But before choosing a residence permit in Portugal for pensioners, it is important to weigh the pros and cons. Cost of living and quality of life is excellent in Portugal, for example, the Algarve has a place on the list of “best places to live” in many well-known publications such as Forbes magazine, and currently, you can find many services that work to improve the retirement process for those who want to retire in Portugal.
In 2009, changes in Portuguese pension tax law made it even easier for expats to retire in the country. But, if you want to retire in Portugal, there are important aspects that you must consider, such as the Retirement Residency Act, retirement age, and tax information.
Who can retire in Portugal?
Non-EU citizens who would like to retire in Portugal need permission from the Portuguese consulate in their home country in order to be able to relocate to Portugal. This requires a valid passport, proof of income, medical insurance, and criminal background checks. If you are an EU citizen, you can also get a temporary residence permit that allows you to live in the country for five years before applying for permanent residence.
Another option for retiring in Portugal is the Golden Visa, which allows investors from non-EU countries to enter. But this program also has requirements that must be met in order to obtain a residence permit:
- acquisition of real estate worth at least 500,000 Euros;
- purchase of property worth at least 350,000 Euros for repairs. It should be noted that real estate should be built more than 30 years ago or be in areas of urban regeneration;
- capital transfer of 1 million Euros or more to Portugal;
- creation of at least 10 jobs;
- Investments of 350,000 Euros or more for research;
- Investment of at least 250,000 Euros to support Portuguese local art or the country’s national heritage sector;
- Investments of at least 500,000 Euros for the acquisition of shares of investment funds or venture capital aimed at capitalizing small and medium-sized Portuguese companies.
After you enter the Golden Visa program, you will be granted a visa-free regime of residence, a residence, and work permit in Portugal if you live in the country for at least 7 days during the first year and at least 14 days in subsequent years. You can also get a visa exemption for travel to the Schengen area, family reunification, permanent residency application, and Portuguese citizenship.
Your pension in Portugal
Since January 1, 2017, the retirement age in Portugal is 66 years and 3 months for both men and women. If a citizen has made at least 15 years of social security contributions while employed in Portugal, they can apply for contributions based on the state pension. And, in some cases, private company pensions are also available.
If you are an EU citizen, you can transfer contributions from your home country, or from any other EU country where you worked, to your state pension in Portugal.
If you are not an EU citizen, you must consult with the state pension service in your country to receive a pension abroad. You will find that Portugal has several taxes and social security agreements with non-EU countries, so the process may be easier than you think.
Transfer of international pensions
Portuguese residents are taxed on their worldwide income, so if you retire to Portugal and your private pensions are paid abroad, they can be taxed by Portuguese. In some cases, it may be possible to transfer private pensions without charging fees using an offshore scheme. UK citizens can use the Qualified Overseas Pension Scheme (QROPS) to transfer their pensions without problems.
Another option available to those who wish to protect their international private pensions is Irregular Residence (NHR). This entitles expats to preferential tax treaties for a 10-year period.
Portuguese pension tax
Since 2009, Portugal has been offering the Non-Regular Residence (NHR) option, which has attracted expatriates with favorable tax conditions. NHR status is available to anyone who has not been a tax resident in the country for at least five years.
After granting NHR status, recipients will have overseas income (including income from work, business, investment, rental, capital gains, pensions), exempt from tax for 10 years. No wealth tax will be levied during this period either. In addition, any income earned in Portugal will be taxed at a fixed rate of 20%, and not at a progressive rate, which can reach 48%.
If you are not a non-resident taxpayer, you must pay tax on your income worldwide if you live in Portugal. To be considered a tax resident, you must reside in Portugal for at least 183 days of the tax year or have a permanent residence as of December 31.
Official Portuguese residents must complete an annual self-assessment tax return form to declare their income.
It is also important to know that Portugal has tax agreements with all EU countries, as well as several non-EU countries, to prevent double taxation.
Healthcare requirements
The National Health Service (SNS) provides free medical care for Portuguese citizens and foreign residents. SNS is funded by the state and operates through community health centers, hospitals, and local health units.
If you plan to retire to Portugal from an EU country, you can access this system through SNS with form S1. This is a medical certificate issued by your country’s pension center. Despite the fact that medical care is considered good in comparison with international standards, many emigrants also get additional medical insurance, among many available in the country.
If you come from a non-EU country, you will not have access to a free health care system until you become a permanent resident, so you may need private health insurance.