Supreme Administrative Court Clarifies Taxation of Inherited Shares in Undivided Estates. Judgment of the Supreme Administrative Court – Case No. 033/24.1BALSB, 29 April 2025
In a recent harmonization ruling, Portugal’s Supreme Administrative Court (STA) settled a relevant legal question concerning the taxation of capital gains resulting from the sale of an inherited share (quinhão hereditário) in an undivided estate consisting of real estate.
The legal issue at stake
The court was asked to determine whether the sale of an inherited share, before the estate is formally divided, constitutes a “transfer for consideration of real rights over immovable property” under Article 10(1)(a) of the Portuguese Personal Income Tax Code (CIRS), which would trigger a capital gains tax.
The STA’s decision
The Court ruled that:
❝ The sale of an inherited share, even if the estate comprises only immovable property, does not qualify as a transfer of real rights over real estate. ❞
The reasoning is that, until the estate is divided, heirs do not hold individual ownership rights over specific assets, but rather an abstract right over a fractional share in the entire estate. Only through partition does each heir acquire a concrete right of ownership.
Legal foundation
This decision follows consolidated case law of the STA and the Supreme Court of Justice:
An inherited share refers to a right in a universal legal mass, not a real right over individual property.
It is only upon partition that heirs receive title to specific assets.
Thus, a sale of an undivided inherited share is not subject to capital gains tax under the relevant provision, since the legal requirement of a real right transfer is not met.
Practical implications
Heirs who sell their inherited shares before partition are not liable for capital gains tax, even if the estate includes only real estate.
Past tax assessments in such cases may be challenged.
This judgment increases legal certainty and consistency in the taxation of inheritance transactions.