinvest then there is a penalty. Be sure to say if you are going to invest that you do so.
Technically they would want up to 24% of your profits, considering that half of the profits are not taxed. 😀However, due to how the progressive tax rate works, the effective tax rate would actually be considerably lower than 24%. (source: I'm Portuguese, been there, done that).
Yap.
They are like the mob want a percentage of your profits or else they'll come 'round.
That sounds much better and understandable
Which is about the same as the US. Long term home capital gain 0, 15 or 20% dependent on income.
Guess the information isn’t valuable at all!
Congrats on the good tax news. On a TOTALLY different note, I am an Optometrist, and I notice that you are adjusting your glasses about once a minute. You really need a frame with nosepads or have those adjusted to fit better. I don't think adjustment will work because the bridge seems to be the problem, and that is almost impossible to re-configure. Good luck with your future home purchase AND your future eyeglass purchases!
I am completely floored the accountant said 36 months! Wow...thank you so much for continuing to share knowledge as you both work through your own journey. Much love for you both.
Thank you for sharing this info. As an aside, I'm very excited to say that my wife( who is Portuguese) and I *just* closed the purchase of her family home last week in Sao Miquel, Azores and we are looking to relocate there in 2 years. Your journey has been a great inspiration for us since finding your channel two years ago.
Cheers to you and Christina!
So happy you found knowledgeable and responsive advisors! I’ve read so many times how difficult that can be! Can’t wait to see the next chapter unfold!
What are the USA tax implications? If you haven't already please do a video on USA tax obligation while living abroad in another country for over a year.
I had the same question. It can be complicated to be an expat
If the taxes are less than what US would take, then you have to pay the difference.
Thank you sooo much for sharing this information!!!
You are so welcome!
Thank you, Aman! It was very helpful video! Have a good one!🎉🎉🎉
Great news and information. Congratulations to you and your family. Thanks again for the great content.
Wow. I had no idea! Thank you for sharing this info, Amon!!
What i think was forgotten and is huge news is that the next purchase does not even have to be in Portugal, you can choose your next home within the EU (including obviously Portugal) or a European Economic Area (EEA) country which exchanges tax information with Portugal.
That would be great. Do you have more info on this? Thank you!
Amon that's awesome! You all are sooooo savvvy... I like it though and hopefully I get to meet you when I visit Portugal!
Thank you for the information and the good news for you
That was a good and simple breakdown
Great stuff and thank you guys so much for sharing! Now, let's meetup for dinner and a drink or two!
Thank you for sharing knowledge and wisdom.
Total inspirations yout choices and successes on your journey. Totally helpful all your insights. Thank you for posting👍🏻👍🏻👍🏻
thats awesome, thanks for sharing and your profit!! :)
Thank you, sir. That is great information.
Congrats and great news!
Great report and congrats! Those glasses are a keeper! 🤓
That is excellent news! I can't wait to see the next project. Tell me, how is the coffee over there? Enjoy your day!
Thanks a ton for posting, this is really helpful info. Do you know how deductions work - reno costs - are they deductible? Would they need to be invoices from a contractor, or will DIY reciepts help? My other question is about reinvesting to avoid the tax; does that need to be the full sale amount, or only the capital gain? And if you buy a place that's less than the full amount... are you only taxed on the overage?
This is great to hear about the 36 months. Hopefully your daughters go to the same college so you can invest in an apartment for them. ❤
Please make a video on what your plan is with the profit while you plan on your next residence. What would be the best option when one has this money. Thank you both. This video is so important.
Thanks a lot for sharing! No budget for property yet but love learning from you guys 🙏
Care is a socialist country... They will tax your panties if they can...
Investment in Portugal is so insane as Invest in
North Corea ...
He have a insane luck because in last year's real state have some valorization, not by locals but from people form outside, actually they have a inverted age pyramid... Real State in Portugal is a bobble about to burst at any time 🙄
Keep in mind the legislation is being changed with the next government budget. They already talk to reduce that time and the house being sold should be primary residence for 3 years. I think you must kept your rights but keep very attentive to the changes.
When you reinvest in another primary residence, that residence doesn't have to be in Portugal (as it used to be). It can be anywhere within the European Union or EEA.
Whether you can move to that country as a non-EU citizen is a whole different matter. If you're an EU citizen, no problem at all because you have freedom of movement under EU law.
