In Portugal, children are exempt from the 10% Stamp Duty rate on free transfers of real estate, as provided for in Article 6 of the Stamp Duty Code. This exemption also applies to spouses, cohabiting partners, descendants, and ascendants. However, donating a house to a child is not a totally tax-free operation.
When the donation involves rights over real estate, the 0.8% rate provided for in item 1.1 of the General Table of Stamp Duty continues to apply. The family exemption removes the 10% rate, but does not cover these 0.8%. As an example, on a house with a base value of 200,000 euros donated in full ownership, the child would pay 1,600 euros in Stamp Duty. The calculation is normally made based on the taxable patrimonial value at the date of transfer.
If parents wish to continue living in the house, they can donate only the bare ownership, reserving the lifelong usufruct. In this situation, the tax applies to the fiscal value of the bare ownership, calculated through percentages that vary according to the age of the usufructuary, and not on the total value of the full property.
In inheritance, children also benefit from the exemption of the 10% rate, but the 0.8% rate does not apply to transfers upon death. Thus, donating during one's lifetime may create an immediate fiscal cost that would not exist in the same terms in inheritance. The donation must also be communicated to the Tax Authority through Model 1 of Stamp Duty, by the end of the third month following the act.
