Cost of living, climate, assets, property prices and taxation have made Portugal an Eldorado for French retirees. But this craze also contributes to the increase in real estate prices and the housing crisis for the Portuguese. This is why from 2024, Portugal is putting an end to the tax gift granted to foreign retirees. So will it still be interesting to retire in Portugal? We take stock!
Retirement in Portugal: what will change in 2024?
In 2009, the Portuguese government decided to grant foreigners a total tax exemption for 10 years, until 2020. Subsequently, a reduced tax rate of 10% was applied.
French, Italian and even Spanish retirees settled in Portugal and were able to take advantage of this measure and thus revive the country’s economy. With this non-habitual resident (RNH) status, they could then avoid paying income tax in their country of origin and in Portugal.
The other side of the coin is that these measures have also contributed to the housing crisis which is shaking up the country today. Consequently, Portuguese Prime Minister Antonio Costa announced the end of the tax exemption reserved for foreigners from 2024.
On the other hand, foreigners already established in Portugal continue to benefit from the system.
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Retirement in Portugal: what taxation from 2024?
If you have decided to emigrate and retire in Portugal in 2024, you will no longer benefit from the non-habitual resident agreement (RNH) and therefore the tax advantage!
Consequently, the applicable taxation will depend on the duration of your stay. Indeed, if you reside for more than 183 days during the calendar year you will be considered a tax resident in Portugal. In this case you will have to pay theincome tax in Portugal. Otherwise, your pension and other income remain taxable in France.
Like France, income tax is calculated according to a progressive scale. Income tax (IRS) rates in Portugal therefore vary from 0% to 48% with several intermediate sections.
On the other hand, as a tax resident in Portugal you benefit from a exemption from social contributions (CSG -CRDS) which vary between 0% and 8.3% depending on your income!
If you are retired from the civil service, you remain subject to French taxation!
Should you invest in Portugal for your retirement?
Although the price ofreal estate increased by 78% between 2012 and 2021Despite everything, investing in stone remains interesting. In fact, you must count €4,000 per square meter for a new property in Lisbon and around €2,900 for an old property. The median price in Algarve, the city favored by the majority of French retirees, is €3,800 per square meter for an apartment. As for notary fees, you must allow between 6% and 7% of the value of the property.
But Portugal’s advantage is also a taxation at the rate of 28% on land and capital income. As a reminder, in France, property income is subject to the progressive scale of income tax and social security contributions of 17.2%. As for capital income such as dividends, they are taxed at Flat Tax at a rate of 30%.
On the other hand, there is no no real estate wealth tax in Portugal and no inheritance tax !
On the other hand, capital gains are subject to taxation, namely:
- Real estate capital gain : the tax rate is 50%. However, the main residence is exempt if the proceeds of the sale are reinvested in another main residence located in the EU.
- Movable capital gain : the tax rate is between 12.5 to 25%.
In other words, the Investments and taxation in Portugal remain interesting, despite the abolition of non-habitual resident status (RNH). Of course, this depends on your income and your goals!
What are the steps to retire in Portugal?
If you are considering retiring in Portugal, you should remember to take a few steps:
- Formalities in France: You have to notify your basic and supplementary pension fund. Every year you must send them a life certificate completed by the Portuguese authorities.
- Formalities in Portugal: As a French person, you can enter Portugal without any formalities. If you stay more than 3 months, you must register with the town hall of your residence in Portugal. Beyond 180 days, you must apply for a residence permit. It will be issued to you for 5 years. Subsequently, you will be able to apply for permanent resident status from the Foreigners and Borders Service of your place of residence.
Retiring in Portugal: a good idea? Our opinion ?
Portugal still offers benefits for French retirees with property prices cheaper than in France as well as the cost of living. Without forgetting that Portugal enjoys a pleasant climate!
The abolition of non-habitual resident status sounds the death knell for tax exemption on retirement pensions but taxation remains lighter than in France in all areas!
Portugal and France have signed a tax convention in order to avoid double taxation, you will nevertheless need to look into the applicable taxation depending on your income and assets.
The best thing is to start asking people who have already left. If you have friends, they will be the best people to talk to. If this is not the case, you can find forums on which retirees who are already expatriates can give you advice on recommended cities, procedures and their feelings.
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