Many retirees are looking to Portugal as a place to retire due to its amazing climate, beautiful coastlines, and tax benefits.
Those planning to buy property can also take advantage of relatively low real estate prices compared to other European countries.
In 2009, Portugal’s retirement laws went through a significant change, in order to attract foreigners. The non-habitual tax resident regime (NHR) allows for those residents to benefit from a discounted flat income tax rate of 20%, instead of the regular rates that climb up to 48%.
The NHR status is available to anyone who was not a tax resident in Portugal in the last five years and meets certain criteria in order to qualify.
All residents have to pay tax in Portugal on their worldwide income unless they are considered non-resident taxpayers. You are a tax resident if you live in Portugal for at least 183 days during a tax year or if you have permanent residence there on 31 December.
As residents in Portugal are taxed on their worldwide income if you retire in Portugal your private pensions paid from abroad could be liable to Portuguese taxes. In some cases, it may be possible to transfer private pension earnings without incurring charges via an offshore pension scheme.
Portugal also has double tax treaties with all EU countries and most non-EU countries, preventing double taxation.
Retiring in Portugal if you are an EU citizen
For EU citizens, retiring to Portugal is fairly straightforward; you can easily apply for residency and enjoy many of the same benefits as local residents, this can be done directly from SEF (Servico de Estrangeiros e Fronteiras) or any of the regional offices of the Portuguese Immigration Service.
EU citizens can transfer contributions from their home country, along with contributions from any other EU countries they have worked in; this all counts towards the state pension in Portugal.
Retiring in Portugal if you are a non-EU citizen
Non-EU citizens must apply for a residence permit at a Portuguese consular office in their home country before relocating to Portugal and show a valid passport, proof of income, proof of health insurance, and submit to a criminal background check.
Non-EU nationals can obtain a temporary residence permit for five years; after this, it is possible to apply for permanent residence.
Expats retiring to Portugal from non-EU countries aren’t entitled to free healthcare until they become permanent residents. You may need private health insurance for up to the first five years of residence. Portugal has tax and social security arrangements with several non-EU countries to make things easier for those relocating overseas. Check in advance whether your country has an agreement in place.