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Five Flags: Comparing Panama And Portugal’s Citizenship, Residency, Real Estate, And Taxes

Why We Say Portugal Is #1, Part I

Kathleen Peddicord by Kathleen Peddicord
Dec 02, 2018
in Comparison, Investing, Offshore, Panama, Portugal
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We Americans tend to dismiss Europe for overseas lifestyle and investment options, thinking this part of the world is too complicated or too expensive.

The truth is that some European countries can be cheaper than destinations that might much sooner come to mind as top live and invest overseas options. Portugal is one of them.

I’ve gotten to know Portugal well over the past several years. My bottom-line impression as a result is that this country is the best place in the world to think about living or retiring overseas in 2019.

Big, bold claim that I don’t make lightly.

And, in fact, it’s not the whole of it.

In fact, this country is more than the world’s best place to live or retire overseas.

Portugal is also one of the best places in the world to think about owning real estate today… for investment, for personal use, or, best case, for a combination of the two.

This country also makes it easy and affordable to establish residency and even to acquire a second citizenship, if that’s an agenda for you. In fact, its minimum-income residency option could just be the most affordable available anywhere.

Some 25 years ago, I was the first to identify Panama as a top overseas retirement haven. That country, you know, went on to become broadly recognized in this context and today is one of the world’s most established and respected retire-overseas destinations.

It’s also home to our Live and Invest Overseas HQ.

In other words, I know Panama well. How would I compare Panama and Portugal?

As I suggest above, you should look at any country you’re considering for your new life overseas from two perspectives—personal and financial.

On one hand, what would your life in that place look like day to day…

And, on the other, what investment and diversification opportunities would be available to you?

One reason Panama has emerged as a top live and invest overseas option is because it offers excellent choices on both fronts. Panama can be a great place to live… and, living in Panama, you can access some of the world’s most interesting chances for diversification and making money.

So, again, how does Portugal stack up?

Let’s consider the answer to that question first from the point of view of the investor.

Here goes…

Portugal Versus Panama: Real Estate Purchase And Investment

Portugal continues to emerge from recession and its extended post-2008 real estate crisis. Prices have stabilized and are on the rise in spots, especially in key Lisbon neighborhoods, for example. The best addresses in Lisbon are now comparably priced to comparable neighborhoods in other European capitals, such as Rome and Madrid, but real state in this city remains less costly than property in Paris or London.

That said, property prices in other parts of Portugal are reasonable in general and a bargain for Western Europe.

In the Algarve, you can still buy at 1,400 euros per square meter or less outside the center of old-town Lagos, for example, where Lief and I made our first Portugal investment three years ago. Prices start at as much as 2,000 euros a square meter in higher-end tourist locations like Carvoeiro. Thanks to a still very robust U.S. dollar, that means that even the upper end of the apartment market here is still very affordable.

Note that villas have different pricing, as they come with land.

Renting short term on the tourist market, you can look for net yields of 5% at a minimum. Buying right, working your rental marketing, and filling your property in the off season with a three- to six-month rental, you could net 8% per year or more.

In Panama City and in the City Beaches area nearby, condos in the better areas are selling for at least US$2,400 a square meter. In Punta Pacífica, prices are more than US$2,700 a square meter. Rental rates support these prices. That is, you can expect net yields in the range of 5% to 8%, but you’re not likely to see double digits even at the beach.

Portugal Versus Panama: Residency

Panama offers more than a dozen residency visa options and qualifying for them can be easy… but it’s not cheap. Between government fees and attorney costs, expect a pensionado residency visa to run you about US$2,500 all in. You’ll spend US$3,500 to become a Friendly Nations resident.

You need at least US$1,000 a month (US$1,250 for a couple) from a pension or Social Security to qualify for Panama’s retirement visa. In Portugal, an individual must show around 1,300 euros (double that for a couple) of monthly income, but the income can be from any source.

The cost of applying for a residency permit in Portugal will depend on the type of visa/residency permit. Investment related residency permits, and entrepreneur residency permits are more expensive and require additional work regarding the investment itself and setting up the company. For simpler visas and residency permits, the cost of applying through a good lawyer should be range between EURO 2,200 to 2,500.

