Selling Algarve Property in 2026: How Capital Gains Tax (Mais-Valias) Works

The short answer

Selling property for more than you paid creates a capital gain (mais-valia) under article 10 of the IRS Code. Under article 43, the year's property gains and losses are netted, and the balance is normally counted at only 50% of its value. For a taxpayer taxed at the general rates in article 68, that 50% is taxed in 2026 at bracket rates from 12.5% up to 48%. The more other income you have, the higher the rate on the gain.

What counts as a taxable gain

Article 10(1)(a) of the IRS Code treats as mais-valias the gains from the paid transfer (alienação onerosa) of real rights over property. Article 10(1)(d) also covers the paid assignment of contractual positions or other rights under contracts relating to property.

Why only half the gain is taxed — and when all of it is

Article 43 sets the taxable amount. First, you net all gains and losses realised in the same year. For property sales, that balance is then counted at only 50% of its value, positive or negative. The gain itself is worked out under the articles that follow article 43. Those rules set what counts as the sale and acquisition values and are not reproduced here.

There is one exception. The full balance is taxed if the property received non-repayable support from the State or another public body worth more than 30% of its tax value for IMI (valor patrimonial tributário). This applies where the support was for buying the home or for works, and you sell within 10 years. The 10 years run from the purchase, from the declaration confirming the works were received, or from the last payment covered by the support.

The 2026 IRS rate brackets

Article 68, in the wording set by Lei n.º 73-A/2025 of 30 December, sets these general rates by band of taxable income:

• Up to €8,342: 12.5%
• Over €8,342 to €12,587: 15.7%
• Over €12,587 to €17,838: 21.2%
• Over €17,838 to €23,089: 24.1%
• Over €23,089 to €29,397: 31.1%
• Over €29,397 to €43,090: 34.9%
• Over €43,090 to €46,566: 43.1%
• Over €46,566 to €86,634: 44.6%
• Over €86,634: 48%

The system is progressive. Each slice of income is taxed at its band's rate, not the whole amount at the top rate. Article 68 sets out the exact method for splitting income between bands.

Worked example: how big Algarve gains have become

Photo by FIN on Unsplash

INE records what dwellings actually sold for. In the Algarve, the median sale price was €2,814/m² in the 12 months to Q1 2025. It reached €3,240/m² in the 12 months to Q1 2026, a rise of 15.1%.

As an illustration only, take a hypothetical 100 m² home valued at those two regional medians. That gives €281,400 one year and €324,000 the next, a difference of €42,600. Under article 43, half of that, €21,300, would count as income. Suppose your other taxable income is already above €86,634. Then every euro of that €21,300 falls in the 48% band, giving €10,224 of tax. A seller with lower income would pay less, because part of the gain would be taxed in lower bands.

Asking prices are higher still

Idealista measures asking prices, not sales, so its figures cannot be compared with INE's. It reported the Algarve's median asking price at a record €4,216/m² in September 2026, up 7.8% on a year earlier. The most expensive municipalities by asking price were Loulé (€5,194/m²), Lagos (€4,729/m²) and Albufeira (€4,194/m²). The largest rises were in Monchique (26.3%), Vila Real de Santo António (14.9%) and Faro (14.3%). Owners who bought years ago in these areas may be sitting on substantial gains.

When the gain counts as realised

Photo by Jakub Żerdzicki on Unsplash

Under article 10(3), a gain is normally obtained when the sale takes place. There is a catch where there is a promissory contract (contrato-promessa). In that case, the gain is presumed obtained as soon as the buyer receives delivery or possession of the property. Hand over the keys before the deed, and the gain may fall into an earlier tax year than you expect.

Can you avoid the tax? Reinvestment reliefs

The official excerpt of article 10 that we rely on does not set out any relief for reinvesting the sale proceeds, whether in a main home or in rental housing. We therefore do not describe reinvestment reliefs or their conditions here. If your plan depends on a relief, have a tax adviser or the Autoridade Tributária confirm whether one applies to your situation, and on what terms, before you sell.

Non-resident sellers

The official texts cited here do not set out how non-resident sellers are taxed on Portuguese property gains. If you are not tax resident in Portugal, get advice on the rate and inclusion rules that apply to you. Also check how the sale is treated in your country of residence.

Checklist before you list

1. Find your original deed and purchase price; the gain is measured against it.
2. Check whether the property ever received public non-repayable support above 30% of its tax value, and when. If you sell within 10 years, the whole gain may be taxed.
3. List any other property sales planned for the same year, because gains and losses are netted.
4. Estimate your other taxable income to see which 2026 band the included half of the gain will fall in.
5. Agree the key-handover date with care if you sign a promissory contract, as possession can fix the tax year.
6. Ask an adviser whether any reinvestment relief applies to you before setting your sale date.

About Homiberia

Homiberia is a family-run Algarve agency, a mother-and-son team. We operate under Portuguese brokerage licence AMI 11961, are ASMIP members (nº 1637) and hold a 4.8-star Google rating from 47 reviews. We can help you plan your sale timeline alongside your tax adviser.

Is the whole capital gain on my Algarve home taxed?

Usually not. Article 43 of the IRS Code counts the year's net property gain at 50% of its value. The full gain is taxed only where the property received public non-repayable support worth over 30% of its IMI tax value and is sold within 10 years.

What rate applies to the gain in 2026?

For a taxpayer under the general rates of article 68, the included half of the gain is taxed in bands from 12.5% (up to €8,342) to 48% (above €86,634), as set by Lei n.º 73-A/2025.

Can signing a promissory contract change the tax year?

Yes. Under article 10(3)(a), where there is a promissory contract, the gain is presumed obtained once the buyer receives delivery or possession of the property. That can be before the deed.

Can I avoid the tax by buying another home?

The official texts cited in this guide do not set out any reinvestment relief, so we cannot confirm that buying another home reduces the tax. Ask a tax adviser or the Autoridade Tributária whether a relief applies to your own dates and amounts before you sell.