The fiscal authorities, Finanças, have just published an official, binding ruling (Processo 26828, com despacho de 2024-08-29) regarding the sale of a property before three years have passed after the cancellation of the Alojamento Local registration for that property.
The ruling describes the case of a taxpayer, who had asked Finanças for an official ruling after cancelling the AL registration for a property in May 2022. The taxpayer wanted to know if the gains from that sale could be used to amortize the mortgage currently being paid for their primary residence.
Without taking into account the fact that the property was previously an AL property, capital gains from such a sale could normally be reinvested in a primary residence mortgage and be exempt from capital gains tax, as we describe here.
However, Finanças clarifies in the ruling, published last week, that if three years haven’t passed since the AL registration was cancelled, no such exemption is possible.
We can deduce from this, however, that there would be no problem at all to use the gain in this way to obtain tax exemption, if the owner cancels the AL, waits for 3 years, and then sells the property. However, the sale has to be made before the end of 2024 to be applicable for the exemption when paying off the mortgage of a secondary home. This in turn implies that the AL had to be cancelled already in 2021.