Learn how to comfortably retire in Portugal as an expat; this guide explains who can retire to Portugal, transfer a pension and qualify for Portugal’s retirement tax and residency law.
Numerous foreigners have been swayed to retire in Portugal for its pleasant climate, beautiful coastlines and reasonably priced property. There is a variety of places to live in Portugal, from sleepy fishing villages to riverside bustling cities. The stunning coastal Algarve region, however, attracts many expat retirees. This in turn sparked numerous English-speaking services handling all aspects of the Portuguese retirement process, from Portuguese real estate to tax and Portugal’s immigration rules.
LWM International is an international financial management consultancy. They provide a range of financial services tailored to expats, including personal pension plans and investment management. So, make sure your pension meets your needs in Portugal by speaking to the professionals at LWM International.
Introduction to retiring in Portugal
Since 2009, changes to Portugal’s retirement tax laws have made it more attractive for foreigners to retire to Portugal. Portugal is also one of best places to retire abroad, with the Algarve region listed by CNN and Forbes as one of the best places to retire in the world. Portugal has an affordable cost of living at around USD 1,500–1,700 per month in smaller towns, or around USD 2,200 for larger cities.
This retirement in Portugal guide explains the important aspects expats need to consider before they retire in Portugal. These include Portugal’s retirement residency law, the retirement age, and tax aspects of retiring to Portugal from another country.
Who can retire in Portugal?
For citizens of the European Union, retiring to Portugal is fairly straightforward; you can easily apply for residency and enjoy many of the same benefits as local residents. EU citizens can apply for a residence permit from any of the regional offices of the Portuguese Immigration Service or SEF (Servico de Estrangeiros e Fronteiras). A list of regional offices is available here.
Under Portugal’s retirement residency law, non-EU citizens who want to retire to Portugal must apply for a residence permit at a Portuguese consular office in their home country before relocating to Portugal. You must 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, you can apply for permanent residence. Read Expatica’s guide for more information about residence permits in Portugal.
Portugal’s Golden Visa
Non-EU residents looking to retire in Portugal can also take advantage of Portugal’s Golden Visa scheme. This was introduced to attract investors from non-EU countries. This option is only open to third-country nationals who are able to fulfill at least one of these requirements:
- purchase real estate with the value of at least €500,000 or above
- purchase of real estate property with a minimum value of €350,000 for the purpose of refurbishing (properties must either have construction dating back more than 30 years or be located in urban regeneration areas)
- make a capital transfer equating to €1 million or greater towards the country
- create at least 10 jobs
- make a capital investment of €350,000 or more towards research activities conducted by public or private scientific research institutions involved in Portugal’s scientific or tech systems
- transfer a capital investment of at least €250,000 to support Portugal’s local arts or the country’s national heritage sector
- make a capital investment of €500,000 or more for purchasing shares in investment funds or in venture capital geared to capitalize small and medium companies in Portugal.
Expats who acquire the Golden Visa can do the following:
- a residence visa waiver for entering Portugal
- permit for living and working in Portugal under the condition that they stay in Portugal for a period of seven or more days in the first year, and 14 or more days in the subsequent years
- visa exemption for traveling within the Schengen Area
- family reunification
- application for permanent residence and Portuguese citizenship by naturalization provided they fulfill all the requirements.
Portugal retirement and your pension
The retirement age in Portugal is 66 years and 3 months for both women and men. There is a contribution-based state pension in Portugal that residents can claim if they have made at least 15 years of social security contributions while under Portuguese employment. There are also some private company pensions available.
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. Read how to calculate state pensions from several EU countries.
Foreigners looking to retire in Portugal from non-EU countries should check with the state pension service in their home country to see what the situation is withdrawing their pension abroad. 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.
Read more in Expatica’s guide to pensions in Portugal.
Transferring international pensions to retire in Portugal
As residents in Portugal are taxed on their worldwide income, if you retire to 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. For those retiring to Portugal from the UK, this is possible through the Qualifying Recognised Overseas Pension Scheme (QROPS). You can read if QROPS is a viable option for you.
