The Tax Authority Overcharged Investors Who Held Foreign Shares and Funds Long-Term, and Is Now Reissuing Their IRS Bills

If you sold foreign shares or fund units this year and had held them for more than two years, there is a real chance the tax you were charged was too high. The Autoridade Tributária (Tax Authority, often called the Fisco) has acknowledged that its computer system miscalculated the IRS — Imposto sobre o Rendimento das Pessoas Singulares, Portugal's personal income tax — owed on long-term capital gains from foreign securities during this year's filing season, and it is now issuing corrected assessments.

The problem was reported by Jornal de Negócios on 6 August 2026. In processing this year's returns, the Tax Authority's system failed to apply a tax break that rewards holding investments for the medium and long term. Without that relief, investors who kept their assets for more than two years ended up with a bill larger than the one they actually owed. Several taxpayers who filed Anexo J (Annex J, the schedule of the IRS return used to declare income earned abroad) have already received notices saying the Fisco would "correct the identified error and issue a new tax assessment."

The tax break that was left out

Portugal taxes gains on securities — shares, bonds, fund units — at a flat autonomous rate of 28%. But since June 2024, a holding-period incentive shaves down the taxable portion of the gain the longer you have owned the asset. Hold it for more than two years but under five, and 10% of the gain is excluded from tax. Hold it for at least five years but under eight, and 20% drops out. Hold it for eight years or more, and the exclusion rises to 30%.

In practice, that turns the headline 28% rate into an effective 25.2% for gains on assets held more than two years, 22.4% beyond five years, and 19.2% beyond eight. It is a meaningful discount for long-term investors — and it is precisely the relief the Tax Authority's system did not apply to foreign-held securities this year.

Why foreign holdings were the sticking point

Until recently, this long-term incentive was written to benefit domestic securities. That put Portugal on the wrong side of European law: the Tribunal de Justiça da União Europeia (Court of Justice of the European Union) had condemned the country for treating foreign securities less favourably than domestic ones — a discrimination against the free movement of capital.

To fix it, this year's Modelo 3 return — the main IRS declaration — extended the holding-period relief to securities held abroad, bringing the treatment of a fund bought through a foreign broker into line with one bought in Lisbon. The rule changed; the software did not keep up. The result was that Anexo J filers, the very group the fix was meant to help, were the ones overcharged when the system computed their tax without the exclusion.

What to do if you may be affected

• Check your assessment. If you declared capital gains on foreign shares or fund units held for more than two years, look at your nota de liquidação (tax assessment) to see whether the long-term exclusion was applied. A tax charged at the full 28% on a long-held asset is the tell-tale sign.
• Watch for a corrected notice. The Fisco says it is reissuing assessments for the affected returns. If you receive one, it should reflect the reduced taxable base — and any overpayment should come back to you as a refund.
• Keep your purchase records. The relief depends entirely on how long you held each asset, so acquisition dates and contract notes are what prove your entitlement. This matters most for expats whose portfolios sit with brokers outside Portugal.
• Know your appeal route. If a corrected assessment does not arrive and you believe you were overcharged, you are not stuck. There are formal channels for contesting a tax assessment, starting with an administrative complaint.

For foreign residents, the episode is a useful reminder that the machinery behind Portugal's tax returns is not infallible, and that the burden of catching an error often falls on the taxpayer. It also lands on the right side of a long-running principle: after the European court's ruling, a fund or share held abroad now earns the same long-term discount as one held at home. Anyone with investments outside Portugal should read the fine print of Anexo J, and, for the wider rules on rates and reliefs, our overview of how tax in Portugal works.