NEWSLETTERS

Inheritance Tax and Stamp Duty

A consequence of alterations in the law in in 2003, was the abolition of Inheritance & Gifting Tax which was substituted by a Stamp Duty which included some exemptions.

Law number 287/2003, which approved the Stamp Duty Code, establishes a number of exemptions of payment of this tax for example when the heirs (or beneficiaries of a gift) are the spouse, the children (descendents) and the parents (ascendants) of the deceased (or author of the donation process). Any other category of heir/beneficiary would be subject to the payment of Stamp Duty.

ARTICLE 6º Individual exemptions The following are exempt from stamp duty, when they are the responsible entity: A) The State, the Autonomous Regions, local councils and their associations and the public law federations and others under their service, establishments and organisms, even with juridical personality, including public institutes, that have no commercial purpose; B) Social Security Institutions; C) Companies of public administrative use and of pure public use; D) Private institutions of social assistance and legally equivalent entities; E) The spouse, the descendents and the ascendants, in free transmissions of which they have been beneficiaries.

The Stamp Duty due by whoever is not listed in the above mentioned exemptions will be at the rate of 10% over the total value of the received assets and duly listed and informed to the Finance Department under the terms of the General Schedule of the Stamp Duty.

General Schedule of Stamp Duty
1.1 – The acquisition for a consideration or by gifting of the right of property or of arts of this right over property as well as the resolution, invalidity or extinction, by mutual agreement of the respective contracts – 0,8% of the total value.

1.2 – The free acquisition of assets, inclusive of that by right of tenure, to increase in such event to the number 1.1 – over the amount…... 10%.

The information to the authorities of the death and the list of the assets (estate) must be delivered and submitted within the deadline established by article 26, which is until the end of the 3rd month following on from the date of the death (or the date of gift). All submissions made after this deadline will be subject to fines.

ARTICLE 26º Information of assets transmission 1- The head of the household and the beneficiary of any free transmission subject to tax must inform the competent finance service of the gift, death of the author of the succession, the presumed death declaration or the judicial justification of the death, the judicial justification or notarial acquisition through right of tenure or any other act or contract that might involve the transmission of assets; 2- (…); 3- The information must be submitted to the competent Finance Department in order to calculate the tax due by the end of the 3rd month following the cause of the tax obligation.

Notwithstanding the existence of individual tax exemption under the terms of Article 6.º of the above mentioned law, the head of the household and/or beneficiary still has the obligation to present the information regarding the death of the person to the Finance Department.

Despite the existence of several international agreements to avoid double taxation the fact of the matter is that Succession Law is never normally considered in such agreements, a reason why it is important to verify case by case, and nationality by nationality.

Regarding all assets in Portugal which are subject to the information to the Finance Department for Stamp Duty purpose, the inheritance initiated by the death of the foreign citizen, resident or not, or the gifting in similar situation, will be subject to the tax law of Portugal. Even so it may well happen that is also subject to the tax laws of their own home country.

Regardless if the deceased is or is not a resident, national or foreign, the Stamp Duty procedure must be initiated within the deadline established in order to allow the transmission of the estate.