Inheritance Tax in Portugal: Selling an Inherited House
A house left to several heirs belongs, for a while, to all of them and to none.
Portugal has no separate inheritance tax. What applies instead is stamp duty, together with a precise order of steps before an inherited house can be sold. Many of the country's old houses, town houses in the Alentejo, quintas in the north, family homes in the Beira, reach the market this way, sometimes after years held in common by brothers, cousins and their children. This guide explains inheritance tax in Portugal as it applies to property, and what heirs must do, and in what order, to sell.
Stamp duty: who pays, who does not
What works as inheritance tax in Portugal is stamp duty on gratuitous acquisitions, at 10% (item 1.2 of the general stamp duty table). For property it is charged on the tax value recorded in the matrix, the VPT, at the date of death, not on market value. The spouse or de facto partner, children and grandchildren, parents and grandparents are exempt. Brothers and sisters, nephews and nieces, friends and other beneficiaries pay 10% on what they receive. The 0.8% stamp duty on property applies to purchases and gifts, not to inheritance.
Exemption does not mean silence. The head of the estate must file the participation of the death with the Tax Authority, on form Modelo 1 of stamp duty, by the end of the third month after the month of death, even when every heir is exempt. The form identifies the heirs and lists the assets. The tax office may extend the deadline by up to 60 days, and only for a justified reason.
The head of the estate and the undivided estate
Until it is divided, the estate is a herança indivisa, an undivided estate. It is managed by the cabeça de casal, the head of the estate, whom the Civil Code designates in order: the surviving spouse, if an heir or entitled to half of the couple's property; the executor named in a will; then the legal heirs, nearest relatives first; then heirs named in a will. Among equals, the one who lived with the deceased for at least a year comes first, then the eldest.
The head of the estate requests a tax number for the estate on the Portal das Finanças (a non-resident can do so through the e-balcão), pays the IMI on its properties and represents it before the tax office. He or she cannot sell the house alone. Rights over the estate are exercised by all the heirs together, under article 2091 of the Civil Code.
Proving who the heirs are
No sale can happen without the habilitação de herdeiros, the deed that declares who the heirs are. It is made before a notary or at a Balcão das Heranças of the registry service, the IRN, on the declaration of the head of the estate or of three people of good standing. The IRN also offers a single procedure that combines the declaration of heirs, the division of the estate and the registration of the property, and files the participation with the Tax Authority if it has not yet been made. Its base fee is €425, before taxes and registration fees.
The property is then registered in the heirs' names, in common and without determination of shares, which is how the land registry records an undivided estate. For a buyer, this registration, read with the declaration of heirs, shows that the people at the table are the people entitled to sell.
Sell together, or divide first
Heirs have two routes. They can sell the house while the estate is still undivided: all heirs sign the promissory contract and the deed, in person or through a power of attorney, and share the proceeds according to their rights. Or they can divide the estate first, the partilha, with one heir taking the house and paying the others their share in money, the tornas; that heir then sells alone.
The first route is quicker when everyone agrees on the price. The second suits families in which one heir wants to keep the house, or a buyer who prefers to deal with a single owner. An heir may also sell his or her share of the estate to an outsider, but the co-heirs then have a right of preference, on the same terms as co-owners (article 2130 of the Civil Code).
One heir who will not sign is enough to stop a sale.
When there is no agreement, the way out is an inventory, the formal division of the estate. Under Lei 117/2019 it can be handled by a notary or by the courts, and a notary may send to the courts disputes too complex to settle outside them. It takes time. Meanwhile, a house left closed for years loses more than any tax would take: roofs leak, gardens close in, buyers move on.
Capital gains when heirs sell
When an inherited house is sold, the gain is taxed under IRS. The acquisition value is the value used for stamp duty, or the value that would have been used had the heir not been exempt (article 45 of the IRS Code): in practice, the VPT at the date of death, not what the deceased once paid. Because the VPT of an old house is often well below its market value, the taxable gain can be large. Half of the balance counts towards income (article 43). In an undivided estate, each heir declares his or her own share in the annual return. Our guide to capital gains tax on selling a home sets out the calculation, and our note on property taxes in Portugal covers IMI and stamp duty.
Heirs abroad, land in the country
Many heirs of Portuguese houses live in another country. Each needs a Portuguese tax number (NIF) and, if they will not attend the deed, a power of attorney; documents issued abroad may need an apostille and a certified translation, depending on the country and the document. Within the European Union, Regulation 650/2012 applies to deaths from 17 August 2015. One law governs the whole succession, as a rule that of the deceased's last habitual residence, unless they chose the law of their nationality in a will. The European Certificate of Succession lets heirs prove their status in another member state, and can be requested in Portugal at the IRN. The regulation does not apply in Denmark or Ireland, and it does not deal with tax.
Rural land adds a further layer. In participating municipalities, rural and mixed plots can be identified and mapped through BUPi, the simplified land information system, which settles boundaries before a sale: see our guide to BUPi and rural land.
Before the house goes on the market
Before the first visit, heirs should have the declaration of heirs, the registration in their names, the stamp duty participation filed and any tax paid, the IMI up to date, the caderneta predial and the certidão permanente, the energy certificate and the use licence or its exemption: see older buildings and the use licence. They should also agree, in writing, on the price, on who speaks for the family and on who will sign. The mediation contract should be signed by all of them. Our guide to selling property in Portugal, step by step lists the rest, and home staging explains how to prepare the house itself.
Wiseguys Properties often works with families selling a house that has passed through generations, with heirs in several countries. We coordinate the papers, the visits and the deed. To talk about an inherited house, contact us. For an example of the houses we represent, see Casa D. Adelina 1904 in Nisa, and read about the house where Nisa embroiders.
Frequently asked questions
Is there inheritance tax in Portugal?
Not as a separate tax. Inheritances pay stamp duty of 10% on the tax value of the assets, but spouses, de facto partners, descendants and ascendants are exempt.
Do exempt heirs still have to declare the inheritance?
Yes. The head of the estate must file form Modelo 1 of stamp duty by the end of the third month after the death, even if all heirs are exempt.
Can one heir sell an inherited house alone?
Not while the estate is undivided. All heirs must agree and sign, in person or by power of attorney. An heir can sell his or her share, but the co-heirs have a right of preference.
How are capital gains calculated on inherited property in Portugal?
The acquisition value is the value used for stamp duty, normally the VPT at the date of death. Half of the gain is taxed under IRS.
Do foreign heirs need to travel to Portugal?
Not necessarily. They need a NIF and can sign through a power of attorney. Within the EU, the European Certificate of Succession helps them prove their status.
This article is general information and does not replace legal or tax advice. Sources: Código do Imposto do Selo (articles 6, 13 and 26; general table, items 1.1 and 1.2); Código do IRS (articles 43 and 45); Código Civil (articles 2080, 2091 and 2130); Lei 117/2019; Regulation (EU) 650/2012; Portal das Finanças, Óbito; IRN, Habilitação de herdeiros, partilha e registo. Photographs: Wiseguys Properties.
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