Living In Portugal – The Expat’s Guide
Living in Portugal guide: the cons and pros of moving to Portugal, healthcare options, banking for expats, your UK pension options, zero-tax living in Portugal, housing, etc.
Portugal features higher and higher on many people’s list of the best places to live in retirement. For some, it’s the indisputable champion.
There are some very good reasons – beyond the weather and excellent golf amenities – why Portugal is so highly regarded as an ideal place to retire.
In our guide to living in Portugal, we will cover the benefits retiring to Portugal can offer you, along with some essential points to consider when planning your retirement, such as healthcare and your pension options, property and money matters.
We will also discuss one of the most attractive features of retiring to Portugal – namely how you can save a lot of money by living a tax-free life for the first ten years of your Portugal retirement.
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In recent years Portugal has moved into the top ten countries for retiring abroad, and it seems like it’ll stay there for some time to come.
Expatra isn’t the only publication to rank Portugal highly. From the 2017 Forbes’ list of the best countries for retiring abroad and the Live and Invest Overseas rating, to the International Living Index, all of these publications also acknowledge Portugal as one of the best places to retire overseas.
The weather, the lifestyle and a lower cost of living are the main reasons behind Portugal’s growing popularity. The country has a lot to offer: amazing and diverse nature and scenery, opportunities for an active and healthy lifestyle, good connections to European cities, and much more.
However, there are also some drawbacks, including wet and rainy winters, the cold waters of the Atlantic Ocean, a slow pace of life, etc.
Knowing both the positives and the negatives beforehand gives you a chance to weigh them against each other and decide whether you are prepared to live with the potential drawbacks.
There will be changes to residency rules for UK citizens and also to general agreements between Portugal and the UK after Brexit.
To make sure you are aware of the changes, keep an eye on our Living In Europe After Brexit guide. It has links to official resources that update UK citizens on how Brexit can impact their life in EU member states.
Portugal is not the most expensive country in the world.
On average, life in Portugal is 34 percent cheaper than in the UK, including rent. That’s what makes is such a great retirement destination – you get all the perks for less money.
When it comes to buying a property in Portugal, the average cost across the country is cheaper than in the UK.
However, if you are looking at the favourite retirement destinations for expats, which are mostly around Lisbon, Porto, and the Algarve, you will probably find that property prices are the highest there.
For example, an average two-bedroom apartment on the Algarve coast costs at least two or three times as much as in central Porto. Still, for £300,000 you can buy a three-bed villa in a gated community, with access to a swimming pool and a five-minute walk from the beach.
There is a progressive rate of income taxation in Portugal, starting at 14.5 percent for earnings up to EUR 7,035 and rising to 48 percent on earnings above EUR 80,000.
One of the biggest incentives to living in Portugal is the possibility of zero-tax living.
You can move to Portugal and pay absolutely no tax whatsoever on your pension, whether you decide to take it as one lump sum or as regular income.
It’s not quite as simple as it sounds – you can’t just move to Portugal and forget about your taxes. What you need to do is to apply for the Non-Habitual Residents Regime. Those who qualify can enjoy a 10-year tax-free period in Portugal.
Portugal’s Non-Habitual Residency tax regime allows foreign retirees to live tax-free in Portugal for the first 10 years, providing their income is generated abroad.
Under the NHR scheme, any income generated in Portugal will be taxed at a flat rate of 20 percent, instead of at the normal progressive rates up to 48 percent.
After ten years of the NHR, normal tax rates will apply to your worldwide income.
Portugal’s wealth tax is essentially an extension of Portugal’s Imposto sobre Imóveis (IMI), or property tax.
You will normally pay 0.3% for your Portuguese property if it’s worth more than EUR 600,000. If you are married or in a civil partnership, you as a couple will be granted a combined threshold of € 1.2m.
Whether you choose to apply for the NHR regime or not, it is still advisable to consult a tax specialist in Portugal. They will help you to arrange your tax affairs in the most efficient way, taking on the necessary paperwork and making sure you don’t break any tax regulations.
It’s definitely worth renting first to make sure your chosen area in Portugal meets your expectations. Renting will also allow you time to learn more about the local property market and its peculiarities.
If you are planning to live in regions famous for seasonal tourism, such as the Algarve, it might be difficult to find a good property for long-term rent as landlords prefer to let their properties short-term to holiday-makers.
You might also find that short-term rentals in such regions are quite costly. Property owners can make a healthy profit during the tourist season and don’t mind leaving their properties empty during winter.
In the main cities, such as Lisbon and Porto, long-term rental are relatively easy to come by.
You can look for a rental property yourself or use a local agent. Good agents can help you by advising, negotiating with landowners and even providing a tenancy agreement in English.
To rent a property in Portugal you will need a Portuguese fiscal number.
You will usually be asked for the equivalent of two months’ rent as a security deposit before moving in.
