You have worked hard your entire life and your eagerly awaited and much anticipated retirement is here. Now you finally have time and money to spend and of course you want to make the most of it – so what are retirees up to nowadays? They’re retiring, investing and moving to Portugal. Besides the stunning beaches, outstanding weather and a superb quality of life, Portugal’s real estate market has been attracting senior retirement investors for years, largely because of the tax benefits for foreign pensioners.
Who can retire in Portugal?
The first thing you need to know when thinking about retirement in Portugal is that anyone can retire here – yes anyone. For EU-citizens, the process is quite easy and simply requires the application for residence through the Portuguese Immigration and Borders Services (SEF). Non-EU citizens can also invest or retire in Portugal by applying for Portugal’s Golden Visa. Either way, the country offers interesting tax benefits for foreign pensioners.
Tax benefits for foreign pensioners in Portugal
- Non-habitual residency
Portugal created the non-habitual residency scheme in 2009, with the goal of attracting investors from all over the world through the application of special tax benefits for the first decade living in the country, as long as they haven’t been a resident of Portugal for five or more years. This status guarantees:
- Reduced tax rates and some exemptions for new residents during their first ten years living in Portugal.
- Attractive tax benefits on investment properties.
- Low wealth tax rates and only for properties that are worth more than €600,000 or €1.2 million for couples.
- Tax-free foreign income, including rental income, employment, interest, dividends and capital gains on real estate.
- Any income generated in Portugal has a flat 20% tax rate.
2. Low tax on foreign pensions
Under the non-habitual residency scheme, foreign pensions are taxed at the low rate of 10% for the first ten years of living in Portugal. Following that time period, taxable rates do rise, however, they continue to be significantly lower than in many other European countries.
3. No inheritance tax
For foreign pensioners that invest in Portugal real estate, there’s an additional advantage: this country does not have inheritance tax on real estate properties. The only requirement is the payment of the associated administrative fees, and a stamp duty at a flat rate of 10%. Spouses, descendants and ascendants are exempt from the latter.
How to benefit from the NHR status
In order to be granted the NHR status, the pensioner must be a tax resident in Portugal, meaning the pensioner must prove that he/she has lived in Portugal more than 183 days (consecutive or not) during a 12-month period beginning or ending in the year that the pensioner applies for the NHR status; or alternatively, the pensioner has lived in Portugal for less than 183 days but has acquired, during the last 12-month period, a real estate property that makes it clear that this is and will continue to be the pensioner’s main residence. The application for the NHR status must be filed until March 31 of the year following the year of registration as a resident. Granted for a period of 10 years, the NHR status is non-renewable. However, if the pensioner is not recognized as a Portuguese tax resident during one year, for example, the status is not lost and the pensioner can continue to benefit from it once they become a tax resident in Portugal again.
Greater savings, greater quality of life
With such a broad range of tax benefits for foreign pensioners, spending power is increased. And when you factor in the fantastic quality of local life – natural beauty, weather, safety, health system – and low cost of living in Portugal, well these are exactly what retirement dreams are made of.