Francisca Abrantes | Tax Consultant

For years, heirs in Portugal faced a significant tax hurdle: when selling an inheritance share (quinhão hereditário) that included real estate, the Tax Authority (AT) insisted on taxing it as a property sale. This often resulted in unexpected and, as it turns out, legally flawed capital gains assessments.

Inheritance Shares Taxation in Portugal: How the Tax Authority’s New Position Affects Heirs

However, following a landmark ruling by the Supreme Administrative Court (STA), the landscape has changed. The AT has finally aligned its practice with the court’s interpretation through Administrative Circular No. 20281/2025.

The issue

For several years, the Tax Authority argued that where an inheritance included real estate, the sale of an inheritance share before the partition of the estate should be treated as the sale of immovable property.

On that basis, it assessed capital gains tax under Article 10(1)(a) of the IRS Code.

This interpretation was challenged in court and resulted in conflicting case law.

The Court’s position

The Supreme Administrative Court clarified that the object transferred in these transactions is not the real estate itself but the inheritance share as such.

Until the estate is partitioned, heirs do not hold ownership over specific assets. They hold a share in the estate as a whole.

The transfer of that share therefore does not amount to the transfer of a real right over immovable property for the purposes of Article 10(1)(a) of the IRS Code.

The Court also made clear that this characterization does not change even if the estate consists exclusively of real estate.

Administrative guidance

Following the judgment, the Portuguese Tax Authority issued Administrative Circular No. 20281/2025 aligning its administrative practice with the Court’s interpretation.

The circular clarifies that the non-taxation principle applies where the transaction clearly involves the transfer of the inheritance share itself. Where the transaction concerns the transfer of specific assets belonging to the estate, a different tax treatment may apply.

Review of past assessments

Following the Supreme Administrative Court’s decision and the subsequent administrative guidance, taxpayers who were taxed in the past on the  sale of an inheritance share may wish to review their situation.

Where such transactions were treated as real estate disposals and capital gains tax was assessed accordingly, it may be possible to request a revision of the assessment and seek a refund of the tax paid, subject to the applicable legal deadlines and procedural requirements.

For this reason, taxpayers who have carried out similar transactions in recent years should consider reviewing the relevant documentation and tax filings in order to determine whether corrective action is available.

How LVP Advogados can assist

Given the recent clarification of the law and the potential impact on past transactions, taxpayers may benefit from a review of their specific circumstances.

LVP Advogados can assist in assessing whether previous tax assessments may be open to revision, analysing the relevant documentation and, where appropriate, supporting the submission of requests for review or refund before the Portuguese Tax Authority.

For tailored tax advice, please contact our team through our contact form.