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Retirement for Expats in Portugal

Author: Jason Zhou
Submitted: October 2014

The annual Retire Overseas Index by ‘Live and Invest Overseas’ put the Algarve in Portugal in first place out of the 21 best regions to retire overseas. You may be one of the many people from all over the world who have a plan to spend their golden age in this southern European country. If you are a European Economic Area (EEA) or Swiss citizen, you have the right to live in and hence retire in Portugal. Similarly, spouses and relatives of EEA and Swiss citizens can normally get a visa though an easy route. If you are not an EEA or Swiss citizen, you may need a visa. For more information about visas and immigration, please see here: https://www.sef.pt/portal/V10/EN/aspx/apoioCliente/detalheApoio.aspx?fromIndex=0&id_Linha=4351.

If you are not an EEA or Swiss citizen or a family member of one, you will need to apply for a permanent resident visa; you can normally do this when you have been resident in Portugal for five years. Portugal has recently introduced a Golden Visa for those who are planning to retire in Portugal. To be eligible for this visa, you will need to make a generous contribution to Portuguese interests, that is, either invest at least €1m in the economy, create at least 10 jobs in Portugal or spend at least €500,000 on Portuguese property. You will be required to stay in the country for more than seven days in the first year and 14 days in the following two years, but after five years you will get a permanent resident visa. There are more details about this route here: https://www.sef.pt/portal/V10/EN/aspx/apoioCliente/detalheApoio.aspx?fromIndex=0&id_Linha=6269.

Health care is another major consideration during you retirement, as you are more likely to see doctors than before.  If you are not an EEA or Swiss citizen, you will be required to have adequate medical insurance when you apply for a visa. EEA and Swiss citizens should obtain a valid European Health Insurance Card before entering Portugal. This enables you to have the health services via the Serviço Nacional de Saúde (SNS, 'National Health Service') at a reduced cost or sometimes even free.  For more information, please see National Health Service for Expats in Portugal.

Employees and self-employed persons are obliged to pay contributions into the state pension scheme through the social security contribution system. In general, employees contribute 11% of their income, and companies 29.6%. The rate for self-employed contribution is at 26.5%. The Instituto da Segurança Social (Social Security Institute) is the government body that administers the provision of old age, disability and survivors’ pensions and unemployment benefit. Private superannuation funds are not very popular in Portugal; individuals still mainly rely on the state pension scheme.

If you are retiring from another country, you will not need to worry about this. However, you do need to make sure your pension income can be paid to your account in Portugal if you want to live there for a long time. In Portugal, pension incomes over €4,104 per year are taxable. Portuguese tax treaties may provide for the taxation of pensions in either the country of residence of the recipient, or the country from where pensions are paid.

It is important to consider the tax consequences before you retire to Portugal as a long-term resident. Tax residence is the primary determinant of Portuguese tax liability. Individuals classified as tax residents in Portugal are subject to tax on their worldwide income. Non-residents are taxable only on Portugal-based income. The number of days spent in Portugal is an independent criterion in determining tax liability. If an individual stays in Portugal for more than 183 days, he or she is deemed to be a tax resident for the whole year, whether or not the stay is continuous in a calendar year.  

Most people would like to retain the standard of living they had before they retired. However, studies show that people often find their savings have finished much earlier than expected. Hence, it is recommended to establish a detailed retirement plan and start saving now, regardless of your age. A retirement plan should include your expected retirement age, the lifestyle you would like to have during retirement, the cost of living you expect, sources of your income, and the level of risk of your source of incomes and strategy to meet your goals. For a general idea about the cost of living in Portugal, you can visit this page: https://www.numbeo.com/cost-of-living/country_result.jsp?country=Portugal. There is also other information about retiring to Portugal before you make a decision on this page: https://www.expatsblog.com/contests/4/moving-to-portugal-5-things-to-consider.




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