Another option to protect international private pensions is to apply for non-habitual residency (NHR). This entitles foreigners to favorable tax arrangements for a 10-year period.
Portugal retirement tax
NHR is an option to attract foreigners to Portugal. It offers favorable tax conditions, including for earnings otherwise subject to Portugal retirement tax. The NHR status is available to anyone who has not been a tax resident in Portugal in the last five years, as long as they meet certain criteria.
Those with NHR status have a tax exemption in Portugal for a period of 10 years. There will also be no tax on wealth during this period. In addition to this, any income generated in Portugal will be taxed at a flat rate of 20% instead of at the progressive rates, which can be as high as 48%. Learn more about the NHR program in the government’s Portal das Finanças website.
All residents have to pay tax in Portugal on their worldwide income, unless they are considered a non-resident taxpayer. 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.
All official residents in Portugal have to fill out an annual tax return self-assessment form declaring any income. There is a progressive rate of income taxation in Portugal starting at 14.5% for earnings up to €7,035, rising to 48% on earnings above €80,000. Read more in our guide to income tax in Portugal.
Portugal has tax treaties with all EU countries as well as a number of non-EU countries to prevent double taxation. See the conditions and a list of countries that have tax treaties with Portugal.
Healthcare requirements to retire in Portugal
Portugal’s National Health Service, known as the Servico Nacional de Saude (SNS), provides free healthcare in Portugal to all Portuguese citizens and foreign residents, although some fees have been introduced. The SNS is publicly funded and provides healthcare through community health centers, hospitals, and local health units.
Those who plan to retire to Portugal from EU countries can access free healthcare in Portugal through the SNS with an S1 form. This is a healthcare certificate issued by the pension center in your home country. For those retiring to Portugal from the UK, more information on the S1 form can be found here.
The standard of healthcare in Portugal through the SNS is quite good. However, some EU citizens retiring to Portugal also take out additional health insurance. There is a variety of social and private voluntary health insurance schemes available.
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.
Those wanting or needing to take out private international health insurance can compare plans using a website such as International Insurance. For more information read Expatica’s guides to healthcare in Portugal and health insurance in Portugal.
Inheritance implications for retirees
Portuguese inheritance law, derived from the Portuguese Civic Code, dictates that any inheritance process should be governed by the laws of the home country of the deceased. So if you retire in Portugal from the UK, for example, then UK inheritance laws will apply. In cases where the spouse is from a different country than the deceased, Portuguese law can apply if Portugal was the country of permanent residence.
There is no inheritance tax in Portugal on property. However, there is a stamp duty payable at a flat rate of 10% although spouses, descendants, and ascendants are exempt. There are also some administration fees associated with the inheritance process.
Under Portuguese inheritance law, a portion of the estate must be distributed to legitimate heirs. These include the spouse, biological and adopted descendants, and ascendants of the deceased. This is only negated by the will. Expats who retire to Portugal can read more in our guide to Portuguese inheritance law.
Retirement in Portugal guide
Portugal is a popular location for retirees; as well as the favorable climate, scenery, popular Portuguese tourist hotspots and reduced tax options, those who retire to Portugal enjoy affordable (although rising) living costs, good property costs, a decent standard of healthcare and generally good infrastructure and security.
The Algarve region has proved popular with English-speaking expats in particular. Made up of 16 municipalities on the Portuguese southern coast, it includes beautiful beaches and clifftops and is the most affordable option in Europe for retirees according to Forbes. Other popular retirement communities in Portugal are available in Cascais, Guimaraes, Lisbon, and Madeira, among others.
Portugal scores well for its reasonable property price to income ratio, with the cost of living in Portugal around 31% lower and rent around 48% lower than in the UK. Those planning to buy property can also take advantage of relatively low real estate prices compared to other European countries. Read more about the housing market in our guide to buying property in Portugal.
To get a better idea of Portuguese culture, you can brush up on interesting facts about Portugal, learn about Portuguese etiquette or experience some festivals in Portugal. Residents can also enjoy a range of relaxing activities including golf, fishing, and boating, as well as tasty Portuguese food. Many activities are available at concessional rates for those over 65.