This measure came into force on October 7, 2023, after the government announced it in March. You now have three months to regularize your sales made in 2022 and 2023.
You can start gathering your documents now, although there are still some bureaucratic issues that need to be resolved.
The law on the "Mais Habitação" program was published in the Diário da República on Friday, October 6 and came into force the following day.
According to the transitional rule, taxpayers who have taken out a loan to buy their own home are exempt from IRS on capital gains made on the sale of other properties they own (apart from their own permanent home).
It is important to remember that, without this rule, you would be obliged to pay up to 25% of your profits to the state. In some cases, this could be many thousands of euros.
Parents and grandparents may also have vacant homes or real estate, such as land, that they could sell to help their children or grandchildren pay off the mortgage, but until now, they chose not to because of the high tax burden. Until recently, the only way to avoid paying capital gains tax on these profits was to use the money from the sale of a permanent home to buy another permanent home.
Applicable to sales made after 2022
The sale of real estate to pay off a mortgage will be exempt from capital gains tax for transactions made between January 1, 2022 and December 31, 2024, and the taxpayer will have three months to repay the loan with the sale proceeds or choose to settle the other measures with the tax authorities.
The legislation also specifies that the property sold must not be used as the main residence of the taxpayer or their family members and that the proceeds of the sale must be used to repay the HPP of the taxpayer or their descendants (children or grandchildren).
The excess will be taxed in accordance with IRS capital gains regulations if the value of the property sold is more than the sum utilised to pay off the loan on the residence where the taxpayer resides. Regarding this additional sum, there is no exception. You have three months following the sale to pay off the mortgage of your choosing (either your own or that of your heirs). You must provide confirmation of the sale of the land or property and that you paid this sum back on one of your family's HPPs when you submit your 2023 and 2024 tax forms. Now, everyone who sold a home between January 1, 2022, and October 7, 2023 has three months to pay back that mortgage balance.
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