The mild climate, fantastic culture and comparably low living costs have long made retirement in Portugal an attractive prospect, with an estimated 20,000 UK citizens now living there as permanent residents.
Recent news around changes to the golden visa programme has caused concern, but the scheme, officially called the Residence Permit for Investment Activity, remains active. The major reform introduced in 2023 means that property purchases are, however, no longer eligible investments for permanent residency.
In this guide, we clarify the changes and what they mean, explore alternative routes to applying for residency in Portugal as a retiree, and discuss some of the key considerations to bear in mind when planning your European retirement.
Understanding Changes to the Portuguese Golden Visa Programme for Retirees
The Portuguese government announced that the golden visa scheme would no longer include the option of purchasing a qualifying property, primarily due to housing shortages throughout the country impacting many of the larger cities and tourist regions.
High demand for foreign property investment has reduced the number of homes available to Portuguese people, and with many purchased as holiday homes or rental properties, this has contributed to rising housing costs, prompting the call for change.
That said, the adjustments to the visa scheme only affect this particular eligibility route, and it is certainly still possible to make an alternative investment and qualify for residency as before. Those options include:
- Investing €500,000 or more in an approved private equity or venture capital fund.
- Contributing at least €500,000 to a Portuguese company and generating employment for five or more full-time employees.
- Donating capital of €250,000 to a national heritage, arts or culture programme or €500,000 to a qualifying research and development project.
Additional criteria apply, such as holding appropriate private health insurance and providing proof that your income is sufficient to cover your living costs. The scheme is open to non-EU citizens who comply with the terms, hold a valid passport, and have no criminal record.
After five years, permanent residents may be eligible to apply for full citizenship and can usually include children, a spouse, and dependent parents in their residency application.
Alternative Ways to Retire in Portugal Outside of the Golden Visa Scheme
Some retirees may apply for a different visa or permit, depending on their plans and whether they are currently employed or own a business and hope to retire in Portugal in the coming years, or are already retired and looking to relocate overseas.
The D7 visa is one example. It is intended for non-EU citizens who wish to retire in Portugal and does not have any minimum investment thresholds. Instead, applicants need to show that they have a passive income generated outside of the country.
For example, a retiree with a property portfolio in the UK that generates revenues above the minimum wage, currently €9,840 per year, would be able to apply. Other passive income streams, such as pension benefits, are also eligible, provided they meet or exceed the national minimum.
Retirees are required to open an account with a Portuguese bank and provide evidence of their income and where it originates. They must also deposit and maintain a minimum balance within a local bank account, equivalent to the annual minimum wage. Once they are granted a residence permit, non-EU nationals can access these funds as they wish.
The visa process also means applicants must apply for an NIF number—a taxpayer number issued when they register their details with the Portuguese Tax Office. This code is the equivalent of your UTR in the UK and is needed before you can open a Portuguese bank account to comply with the rules we’ve mentioned.
The norm is for a Portuguese D7 visa applicant to apply from their home country, receiving a temporary residence permit that gives them the right to live in Portugal for four months. After arrival and organising accommodation to act as a registered address, they can apply for a residency permit.
Unlike the golden visa scheme, there are no conditions linked to property ownership, and a retiree can rent or purchase a property in any location and of any value.
Speak to an Adviser in Portugal
Key Aspects of Planning Retirement in Portugal
Alongside your preferred visa route and how this may impact your decisions regarding purchasing a property or sustaining an income from overseas, there are multiple other factors to evaluate before making any firm plans.
For example, if you intend to live permanently in Portugal, you might need to weigh up the tax benefits and drawbacks of keeping assets in another country or review the tax regulations that could apply to income from your pension and other retirement savings.
Tax Residency for International Expat Retirees
If you live in Portugal for 183 days or more of the year or meet other criteria that mean you are categorised as a tax resident, you will be liable to pay taxes on your worldwide income and assets, which normally means filing an annual tax return to declare all taxable revenues.
Likewise, retiring overseas could affect your inheritance planning. While there is no tax on inherited real estate in Portugal, you will likely remain a British domicile. That status indicates that your estate and assets may still be subject to UK inheritance tax, irrespective of how long you have lived in Portugal.
Previously, expatriate retirees often relocated to Portugal through the Non-Habitual Residency (NHR) scheme, which allowed successful applicants to pay a fixed low-rate 10% taxation on foreign-source pension income for up to ten years. However, this scheme has now closed, which means pension income could be taxable at up to 48% based on the progressive income tax bands.
While there are several ways to retire to Portugal, with or without the golden visa scheme, it is important to ensure you understand your tax and residency position, have calculated your living costs, health insurance coverage, and accommodation, and know how you will structure or manage your income and assets to support your long-term financial needs.
For more information about Portuguese retirement, handling pension wealth as an overseas expat, or forecasting your tax exposure in Portugal, please get in touch with the Chase Buchanan local team or our UK Administration Centre to arrange a convenient time to talk.
*Information correct as at May 2024