As others have made reference to, if you're a US citizen (in particular) you should familiarise yourself with your US tax obligations and liabilities as an American citizen living abroad. You may be subject to US taxes on earnings from salaries and investment income from real estate projects in Portugal and Europe.
Very informative! Does the exemption if you buy a next property remain, or if you sell the next property do they calculate the next property based on the original property? In other words if you have three properties over a longer period, do you still pay when you sell the final property, based on your total gains, or is the liability gone when you move house to the next property?
That is a good tax provision but wouldn't you always need to sell and reinvest in a new property in order to avoid the steep tax penalty? In other words, you will never be able to sell and move out of Portugal. Your only option would be to continuously reinvest in more expensive property or rent the property.
I thought about this too; however, it sounds like you only could be taxed on the capital gains from that final sale. E.g. If you had a capital gain from the sale of first house of $200K and then bought another primary residence for $200K, put $50K renovations in, then sold it later for $350K your capital gains would be $100K from the sale of the last house. Then only 50% would be subject to tax. I wonder if there is a length of time you must stay in the new primary residence to shelter the gains though.
Precisely. And he only can reinvest the capital that was from his main residence. Second residences, land etc is not covered under that rule
Maybe invest in income producing real estate instead of pulling out the cash...the tax man comes for his cut when you stop playing the game
You are completely right except for your final sentence. The house must be your primary/fiscal home. It is not supposed to rent it.
Excellent video Brother
Good info. But, how will you prepare your NEXT tax obligation report? Will you commit that you will invest this capital gain since you have two more years?
Thanks for the valuable information. Can you also expense out your renovation costs?
36 months to reinvest ! This is amazing !! Thanks for this video.
I'm happy for you and your family. I'm surprised you are back in Lisbon, though. What happened to your large dog? Your previous home seemed perfect for him/her. If you still have the dog in Lisbon, it would be challenging to give him/her enough exercise. In any case, thanks for the info. Good, quality content as always.
This only applies if you had the home that you're selling as fiscal address for the last 2 years.
T'he system seems very similar to that in Spain, but here you Will usually pay more than 24%, usually around 26 or 28% of that profit
Amazing!
just to let you know that you can also deduct all your expenses in buying the house as well as building and refurbishment costs in your profits.
Wow this is so good to know
Good info Amon. Does the Portuguese government capture your renovation costs via your NIF number provided to your various suppliers or will you have to tabulate all of your costs and provide them to your accountant for the tax filing?
Well normally if there was costs with the renovation, if one day the tax office want to check , then you should have proof of the costs!!
Great info and good to see there are tax benefits similar to our 1031 exchange program here in the states. However, with a 1031 there is an endgame to the tax deferral by passing the asset along to your next of kin at the stepped up basis. Are you aware of any similar incentives in Portugal? Or is the plan to just kick the tax can down the road and finally pay them when you decide to liquidate and move on?
Men and I left Portugal 20 years ago to come to America 😮
Great video! Thankfully, we don't have CGT on prinary residences in Australia. I wonder how investing the money back in as a continuous process will pan out. Thanks for sharing!
Care is a socialist country... They will tax your panties if they can...
Investment in Portugal is so insane as Invest in North Corea ...
He have a insane luck because in last year's real state have some valorization, not by locals but from people form outside, actually they have a inverted age pyramid... Real State in Portugal is a bobble about to burst at any time 🙄
I see you've been working hard on your video thumbnails - nice
Congratulations on your sale of your house. May I ask what ( if any) would be your US global taxation for this windfall, since ( assuming) you are still US citizens. Thank you for your time
The taxable gains you are applied to is for Portugal Taxes, correct? What taxes do you have to pay to the USA in regards to capital gains?
and what would be the case in the US?
I think that's similar tax rules with the USA. I recall my friend had to invest into another property within one year to avoid California taxes.
Would you have had to lived in the house on order to get the tax exemption?
Hey there have u considered checking out Africa, Morroco, Ghana areas?
Us always ask about taxes. As soon as you're born you pay taxes 😳
As usual great sharing is caring. Thank you guys for teaching us. Much appreciated.💗💗💗💗 Dignified & Classy. I it!
Do you have to claim this on US taxes also? Since you are still a US resident don't you have to still file taxes each year?
Wow that’s awesome. So you can take your profit put into the stock market. Let that grow over the next three years before for needed to reinvest it.
