Portugal attracts a lot of foreigners thanks to its mild climate, beautiful coastlines and very cost-efficient real estate market. There’s also great variety when it comes to location since you can live in a small village, in a big city or by the sea. The cost of living and quality of life are excellent in Portugal and the Algarve has a spot in the “best places to live” list of many renowned publications such as Forbes Magazine and, nowadays, you can find numerous services that work to improve the retirement process for anyone who wants to retire in Portugal.
In 2009, changes in the Portuguese retirement tax laws made it even easier for expats to retire in the country. But, if you are looking to retire in Portugal there are important aspects you must consider such as the retirement residency law, the retirement age and tax information.
Who can retire in Portugal?
Citizens of the European Union who wish to retire in Portugal undergo a very simple application process and enjoy many of the same benefits as Portuguese residents. EU citizens can apply for a permit from any of the regional offices of the Portuguese Immigration Service or SEF (Serviço de Estrangeiros e Fronteiras).
Non-EU citizens who want to retire in Portugal need a permit from the Portuguese consular office in their home country to be able to move to Portugal. This requires a valid passport, proof of income, proof of health insurance and a criminal background check. If you are a non-EU citizen, you can also get a temporary residence permit that allows you to live in the country for five years before requesting permanent residence.
Another option for retirement in Portugal is the Golden Visa scheme, which allows entrance to investors from non-EU countries. But this program also has requirements that must be met in order to get a residence permit:
- Purchase real estate with a value of at least 500,000 euro;
- Purchase real state with a value of at least 350,000 euro to renovate (the property must either have construction dating back more than 30 years or be in areas of urban regeneration);
- Make a capital transfer of 1 million euro or more towards the country;
- Create at least 10 job positions;
- Make an investment of 350,000 euro or more towards research (in a public or private setting) in scientific research institutions;
- Transfer an investment of at least 250,000 euro that supports Portugal’s local arts or the country’s national heritage sector;
- Make an investment of at least 500,000 euro to purchase shares in investment funds or in venture capital geared to capitalise small or medium-sized Portuguese companies.
Once you enter the Golden Visa program you will be granted a residence visa waiver, authorisation to live and work in Portugal if you stay in the country for at least seven days during the first year, and at least 14 in the subsequent years. You can also get visa exemption for travelling within the Schengen Area, family reunification and application for permanent residence and Portuguese citizenship by naturalisation.
Your pension in Portugal
Since 1st January 2017, the retirement age in Portugal is 66 years and 3 months for both men and women. If a citizen has made at least 15 years of social security contributions, while being employed in Portugal, they can claim a contributions-based state pension. And, in some cases, there are also private company pensions available.
If you are an EU citizen, you can transfer contributions from your home country, or from any other EU country where you were employed, towards your state pension in Portugal.
If you are a non-EU citizen, it is necessary to check with the state pension service in your home country in order to get your pension abroad. You will find that Portugal has several taxes and social security arrangements with non-EU countries, so the process might be simpler than you think.
Here you can learn more about how to collect your pension in Portugal.
Transfers of international pensions
Portuguese residents are taxed on their worldwide income, so if you retire to Portugal and your private pensions are paid abroad, they could be liable to Portuguese taxes. In some cases, it might be possible to transfer private pensions without being subject to charges, using an offshore scheme. UK citizens can use the Qualifying Recognised Overseas Pension Scheme (QROPS) to transfer their pensions without a problem.
The Non-habitual Residency (NHR) is another option available to those who wish to protect their international private pensions. It entitles expats to favourable tax arrangements for a 10-year period.
Portuguese retirement tax
Since 2009, Portugal offers a Non-habitual Residence (NHR) option that attracts expats with favourable tax conditions. The NHR status is available for anyone who hasn’t been a tax resident in the country for at least five years.
Once granted the NHR status, recipients will have an overseas income (including earnings from work, business, investments, rental, capital gains, pensions) exempt from taxation for 10 years. There will also be no tax on wealth during said period. Additionally, any income generated in Portugal will be taxed at a flat rate of 20% instead of at the progressive rate that can reach 48%.
Unless you are considered a non-resident taxpayer, you must pay tax on your worldwide income if you live in Portugal. To be considered a tax resident you must live in Portugal for at least 183 days of the tax year or if you have a permanent residence there as of 31st December.
Official Portuguese residents must fill out an annual tax return self-assessment form to declare their income.
It is also important to know that Portugal has tax treaties with all EU countries as well as several non-EU countries to prevent double taxation.
The Serviço Nacional de Saúde, SNS (Portugal’s National Health Service), provides free healthcare for Portuguese citizens and foreign residents. The SNS is publicly funded and works through community health centres, hospitals and local health units.
If you plan on retiring to Portugal from an EU country, you can access this system through the SNS with an S1 form. This a healthcare certificate issued by your home country’s pension centre.
Even though the healthcare service is considered good compared to international standards, many expats also hire additional health insurance, from among the many available in the country.
If you come from a non-EU country, you won’t have access to the free healthcare system until you become a permanent resident, so you might need private health insurance.
Portuguese inheritance law dictates that any inheritance process must follow the laws of the home country of the deceased. So, if you retire in Portugal from the UK, the UK inheritance laws will apply. If the spouse is from a different country than the deceased, Portuguese law can apply if Portugal is the country of residence.
There is no inheritance tax in Portugal regarding property. However, there is stamp duty in Portugal, paid at a 10% flat rate, although spouses, descendants and ascendants are exempt.
Under Portuguese inheritance law, a portion of the estate must be distributed to legitimate heirs, including spouse, biological and adopted descendants and ascendants of the deceased. Only the will of the deceased can interfere with that.
Now that you have all this information, you are one step closer to getting to live the retirement of your dreams in sunny Portugal!