A set of measures has been recently approved aimed at stimulating the capital markets, granting tax benefits to both investors and companies.

First and foremost, we highlight the tax benefit granted to individuals, subject to personal income tax (PIT), for realised capital gains derived from financial products held over a medium-long term. According to the newly approved framework, realised capital gains derived from the sale of securities traded in stock exchanges or of participations in a Collective Investment Undertakings (CIU) are now partially excluded from PIT tax. This tax relief has different levels depending on the financial products’ holding period:

– For a holding period lower than 2 years, there is no tax relief, hence being applied the autonomous tax rate of 28%;

– For a holding period between 2 and 5 years, 10% of the taxable income may be excluded from taxation, resulting in an effective tax rate of 25.20%;

– For a holding period between 5 and 8 years, 20% of the taxable income may be excluded from taxation, resulting in an effective tax rate of 22.40%;

– For a holding period longer than 8 years, 30% of the taxable income may be excluded from taxation, resulting in an effective tax rate of 19.60%.

The realised capital gains by PIT taxpayers may derive from securities listed on the Portuguese stock exchange or another international exchange, as the legislation does not exclude this possibility.

On the other hand, the special tax regime for Pan-European Personal Pension Products (PEPP) has also been approved, aimed at boosting savings. In broad terms, the tax benefits granted to this financial product are as follows:

– Exemption of PIT in capital gains derived from the sale of the main residence, provided that the proceeds are applied in a PEPP subscription;

– Exemption of Stamp Duty over the amounts invested in a PEPP;

– Granting of a PIT tax credit, up to 20%, on amounts invested in a PEPP, with a capped deduction of €400, depending on the investor’s age, under the same terms applicable to Portuguese retirement savings products (PPR).

For further information, please contact the Tax Law Department of Ana Bruno & Associados, Sociedade de Advogados.