In the US , exempt up to $500K of profit, as far as I know. Anyway. Interesting ! Thank you ! p.s. do you have to declare that income in the US as well (that is if you still keeping your citizenship.. ?)
If the investment was for a house in another country, does it still apply?
what happen if you reinvest in a much cheaper house ? would you still avoid paying taxes?
I am looking for a portugues nhr accountant would you mind recomending one😊
That’s ridiculous, in the US, you would not have to pay taxes/capital gains on selling your primary home of $250000 or so, you have lived in your home for up to 5 years. US might not be that bad after all.
Dont you get taxes in the US too?
And, unless the law/rules changed, you also can reinvest that money anywhere in Europe, not only in Portugal, Madeira and Azores. So if you ever fed up with Portugal, you can sell it and reinvest the capital within Europe. Second homes, land etc, if you sell, you will have to pay the tax, no choice. Did your accountant mention this to you?
It is not a great tax situation in Europe, it’s complicated. Good luck.
In comparison, 1031 exchange f gives you just 90 days in US
However, in the US, if an individual has lived in their primary residence in 3 of the previous 5 years, then the first $250,000 in capital gains is tax free.
For details go to IRS.gov and look for the relevant tax publication.
Armon… you the man 😊
Haven't you guys just bought an apartment in Lisbon? Doesn't that count as the new primary home to offset the capital gains?
So this is like a better version of a 1031 exchange, but I guess if there's a point that you fully liquidate and take profits, regardless of the long term hold, you're still looking at 48%? If yes, I guess that technically effectively works out to 24%? Because half of the profits is tax free. So effectively, this sounds like it's better than the US taxes where long term capital gains taxes on sale of real estate I think is 28% on the high end? With you having three years to reinvest it, you could flip a lot of that money on other things in a way where you won't owe Portugal tax on those gains and then get your new house as well.
Thank you Aman. Very interesting indeed. Great information.
Please, please, please let us know your accountant's contact details.
Sounds like he is worth his wait in gold!
Did you find country life too quiet in Portugal and hence the probable return to Lisbon ?
What happened to cost of basis? After you subtract what you spent to bring it up to selling standards minus the equity you should be good
Super high tax and restrictions are the real reasons for the house crisis in Portugal, low offer created by the government not by the golden visa, only when people can see the truth of the matter will they be able to pressure their own government to move away and let people invest in building new houses or remodeling existing ones.
Problems almost always start with the governments doing too much and forbidding the private sector
Can you recommend your accountant? If so, what’s his info? Thanks !
I received an information that re-investing to reduce tax would also apply to re-investing in another Schengen country… Still can’t believe it and need to verify, but this would be huge
How do we get a loan/mortgage to buy a property in a foreign country like Portugal? Do you get one from your home country? I'm guessing that wouldn't be so easy. Or do we open a bank account in Portugal and start building credit history? But I imagine that would also have some complications and take a long time.
You can get one in Portugal and they will look at your foreign-earned income and credit history. Just apply as you do in USA. Not much to it TBH.
Most real estate agents work with banks, I could easily get up to a million of mortgage with my foreign income, just know that on the purchase you need around 10% for the taxes and writings
WOW!
What does "reinvest all of the money of the sale" mean? If you bought a house for $100k and sold it for $200k. Would you need to buy another house for $100k (the profit) or for the $200k (the sold price)?
If you buy another for 100k your profit is the difference you will be taxed in your 100k profit...
And there's more tax hidden 🤣 like "mais valias" 🤣🤣🤣
If you have more than 5k in your account you will pay for that to...
Care is a socialist country... They will tax your panties if they can...
Investment in Portugal is so insane as Invest in
North Corea ...
He have a insane luck because in last year's real state have some valorization, not by locals but from people form outside, actually they have a inverted age pyramid... Real State in Portugal is a bobble about to burst at any time 🙄
😊 I like this guy 😂
😂😂😂
Money gets frozen in escrow?
Yes, that's true, 48%😮
your accountant should also have told you that you are not obliged to reinvest the TOTALITY of the sale of your main residence as long as you put the cost difference in a Life Insurance wrapper cautioned by the PT government , e.g : you sold your main residence 300K , CGT 100K , you buy your next main residence 250K and the remaining 50K will still be free of CGT if you put them in a LI wrapper. Also if you want to leave Portugal, then you will also be CGT free if you reinvest the amount in one of the EU counties.
