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Portugal – The New Spain For Relocation?

Could Portugal be overtaking Spain as the new hotspot for British expats? In this article, Amy Heslop of Global Expatriate Tax Services Ltd discusses the many benefits of moving to Portugal, including the new tax incentives for non-habitual residents.

Portugal’s popularity increasing unabated

The Portuguese have a phrase ‘Engolir Sapos’, which directly translated means to ‘swallow frogs’. In other words, to do something you don’t want to do. Well, I can think of many things I don’t want to do, such as getting sunburnt at Praia da Rocha beach, or lost in Lisbon on Carnival Day or winding up with food poisoning after one too many Pastel de natas. But one thing I would definitely not consider as ‘engolir sapos’ would be moving to Portugal. Portugal is booming.

Portuguese Chamber of Commerce

According to a survey conducted by the Portuguese Chamber of Commerce in the UK in 2021, 59% were looking to move to Portugal permanently once the Government had reopened travel. The country offers a lot more than just alluring beaches and an attractive climate. But don’t just take it from the 2021 survey; the Chamber’s Christina Hippisley says:

“Portugal appeals to a relatively wealthy demographic. On top of its existing fanbase of older, more established retirees and second homeowners, the country’s growing reputation as a tech investment and manufacturing hub is attracting a new breed of younger, working families keen to live there permanently.”

Christina’s inbox has been flooded with inquiries about business relocations and residency options.

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Comparisons with Spain

With the likes of the art utopia Barcelona, culture rich Madrid and the stunningly beautiful Valencia, Spain has often scored the top spot over Portugal for the expat hit list. This choice is sometimes unjustified, argue local expat tax advisors in Lisbon:

“Portugal offers similar benefits with regard to climate, lifestyle, and low cost of living … Portugal has a similar visa to Spain’s NLV, the Passive Income Visa, which has a significantly lower annual income requirement – €11,970 (approximately £10,379) for a couple and €16,658 (approximately £14,444) for a family of four. The visa also does not restrict you from working or setting up a business as the Spanish NLV does.”

Portuguese tax perks for expatriates

In an effort to score talented or high net worth individuals, 2009 saw Portugal revamp its tax system with an abundance of benefits for non-habitual tax residents (NHR). The introduction of the non-habitual residence (NHR) regime has two clear advantages for qualifying professionals who become NHR.

Firstly, you can live as a Portuguese resident but not pay tax on your earnings elsewhere in the world (including capital gains and employment), effectively giving you a non-resident status. Secondly, you’ll pay income tax on Portuguese earnings at a flat rate of 20%, rather than the standard progressive rates of up to 48%.

It should be noted that the Portuguese government has increased the tax rate on foreign pension income from 0% to 10%, which is still about 20% less than that of the UK average. Furthermore, there is no inheritance tax, gift tax or wealth tax in Portugal for non-habitual residents.

Why else do expats favour Portugal?

We’ve all had those thoughts, you know the ones: wishing that two-week all-inclusive was more of a one-way ticket. You’ve just stepped off one of those lemon sherbet-coloured trams, perhaps with a gelato in hand. The sun is beating down over the boulevard, wherein neatly lined windows the locals hang their washing. You might go to the beach later. A plunge in the sparkling waters off the endearingly rugged coastline sounds just about perfect right now. A siesta this time of day would also just hit the spot.

Staying on in Portugal

Before you know it, you’ve casually wondered past the houses for sale, maybe even detoured to the local schools! The language will need a bit of work, you think to yourself. The beauty of Portugal is it never ceases to amaze all year round. That two-week snapshot above barely scratches the surface of the wonders to come.

A calendar year of attractions

September to October will see the vineyards in full harvest, with a warm temperature cool enough to really make the most of that bursting itinerary of hiking and sightseeing. November to December still lingers at a reasonable 15 to 20 degrees Celsius, compared with the UK’s measly 4 degrees Celsius. These winter months see the celebrations for a Portuguese Christmas, which climaxes on the 24th not the 25th. Christmas can traditionally consist of feasts, nativity scenes, markets, Consoadas, midnight masses, extravagant lighting and more. January welcomes carolling with the Dia de Reis gift giving.

February is carnival month – a three-week non-stop party. The costumes, the music and the dancing are an immersive breath-taking experience. The pockets of vivid rainbow colours, flash as sequins and feathers and the smell of delicious street food hangs in the air. If you’re still sat on the fence, welcome to spring and summer.

March through to May hosts holy week and pilgrimage. Also marking the Carnation Revolution, which saw the end of Portugal’s nearly 50-year dictatorship, is Freedom Day, which happens yearly at the end of April. So, on the 25th April, think homely street parties and captivating firework displays, as well as the most beautiful blossoming of native flowers and rising temperatures.

An opera and classic music festival also takes place in the palaces and gardens during springtime. June until August is when the temperatures easily climb to that much loved 29 degrees Celsius. I’ll leave that one to your imagination.

Global Expatriate Tax Services Ltd (GETS) are highly experienced UK tax specialists helping UK expats abroad AND foreign nationals living in the UK. Contact them today for confidential, no-obligation advice with your UK tax affairs.

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