Portugal also offers what we have named the world’s best residency-through-investment Golden Visa program. See Lief Simon’s essay below for details on how this works.

Portugal Versus Panama: Citizenship

You can apply for naturalization in Panama after five years as a permanent resident. Panama expects you to give up all other citizenships once you’re naturalized, but they don’t enforce this requirement directly, as Singapore does, for example.

Portuguese residency can lead to citizenship after five years of residency (recently reduced from six), and you need not relinquish any other citizenship you hold.

In addition, a Portuguese passport is an EU passport, meaning that, once you’ve qualified for one, you could live and work in any EU nation without restriction. An EU passport is also a more useful travel document, allowing for visa-free travel to more destinations than a Panamanian passport.

In both cases you’ll have to take a test in the local language as part of the naturalization process.

Portugal Versus Panama: Taxes

This is where Panama eclipses most competition, including Portugal. With its jurisdictional approach to taxation and tax exemptions for bank interest and agricultural income as well as tax incentives for tourism projects and businesses operating in certain areas of targeted development (Panamá Pacífico, for example), Panama makes it possible for you to organize your life and your business so that you and it pay little or no tax.

Although Portugal can be a low tax country for expats moving to Portugal, immigration work should be coordinated with other inputs such as corporate, customs and tax, real estate, and/or tenancy law. The country has introduced what they call the Non-Habitual Resident (NHR) Program (yes, we agree… very unfortunate choice of names).

Under the NHR program, you are exempt from taxes on most if not all (you should seek local tax advice to understand how this would play out given your personal circumstances before applying) income from outside Portugal for 10 years. As Portugal taxes residents on worldwide income, the NHR tax exemption can be an important advantage.

The bottom line, all things considered, is that Portugal today competes handily even with the grand-daddies of the invest and diversify overseas world… including Panama.

But what’s it like to live in Portugal?

We’ll pick up this conversation and answer that question tomorrow…

Kathleen Peddicord

This article was first published in April 5, 2018 and has been recently updated.

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Kathleen Peddicord

Kathleen Peddicord

Kathleen Peddicord has covered the live, retire, and do business overseas beat for more than 30 years and is considered the world's foremost authority on these subjects. She has traveled to more than 75 countries, invested in real estate in 21, established businesses in 7, renovated historic properties in 6, and educated her children in 4.

Kathleen has moved children, staff, enterprises, household goods, and pets across three continents, from the East Coast of the United States to Waterford, Ireland... then to Paris, France... next to Panama City, where she has based her Live and Invest Overseas business. Most recently, Kathleen and her husband Lief Simon are dividing their time between Panama and Paris.

Kathleen was a partner with Agora Publishing’s International Living group for 23 years. In that capacity, she opened her first office overseas, in Waterford, Ireland, where she managed a staff of up to 30 employees for more than 10 years. Kathleen also opened, staffed, and operated International Living publishing and real estate marketing offices in Panama City, Panama; Granada, Nicaragua; Roatan, Honduras; San Miguel de Allende, Mexico; Quito, Ecuador; and Paris, France.

Kathleen moved on from her role with Agora in 2007 and launched her Live and Invest Overseas group in 2008. In the years since, she has built Live and Invest Overseas into a successful, recognized, and respected multi-million-dollar business that employs a staff of 35 in Panama City and dozens of writers and other resources around the world.

Kathleen has been quoted by The New York Times, Money magazine, MSNBC, Yahoo Finance, the AARP, and beyond. She has appeared often on radio and television (including Bloomberg and CNBC) and speaks regularly on topics to do with living, retiring, investing, and doing business around the world.

In addition to her own daily e-letter, the Overseas Opportunity Letter, with a circulation of more than 300,000 readers, Kathleen writes regularly for U.S. News & World Report and Forbes.

Her newest book, "How to Retire Overseas: Everything You Need to Know to Live Well (for Less) Abroad," published by Penguin Random House, is the culmination of decades of personal experience living and investing around the world.

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