The Portuguese Supreme Administrative Court (STA) has unified case law by ruling, in Decision no. 7/2025 (29 April 2025), that the sale of an inheritance share (quinhão hereditário) is not subject to Personal Income Tax (IRS) as a capital gain.
This is a significant milestone in clarifying the regime applicable to the transfer of an heir’s position in an undivided estate, a common practice in the context of contentious partitions, asset reorganisations, or immediate liquidity needs.
What is an inheritance share?
It is the right of an heir over the undivided estate, as a unitary and abstract set of assets, rights, and obligations left by the deceased.
Until partition, heirs do not hold ownership of specific assets, but are merely co-holders of the estate as an undivided patrimonial mass.
What is the Supreme Administrative Court’s position?
- The transfer of an inheritance share does not qualify as an “onerous transfer of real rights over immovable property” under Article 10(1)(a) of the Personal Income Tax Code.
- The heir transfers only his or her ideal and abstract share of the estate (a legal universality), and not an individualised right over specific assets.
- The STA emphasised: “Transferring a right over an autonomous patrimony (estate) is not the same as transferring a property right […] even if the estate is composed solely of immovable property.”
- Only upon partition do the assets become determined, thereby giving rise to full ownership capable of generating taxable events.
What is the Tax Authority’s position?
In July 2025, the Portuguese Tax and Customs Authority (AT) issued a binding ruling (Doctrinal Information no. 28661/2025) which, in line with the STA’s unified case law, expressly recognises that:
Sale of inheritance share by an heir ≠ sale of asset by the estate
- The transfer of the inheritance share represents the alienation of an abstract legal position over a universality of assets → not subject to personal income tax.
- The sale of specific assets of the estate, by all heirs, represents the transfer of real rights over immovable property → subject to personal income tax at the level of each heir.
- The transfer of an inheritance share, even if the estate is composed solely of immovable property, is not subject to IRS.
- This qualification depends on the deed unequivocally establishing that the transfer concerns the heir’s position over the universality of the estate, and not the transfer of specific assets.
- The sale of specific assets belonging to the estate, by all heirs, is different and may trigger taxation.
The issue lies not only in who sells, but essentially in what is sold.
The estate is not considered a transparent entity in the strict tax-technical sense. However, the income derived from the estate’s assets (e.g., rents, interest, dividends, capital gains) is directly imputed to the heirs, in proportion to their ideal shares, and taxed under personal income tax in their personal spheres.
This imputation reflects, in practice, a form of material tax transparency.
Only after partition do the assets become part of each heir’s personal patrimony, and subsequent income follows the ordinary tax regime.
Impact for the purchaser of the inheritance share
The case law and the tax authorities’ position have generated enthusiasm in the market, as they appear to open the door to indirect transfers of immovable property without personal income taxation. However, several aspects must be considered.
Take the following example:
There is an undivided estate composed of several immovable properties, several movable assets (furniture, jewellery, etc.) and cash. There are three heirs with equal shares.
- Scenario 1 – sale of one property by the estate:a capital gain arises, subject to personal income tax, in the sphere of each heir, in proportion to their share, in this case, 1/3.
- Scenario 2 – transfer of an inheritance share by one heir:one of the three heirs sells his or her share (abstract right over the entire estate) to a third party. No capital gain subject to personal income tax arises for that heir.
The transfer of the inheritance share is not taxed under personal income tax for the selling heir. However, for the purchaser, this operation may have relevant and potentially adverse tax implications:
- The purchaser assumes the position of heir in the undivided estate, with the right to receive 1/3 of all assets (immovable and others), without any guarantee of receiving specific assets.
- When the estate is partitioned, the assets received are deemed to have been acquired gratuitously. The tax acquisition value will be the value considered for Stamp Duty purposes, and, in the case of immovable property, the Tax Asset Value (Valor Patrimonial Tributário – VPT) as at the date of death of the deceased. This may give rise to significant capital gains upon a future sale.
- Additionally, the transfer of the inheritance share is subject to Municipal Property Transfer Tax (IMT), payable by the purchaser. Municipal Property Transfer Tax is calculated on the value of the proportion of the estate’s immovable property corresponding to the acquired share, and the identification of the immovable assets and the quota transferred is mandatory.
Final notes
Current case law and administrative doctrine strengthen legal certainty in transactions involving the transfer of an inheritance share, creating room for more flexible estate reorganisations prior to partition.
However, the tax treatment of estates still contains several grey areas and pitfalls for the unwary.
The deed (or authenticated document) must unequivocally distinguish between the transfer of an inheritance share and the transfer of specific assets.
Moreover, the tax impact for the purchaser cannot be disregarded — it is essential to assess both immediate charges (IMT) and future consequences (potential capital gains under personal income tax).
As always, appropriate legal and tax advice is crucial to ensure security and effectiveness in transactions of this nature.
https://belim.pt/en/news-articles/news/sale-of-inheritance-share-no-personal-income-taxation/