By Andrea Hargraves 
Taxes on stock market investment profits were reduced, and practically no one talked about this issue. It's strange. Maybe because it was during the holidays. Or maybe no one wanted to draw attention to the tax cut for “those who have money”. I don't know. The fact is that it went unnoticed.
In my opinion, this is good news for those who want to start investing and also for those who have been investing for some time (because it has retrospective effects). Will you take advantage of this opportunity?
What are the changes in capital gains tax?
I remind you that until June 2024, any excess value you have in securities-related instruments is taxed at 28%. In other words, almost a third of all profits go to the state. Such as time deposits and savings certificates.
From now on – and this also applies to investments already made – after two years you will actually pay less than the usual 28%. It is an incentive for the Portuguese to feel more motivated to take risks in products where they can make money with their money. It is still not as good as PPR (where you only pay 8% if 8 years or more have passed), but it is a step in that direction.
With this measure, the government wants to encourage Portuguese people to invest and use their savings in a more profitable way than just term deposits, or other capital-guaranteed products.
If it’s been less than two years since you started investing, nothing will change. You’ll still pay the 28% to the state. But if you redeem that money within two to five years, you’ll only pay 25.2% on the profits. If you hold your investment for more than 8 years, you’ll only pay 19.6%.
If we are talking about small amounts, you will not notice much difference. Let's imagine that you make a profit of 1,000 euros from an ETF. The difference in tax will be a few euros. But if in 20 or 30 years you make a profit of 30, 40 or 50 thousand euros, there will already be a big difference in the net amount you will receive (after applying these new tax rates). It is very significant, because we are talking about a difference of thousands of euros compared to the situation that existed before June 2024.
In the Decree Law published in the Diário da Republica It is interpreted differently: between 2 and 5 years, 10% of capital gains are not taxed; between 5 and 8 years, 20% of capital gains are not taxed, and from 8 years, 30% are not taxed. They are equivalent to the percentages I mentioned above.
So, it goes from 28% to 25.2% and then goes up to 19.6% on capital gains, from 8 years onwards. I think this is excellent news for those who have already started investing and for those who are thinking about starting to invest in these types of products.
- 10,000 profit x 28% = 2,800 euro tax
- 10,000 profit x 19.6% = tax of 1,960 euros
PPRs have the best taxes.
I remind you that, despite this, the best product in terms of taxes is the tax performance report, because after 8 years it only pays 8% of capital gains, which can make a difference of several thousand euros after 20 or 30 years.
This new tax applies to all foreign products, brokers or banks. It does not only concern the buying and selling of Portuguese stocks or products, as I have read written on some sites.
In short, if you have doubts about investing in an ETF, mutual fund or stock, you now have another incentive to start. It is not a “wonder”, but it is better than before to encourage Portuguese to invest. Above all, it is an incentive to hold your investments for a longer period, instead of always buying and selling and not benefiting from the effect of compound interest and their appreciation over time.