Sale of inheritance before distribution
20.11.2025
The transfer of inherited assets is a sensitive and legally complex process by nature. This situation becomes even more complicated when one of the heirs wishes to transfer their share of the inheritance — the so-called 'inheritance share' — to a third party, who may be another heir or someone with no connection to the inheritance. Traditionally, and with some hesitation on the part of the tax authorities, doubts were raised about this operation: was it a sale subject to personal income tax on capital gains? In short, should the heir pay tax as if they were selling a property?
This issue has now been clarified by the Supreme Administrative Court (STA) through a ruling published on 29 April 2025 in case no. 033/24.1BALSB. This decision to standardise case law is binding in similar situations throughout the country.
But what is an inheritance share anyway?
It is not a specific asset, but rather an expectation of rights over a set of assets that have not yet been divided. Until division occurs, the heirs are co-owners of an undivided whole — a joint estate that has not yet been divided into specific parts.
Therefore, selling an inheritance share is not equivalent to selling a specific asset, such as a house, but rather to transferring the legal position in the inheritance.
The issue at hand
The case in question concerned the sale of part of an undivided inheritance before the assets were divided among the heirs.
The Tax and Customs Authority (AT) considered this to be a sale subject to personal income tax as it involved immovable property. However, the Supreme Administrative Court (STA) definitively ruled that this was not the sale of real estate but the transfer of inheritance rights, which is not covered by Article 10 of the Personal Income Tax Code that taxes capital gains.
Legal basis:
According to Article 10(1)(a) of the IRS Code, transfers of real rights over immovable property for consideration are taxed as capital gains. The STA ruled that an inheritance share does not constitute a real right over specific immovable property and therefore does not fall under this tax rule.
This decision reinforces previous case law on the sale of shares, provided there is no division, not constituting a disposal of immovable property.
What changes in practice?
The sale of an inheritance share does not trigger capital gains tax charges. Heirs who sell their inheritance share before division will not have to pay capital gains tax. This decision provides legal certainty for a common practice among family members and investors alike.
It represents an opportunity for the real estate sector.
The STA's clarification may encourage the transfer of inheritance shares in complex or disputed inheritance proceedings, enabling heirs to sell their shares without incurring tax penalties and avoiding the need for lengthy negotiations over the division of assets. This decision is also relevant for investors looking to acquire inheritance shares with a view to future property consolidation.
In short, the Supreme Administrative Court's ruling has put an end to uncertainty: selling a share of an inheritance before distribution does not imply paying capital gains tax.
This is a clear step forward in terms of legal certainty, succession efficiency and market dynamism.
Dr Leonor Gargaté Oliveira – lawyer
Dr Emanuel Andrade – Trainee Lawyer
Additional notes and explanations:
This issue has now been clarified by the Supreme Administrative Court (STA) through a ruling published on 29 April 2025 in case no. 033/24.1BALSB. This decision to standardise case law is binding in similar situations throughout the country.
But what is an inheritance share anyway?
It is not a specific asset, but rather an expectation of rights over a set of assets that have not yet been divided. Until division occurs, the heirs are co-owners of an undivided whole — a joint estate that has not yet been divided into specific parts.
Therefore, selling an inheritance share is not equivalent to selling a specific asset, such as a house, but rather to transferring the legal position in the inheritance.
The issue at hand
The case in question concerned the sale of part of an undivided inheritance before the assets were divided among the heirs.
The Tax and Customs Authority (AT) considered this to be a sale subject to personal income tax as it involved immovable property. However, the Supreme Administrative Court (STA) definitively ruled that this was not the sale of real estate but the transfer of inheritance rights, which is not covered by Article 10 of the Personal Income Tax Code that taxes capital gains.
Legal basis:
According to Article 10(1)(a) of the IRS Code, transfers of real rights over immovable property for consideration are taxed as capital gains. The STA ruled that an inheritance share does not constitute a real right over specific immovable property and therefore does not fall under this tax rule.
This decision reinforces previous case law on the sale of shares, provided there is no division, not constituting a disposal of immovable property.
What changes in practice?
The sale of an inheritance share does not trigger capital gains tax charges. Heirs who sell their inheritance share before division will not have to pay capital gains tax. This decision provides legal certainty for a common practice among family members and investors alike.
It represents an opportunity for the real estate sector.
The STA's clarification may encourage the transfer of inheritance shares in complex or disputed inheritance proceedings, enabling heirs to sell their shares without incurring tax penalties and avoiding the need for lengthy negotiations over the division of assets. This decision is also relevant for investors looking to acquire inheritance shares with a view to future property consolidation.
In short, the Supreme Administrative Court's ruling has put an end to uncertainty: selling a share of an inheritance before distribution does not imply paying capital gains tax.
This is a clear step forward in terms of legal certainty, succession efficiency and market dynamism.
Dr Leonor Gargaté Oliveira – lawyer
Dr Emanuel Andrade – Trainee Lawyer
Additional notes and explanations:
- Inheritance share: the abstract part of the inheritance to which each heir is entitled before the division of assets.
- Undivided universality means that all assets left by the deceased belong to all heirs jointly until they are distributed.
- Standardisation of case law: a decision by a higher court that establishes a uniform understanding for all judicial decisions.
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