When you decide you are ready to buy your own home in Portugal, make sure you enlist the help of a reputable estate agent and have proper legal representation. A notary in Portugal represents the state, not your interests. A notary’s duty is to make sure all the signed papers are recognised by the state and are legally binding.
To make sure your personal interests are protected, you need a solicitador or an advogado. A solicitador is more like a conveyancing specialist in the UK, while an advogado is the equivalent of a qualified UK lawyer.
It’s helpful to know what you need to do when buying a property in Portugal, including due diligence and what steps the buying process should include.
If you derive your income in any other currency but the euro, you need to find the best strategies for bringing the money into Portugal, taking into consideration things like currency exchange rates, bank charges and international wire transfers.
This is especially important when you need to move a large amount of money, when, for example, purchasing a property.
As a result, bank charges and fluctuating exchange rates can have a big impact on the final cost of your purchase.
So what can you do to protect yourself from such a loss?
Forward booking exchange rates
To make the process of moving your money to Portugal cost-effective, safe and easy, the best way is to register with a currency exchange company as soon as possible.
Such companies allow you to forward book your exchange rate when it is most favourable for you. Thus, regardless of possible future fluctuations, you will know exactly what your costs will be at the closing date. It is possible to lock in your exchange rate up to 18 months in advance, meaning you can do so on the day you make an offer on a property you wish to purchase.
This service is not free, of course, but when it comes to the big numbers involved in a property purchase, it might fully pay off to lock in your rate of exchange. Not only will it let you forward book the rate at a favourable moment, but you will also be able to see and plan all your costs in advance.
You might want to open a bank account in Portugal before you move there. It can help you save money on charges for transactions abroad from your bank.
This is what you can do to obtain a Portuguese bank account before you move to Portugal:
Some Portuguese banks offer this option. Banks such ActivoBank and Banco CTT offer excellent services, which include no monthly fees and being free to use in the eurozone.
You have to be in the country to open a non-resident account, as it involves first obtaining a NIF (Número de Identificação Fiscal). You can get it from the nearest Finanças by providing your ID and proof of address (a recent bank statement that lists your non-Portuguese address will do perfectly well).
With your freshly obtained NIF, proof of address and proof of income that states your profession or job title, you can apply for a non-resident bank account. The staff might also ask for your UK NI number.
If you already have your NIF, both ActivoBank and Banco CTT (and a number of the Portuguese banks) offer an online application that involves a video chat with a bank representative to confirm your identity.
This will give you a chance to open an account before moving to Portugal without even needing to visit the country.
Once in Portugal, you can change the address on your account.
Most big banks in the UK will have a branch in Portugal, so it’s worth speaking to them to see who offers better terms and conditions.
You can opt for a mobile-only bank account. They are very easy to set up. The most popular mobile-only bank accounts are Borderless Account from TransferWise, DiPocket, Revolut, LeuPay, N26.
With most of them, you can set up a bank account with a Portuguese IBAN on your mobile phone in minutes. You will need a smartphone and some valid ID, which will allow you to verify your identity either through a quick video call or with photos.
Personal bank accounts in Portugal are not always free. Many current accounts have an admin charge of about €5 per month or so. You will also have to pay small fees for replacement of debit cards or counter withdrawals.
For that, you will get an assigned manager and have a direct line and mobile number. Whenever something happens that requires help, you can talk to them on the phone or go into your local branch and talk to them in person.
To open a Portuguese bank account, you will need your passport, your NIF (a Portuguese fiscal number which you can obtain at the local Financas), proof of income and proof of your Portuguese address.
With a Portuguese bank card, you have access to Multibanco ATMs through which you can not only perform normal ATM activities, but also pay your taxes, utility bills, buy tickets, sort out your mobile phone credit, etc.
Portugal has a comprehensive free public healthcare system. Under the EU law, Britons are entitled to Portugal’s state healthcare.
The Portuguese public healthcare system covers general and specialist care. Certain medicines are also available under the national health service at a discounted rate.
If you are in receipt of a UK state pension, you’re eligible to join Portuguese public healthcare for free. For this, you will need to obtain a UK-issued S1 form.
When in Portugal, hand your S1 form over to your local social security office (Posto de Atendimento da Segurança Social).
If you are not entitled to an S1 form, you can pay voluntary social security contributions or get private health insurance in Portugal.
Private healthcare plans that part-pay for your treatments are a very popular option. With such plans, people can often see a private doctor for as little as €10-20 with the rest funded by insurance.
If you’re planning to retire to Portugal and want to have private health cover, you need to act as soon as possible. If you are older than 55, some companies won’t accept you onto their plan, and at 65, your choices become very restricted.
Portugal offers a healthy and well-paced lifestyle for retirees. The country is diverse, easily accessible from the UK, and perfectly positioned for travelling in Europe. Plus it’s a great value-for-money destination, especially taking into consideration the 10-year long no-tax living it offers to foreign retirees.