When you inherit a property in Portugal, there are three important points from a legal point of view: the applicable inheritance law, Portuguese inheritance tax and Flemish inheritance tax. This article will therefore briefly explain these three points.
The applicable law of succession
The applicable inheritance law determines in se who will receive what property when an estate opens. If the testator has property in Portugal, Portuguese inheritance law will not necessarily apply. Indeed, the country in which the testator has his permanent residence determines the applicable inheritance law. This means that if you are a Belgian resident with a second residence in Portugal at the time of death, Belgian inheritance law will apply to the Portuguese estate.
However, if you are a Belgian resident in Portugal, all your assets will be distributed according to Portuguese inheritance law. In other words, your heirs will be faced with Portuguese inheritance law, which also has a system of reservatory heirs. However, you can avoid Portuguese inheritance law by drawing up a (Portuguese) will in which you opt for the inheritance law of the country of your nationality. You should register such a will in the Portuguese Register of Wills.
Separate from inheritance law is inheritance tax. You have to pay Portuguese inheritance tax whether or not the testator was resident in Portugal. If a Belgian resident with property in Portugal dies, the heirs pay taxes on the property located in Portugal.
Inheritance tax in Portugal
In 2004, the Portuguese inheritance tax was technically abolished but replaced by a transaction tax, the Imposto do Selo. This tax also applies to estates. Basically, there is a flat rate of 10% on the value of the estate, but the testator's surviving spouse, children, grandchildren and parents are exempt. There are also possible exemptions based on the type of property, e.g. personal items, life insurance payout, etc.
Inheritance tax in Flanders
If the testator is a national resident of Flanders, the estate will be subject to Flemish inheritance tax. This includes property abroad, including Portuguese property. The second residence in Portugal will therefore count towards the calculation of the progressive rates in Flanders. However, you will be able to deduct the inheritance tax payable in Portugal from the inheritance tax payable in Flanders, but because of the exemption in Portugal, this is often zero.
One way to avoid an inheritance tax in Flanders is the split purchase.