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How to retire to Portugal: cost of living differences, property and the new tax changes

While the golden visa may be on the way out, the climate and cost of living still has much to appeal to Irish retirees

Cheaper living, warmer weather and world-class golf courses? Retiring to Portugal has lots of appeal. Add tax-free retirement income for 10 years, as was the case under the country’s generous Non-Habitual Residence (NHR) tax scheme, and it’s easy to see why it’s been a magnet for retirees in recent years.

Now, however, that “golden visa” scheme is going to close, so if you’re banking on a cheaper retirement in the sun, you’ll have to crunch the numbers and get professional tax advice to make sure retiring there still pays.

Why Portugal?

For Irish retirees tired of long Irish winters and unpredictable summers, Portugal’s trump card is the weather. The Algarve region in the south is particularly popular – a dry and sunny microclimate means winter temperatures rarely drop below 16 degrees.

It’s no wonder there are about 15,000 Irish people living in Portugal, according to estimates. Indeed, Irish and UK buyers accounted for 71 per cent of property sales in the Algarve in 2022, according to an end-of-year market report by Quinta Properties.


Spring there averages a balmy 21 degrees, with little rain from July to September to spoil your golf. Temperatures in the Algarve will hit 30 or more in July. Of course the world is hotting up, and you’ll pay more for a property with a cooling coastal breeze.

There are regular flights from Ireland too with schedules to Faro ramping up in the summer. While it’s only polite to try to pick up a few words of Portuguese, English is widely spoken.

When it comes to healthcare, Irish citizens have the same rights as Portuguese citizens, so you can expect equivalent care, says Christina Hippisley, general manager of the Portuguese Chamber of Commerce.

There is also the option of taking out private health insurance, to access the large network of private hospitals that have been set up in the country.

“Even if you decide to pay for your dental treatment, as opposed to going on the Portuguese health service, the prices are just lower because the cost of labour is lower,” says Hippisley.

Pastel de nata for nada

Moving to a lower cost economy can help to stretch that pension pot and Portugal’s cost of living is significantly lower than in Ireland, says Hippisley.

Coffees, dining out, pubs and hotel stays are all 29 per cent below the EU average, according to Eurostat figures. Ireland, on the other hand, ranks almost 30 per cent higher than the EU average.

You’ll save even more by dining at home of course. Food shopping in Portugal is lower than the EU average. Ireland, on the other hand, ranks over 17 per higher than the average.

When it comes to renting and maintaining a home, the costs factoring in water, gas, electricity and repairs are almost 20 per cent below the EU average. The same costs in Ireland are 92 per cent higher than the average, says Eurostat.

“It’s definitely more affordable, but you need to follow the local routines,” says Hippisley. “You don’t spend every night in a Michelin starred restaurant, but the value for money in terms of everyday living is very good.”

Venture outside resort living to local market towns for the best prices.

Tax-free pension

Of huge appeal to many Irish retirees in recent years was Portugal’s NHR tax regime. Residents of countries that have double tax agreements with Portugal – including Ireland – were eligible to apply for the regime, as long as they moved there, and also had an interest in a property there. You didn’t, however, have to purchase one: renting was sufficient.

The regime meant you could effectively live tax-free off the proceeds of your pension, saving yourself a considerable amount. After 10 years, you would be taxed at Portugal’s marginal rates.

However, while the Portuguese tax regime provides for tax-free income for 10 years, Irish Revenue also had to clear this income leaving the State tax free.

A housing crisis in Portugal has now prompted the Portuguese government to revoke the scheme. They have, however, approved a transitional regime to the end of this year, to protect those who have already begun the process of moving.

“You can’t now avail yourself of that regime, unless you can prove that you had intent to live in Portugal before December 2023,” says Shelley Wren, head of private client advisory at Sovereign Group, Portugal.

Marta de Assis Rodrigues of Taxwise adds: “To avail of it, you would need to have a promissory contract of a property in Portugal dated in 2023.”

