TAX ALERT: Capital Gains on the Sale of Real Estate from Undivided Inheritances

Selling an inherited property or selling your inheritance share? The distinction that could save you thousands in taxes.

The Portuguese Tax and Customs Authority (AT) recently issued binding information (following the Supreme Administrative Court's uniform jurisprudence ruling No. 7/2025) that definitively clarifies how the sale of properties held in undivided inheritances is taxed.

The AT's clarification draws a red line between two operations that many heirs confuse when going to the Notary, but which have diametrically opposite tax impacts. The Tax and Succession Law team at Global Lawyers summarizes what you need to know before signing a contract:

1. The Sale of an Inheritance Share (Exempt from IRS) When an heir transfers their "inheritance share" (quinhão hereditário), they are selling their position in the inheritance as a whole (a universality of assets and rights), not a specific asset. The buyer steps into their shoes as an heir. According to case law and the AT, this operation does not constitute an onerous transfer of real rights over real estate. Conclusion: the gains obtained are not subject to personal income tax (IRS) under Category G (Capital Gains).

2. The Sale of a Specific Property (Subject to IRS) If, on the other hand, the heirs decide to sell a specific and determined property that is part of the undivided inheritance (e.g., the family home), this is the transfer of a specific asset. In this case, the AT is strict: the gains resulting from this sale constitute taxable capital gains, and the general IRS taxation rules apply.

The "Single Property" Trap The greatest risk for families lies in poor deal structuring. The mere fact that the inheritance consists of only a single property does not automatically transform its sale into the sale of an "inheritance share". If the purchase and sale agreement identifies the specific property (rather than the share in the inheritance), the AT will apply capital gains taxation, resulting in a severe financial impact for the heirs.

The Importance of Prior Structuring This clarification reinforces the vital importance of preventive legal counsel in real estate and successions. The Global Lawyers team strongly recommends that the nature of the transaction be validated by specialists before signing any Promissory Contract (CPCV), ensuring maximum tax efficiency and strict compliance with the law.

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