What's a Life Insurance wrapper?
You didn't mention the alternative of buying another property in another UE-Country instead of Portugal.
Wouldn’t that be a perpetual cycle of buying and taking all of your profit to invest into another home?
Yes, as long as the price of the new home is at least equal to the price of the home you sold + cost of renovations/repairs/etc. This only applies to the primary residence.
@@POVTours And the full cost and renovation cost and expenses of this second primary home that was purchased with the capital gains from the last primary then is subtracted when you then sell this new primary home in the future when calculating capital gains?
@@POVTours So, when you sell the last house, you have to pay capital gains on the gains of all the houses, less costs? So its not a break, its more of a deferment?
This would be much worse in Canada... Capital Gains Tax is a killer for everyone so not typical to Portugal (I am both Portuguese and Canadian and see this on both sides).
Wow! This is really good to know - you could multiply that money before purchasing your next one! 🎉
Let me get this straight. if you doubled the value of your property,,,and take that money and buy another residence within 3 years. where does that money sit for 3 years? also the next property you buy. if you dont have to do any renovactions and sell it for the same cost in 2-3 years. you wont need to pay anything? no profits/ id like to know how long you have to own the second property,before selling it, here in mexico it is 2 years i believe, to even get a reduced capital gains tax. good luck. i have seen so many videos lately of villas,castles,,land in the middle regions it seems for 40,000-120,000. compaired to texas for example where land goes for 20,000-80,000 and acre ,no home. ive been wondering ,why sooo cheap and if i should realize how lucky i am to be here in puerto vallarta mexico. have a great day,,thank you for sharing
I clicked for the thumbnail 🤣🤣😆
Portugal is so expensive it is not worth it anymore. You pay more here for a one bedroom than in paris
Is your accountant in US or Portugal? I’m assuming Portugal and it sounds like there are no language communication barriers which is good.
How much are the capital gains for the US?
If you sell a house or property in one year or less after owning it, the short-term capital gains is taxed as ordinary income, which could be as high as 37 percent. Long-term capital gains for properties you owned for over a year are taxed at 0 percent, 15 percent or 20 percent depending on your income tax bracket...
@@elpatron1977 so they could potentially owe 48% to Portugal and 20% to the US? That's insane
@@barbarar5869 48% is not true, watch the whole video (max is 24%)
I think they have lived in the house for 2 years, so they (married couple) should qualify for 500k exemption for US capital gains tax.
I know you mentioned you are keeping his information private. We are desperately looking for a good accountant cause we have changed accounts 3 times now and still it's hard to get any information in less than a month. Could you share the details of your accountant or even his website. I could share my email with you
That’s why one should consult w Nomad Capitalist before doing big things overseas from USA… so one knows reality vs wish upon a star. Happens to all of us as this is clearly one above-avg couple for competence
if you make money big enough, you won't care about the tax thing. 😂
In Portugal, if you reinvest your profit into your new home, you can avoid paying the capital gain tax. Ask your accountant...you have 6 months to do it.
Aman said they have 36 months to do it. 3 yrs!
It’s so maddening that one can’t even make a profit without the government wanting a share of it.
I believe that you need to declare upfront in the following year’s tax submission that you intend to reinvest the profit and/or the price of the sale of your home to qualify for the tax benefit. I believe that if you do not declare so, you won’t benefit of it. Therefore, please be reminded to include in your next tax submission the statement as to the intention of reinvesting the profit and/or price (as the case may be) in order to benefit of the said tax benefit. Your account should be able to advise better. Can you please inform who your accountant is? I believe that I would like to use his services.
Sounds like Portugal is not very Real Estate Tax friendly...48% yikes!
Ok ..listen carefully what he said... you didn`t understood the message content
As far as I’m aware, 48% doesn’t apply in all cases. Depended on the amount of the sale and the profit.
welcome to the portuguese experience. we pay so much taxes and don't see any improvements.
Literally not true, it's less than 24% at most. Listen to the whole video :)
There's another option to avoid paying this tax. If you declare expenses with the house like, House renovation, monthly payment of your mortgage, house repair. And all other expenses that you may had with the house, it will offset the tax payment.
Another bonus for investing in Portugal.
Then what is the point of buying a house you cannot sell and utilize the funds on something else. You cant eat the house