A promissory contract to buy or rent a property in Portugal is not necessarily registered with a notary in Portugal so it’s not clear exactly how authorities will be able to verify the specific date of your intentions to move.

Politically, things are in flux too.

“We are going through elections right now in Portugal. Depending on the party that wins, this measure may or may not be revoked,” says de Assis Rodrigues. “They may bring it back, it may not be with the same name.”

Taxing times

If you miss the boat on the NHR scheme, but want to retire to Portugal, acquaint yourself with how you will be taxed if you are living there.

“Ireland has a double taxation agreement with Portugal, which means your pension can be taxed only where you are resident. So if you move to Portugal, it would be Portugal that would be entitled to tax your pension, unless it’s a public pension,” says de Assis Rodrigues.

Regarding residency, you are resident in Ireland for tax purposes if you are here for 183 days or more in a tax year, or 280 days or more in total, taking the current tax year plus the preceding tax year together.

Your income will be taxed at the relevant progressive tax rate in Portugal until we have another similar [NHR] regime approved, says de Assis Rodrigues.

Portuguese progressive tax rates start at 14 per cent and can go up to 53 per cent, she says. “It’s definitely not as attractive when tax has very low starting rates,” says Wren.

“The tax bands are low because the income in Portugal is so low – the average person on a reasonable annual income can be up as high as 48 per cent tax, that’s if your pension is significant.”

For example, a resident with income of €78,835 or more will pay tax at a rate of 48 per cent.

“Sometimes, depending on the individual, you may remain dual tax resident in both countries, because it may be that you end up paying more in Portugal than you would in Ireland,” says Wren.

“We would look at your pension, what does it come from – is it a stakeholder pension, a personal pension, defined benefit or contribution, and look at how they have been built and how old you are and when you are going to draw down. The discussion will be different if you are aged 55 or 65,” she says.

If you receive an Irish public sector pension, in general, this pension is taxed in Ireland regardless of your residence status, according to Revenue.

Approved Retirement Fund (ARF) and vested Personal Retirement Savings Accounts (PRSA) are post-retirement investment funds. If you withdraw money from either, you will be charged tax at source regardless of your residence status, says Revenue.

This is because it doesn’t deem drawdowns from such structures as pension payments.

Buying a property

But despite the change in tax outlook, developers still see considerable interest among would-be Irish buyers, with a number holding shows here of late.

Last month, Wyndham Grand Algarve, a branded residence in Quinta do Lago, held talks in Cork and Dublin, selling properties at the resort, offering a 7 per cent return.

Meanwhile, the Moving to Portugal show, with the support of the Ireland Portugal Business Network (IPBN), is also coming back to Dublin, after an absence of five years, on April 18th. It will showcase property developments in the region, as well as explaining the legal, tax, pension and financial implications of making a move to Portugal.

Anyone in the market for such a property needs to do their homework.

Those buying a property in Portugal will pay property transfer tax ranging from 1 to 8 per cent, depending on the price, the location and whether it is a first or second home in Portugal. Stamp duty tax is calculated at 0.8 per cent of the purchase price. There is also an annual property tax which varies by region.

“In Quinta de Lago, it’s 0.3 per cent on the property’s rentable value, so it’s quite low compared with other countries,” says de Assis Rodrigues.

If you rent out the property, the income will be taxed in Portugal, whether you are tax-resident there or not. “Rental income would have 28 per cent taxation,” says de Assis Rodrigues.

If the property is held in a company structure, the tax on rental income is 25 per cent, she says.

“The way the person structures their investment depends on the purpose of the investment – if they want to establish their residency in Portugal or not.”

Capital gains tax is payable on the sale of the property, but only half of the gains are considered. The tax is charged at a progressive rate and will factor in your other sources of income, says de Assis Rodrigues.

“When you rent out a property in Portugal, it transfers from being in your personal name to being a business activity and that changes the way capital gains tax is applied if you sell the property,” says Wren. “Capital gains tax will be higher than it would be for personal use.”

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