Portugal has for decades been one of the most popular retirement destinations for citizens of the United Kingdom and Northern Europe. It has much going for it — lovely weather year-round, a low cost of living, great infrastructure and amenities, and fantastic health care. Now, more and more North Americans are taking a second look.
Taxes for Retirees in Portugal
One of the principal reasons non-European citizens are looking harder at Portugal as a retirement destination is the recent introduction of legislation that eliminates local taxes on foreign pensions and other retirement income.
Under Portugal’s new Non-Habitual Resident regime, anyone who has not been resident in Portugal for the previous five tax years is entitled to receive pensions and foreign-source income free from local taxes 10 years if the applicant’s home country has a double-taxation treaty with Portugal (the United States, Canada and the United Kingdom all have such treaties in place). Registering for the NHR is as simple as signing up with a local tax office once you have acquired the regular residence permits.
To qualify for the NHR regime, an individual must reside in Portugal 183 calendar days, either consecutive or not, in the year of application and subsequent years. Applicants must also, by December 31st of the year they apply, have a permanent residence in Portugal and demonstrate the intention of using it as their primary home.
Residency Visas for Retirees in Portugal
There are no special visa requirements for non-European Union retirees in Portugal. The process is the same whether you are 26 years old or 62 years old. It can, however, take some time and the process must be started in your home country.
Most applicants opt for a Type 1 Resident Visa, which is available from a Portuguese consulate abroad and must be obtained within three months of moving to Portugal. Once in-country, applicants have six months to apply for a Resident Permit. The permit is renewable every two years, and after five years can be converted to a permanent residency permit.
Citizens of the EU who wish to remain in Portugal for more than three months must apply for a residence permit at the local town hall or an office of the immigration authorities within 30 days of arriving in the country. All that is required is proof that you can support yourself and a valid EU passport. The certificate is valid for five years.
A so-called Golden Visa residency permit is available to non-EU citizens who buy property worth half a million euros or more, invest 1 million euros in the country or by start a local business that creates at least 10 jobs. Applicants need only stay in the country 7 days during the first year and 14 days in subsequent two-year periods, and family members are allowed to tag along. The initial permit is valid for five years, after which applicants can apply for permanent residence. After six years they can apply for full Portuguese citizenship.
Where to Retire in Portugal
The vast majority of foreign retirees moving to Portugal settle in the Algarve. Particularly appealing are the municipalities of Silves and Lagoa in Portugal’s southernmost province. In these two spots, you can enjoy the best the region has to offer, from medieval towns and fishing villages to open-air markets, local wine and some of Europe’s best sandy beaches.
Southern Portugal enjoys one of the most stable climates in the world, with 3,300 hours of sunshine per year. There are more sunny days each year in the Algarve than anywhere else in Europe. Consequently, it is one of the top destinations on the continent for Europeans seeking summer sun or looking to escape the cold, dark days of winter up north.
Thanks to Portugal’s strong historic and cultural links with England, English is widely spoken in the country in general and even more so in the Algarve. Retirees here are able to get by without speaking much Portuguese, but the experience is obviously better if they make an effort to learn to communicate with the locals.
U.S. Medicare is not honored in Portugal. However, the standards of health care are excellent in most parts of the country. The Portuguese healthcare system is ranked among the world’s top 20 in overall performance by the World Health Organization. Residents of Portugal who are citizens of EU countries are covered on the same terms as Portuguese citizens, although application is required. Non-EU residents are required to have medical insurance.
The cost of living in Portugal is among the lowest in Western Europe, on average 30 percent lower than in any other country of the region. A retired couple could live here comfortably but modestly on a budget of as little as $1,500 per month. With a budget of $2,000 per month or more, you could enjoy a fully appointed lifestyle in the heart of the Old World.
Real estate in Portugal is undervalued and among the most affordable in Europe. Further, Portuguese real estate has one of the most favorable price-to-rent ratios (a measure of the profitability of owning a house) and price-to-income ratios (a measure of affordability) in the region. What that means is that housing is cheaper to buy and investors can make more money from rentals than in many other European countries.