The benefits of reinvesting property sale into a life assurance plan

Steve Thompson, Founder & CEO @ ATLAS BRIDGE WEALTH | Boutique cross-border financial advisory | Europe & Middle East | Chartered Fellow CISI®

November 20, 2025

I'm going to tell you a story....

Recently I met a British couple in their mid-60s who’ve lived in Portugal for a number of years. Let’s call them Chris & Margaret.

Their kids had moved out years ago, the house felt too big, and they wanted to simplify life. So they made a big decision:

Sell their main home in the Algarve for €1.8 million.

But here’s the twist…

Selling a property in Portugal can trigger a hefty capital gains tax bill, even for long-term residents. And they’d built up significant gains over the years.

They weren’t thrilled at the idea of a large tax hit.

So we slowed everything down, looked at their wider picture, and explored the options available specifically for people aged 65+ who are selling their main home.

And that’s where the opportunity appeared.

What the law actually says (Article 10(7) CIRS)

Article 10(7) of the Portuguese IRS Code gives an exemption from CGT on the sale of habitação própria e permanente(main home) where the gain is reinvested in certain long-term products. The key conditions are: 

1. Eligible products The net sale proceeds (after mortgage and any “new home” reinvestment under n.º 5) must be used to acquire one of:

2. Age / status At the date of sale, the taxpayer or their spouse/partner must be retired or at least 65. 

3. 6-month deadline The acquisition/adhesion/contribution must be made within 6 months of the sale. 

4. 10 years & 7.5% rule Where the investment is in a life insurance contract or open pension fund, it must:

5. Declaration The taxpayer must declare their intention to reinvest (even partially) in the tax return for the year of sale.

The strategy

So, under Portuguese law, retirees (65+) who sell their main home may be able to reinvest the net sale proceeds into a qualifying long-term life insurance or pension contract and obtain a CGT exemption on the gain, provided that:

✔ The contract is taken out within 6 months of the sale ✔ It is designed to pay regular income for at least 10 years ✔ Annual payments are no more than 7.5% of the amount invested ✔ The product is an eligible life-insurance/pension structure under Article 10(7) CIRS

Where only part of the proceeds is reinvested, the exemption applies on a pro-rata basis. Individual cases must always be confirmed with a Portuguese tax adviser.

If you follow these rules?

The capital gain on the property can be exempt from Portuguese CGT.

So that’s exactly what we structured.

Chris & Margaret reinvested part of their proceeds into a compliant contract. They bought a smaller home with the rest. And their gains, which would have faced tax, were instead sheltered.

Individual circumstances vary, this route must be confirmed with a Portuguese tax adviser, the product must meet the relevant rules, and the relief may change in future

The Outcome

Today, people like Chris and Margaret:

• Receive a steady, predictable income every year

• Have no capital gains tax liability on the sale

• Have simplified their life and reduced running costs

• Are still fully invested for the long term

• Have more clarity and comfort in retirement

The relief on their faces when they realised what was possible was genuine.

Why This Matters for UK Expats in Portugal

This planning route won’t apply to everyone, the rules are strict, the timing is tight, and the product choice really matters.

But when the stars align, it can turn a stressful tax event into a powerful retirement-planning opportunity.

I partner with the number one global provider of life-assurance bonds, which means clients always have access to fully compliant structures that meet Portugal’s strict Article 10(7) rules. If you’re considering a move, a sale, or a downsize, I’m always happy to talk through the options.

This post is for information only and should not be taken as financial advice.