Why do so many Brits retire in Portugal?

Portugal attracts a great number of retirees due to the tax treatments for pensioners, as well as its healthcare services and living standards. According to a recently introduced law, foreign pensioners in Portugal need to pay only a 10% tax on their foreign-source pension. This regulation is available for non-habitual residents. Additionally, the health system in Portugal is regularly ranked higher than in the UK by the World Health Organisation (WHO). It provides shorter waiting times along with rapid-response times, which are quite faster than the UK’s.

The Portuguese Immigration and Borders Service’s (SEF) 2019 data also demonstrates the British interest in the country. It shows that there are around 35.000 registered residents in Portugal. Most of them living in Lisbon, Algarve, and Porto.

Portugal also provides a serene and safe environment for the retirees. In fact, it is the third most peaceful country globally, as the 2020 Global Peace Index indicates.

Low taxes and tax exemptions

Favorable tax regulations are great incentives for UK pensioners. The reason is that income tax rates in the UK are higher compared to the European average tax rate. A 2019 study of international income rates of UHY (Urbach Hacker Young International Limited) indicates that the “UK taxpayers on the same salary would pay a 46.1% tax rate, less than in Ireland, Belgium or the US, but above the European average tax rate of 44.2%”. As a result of this, they search for alternatives.

Fortunately, Portugal offers what they need: exemption from taxes on most of their foreign income. It is called Non-Habitual Residency (NHR), and the program is valid for ten years. Under the NHR regime, you are only subject to a 10% taxation rate on your foreign pension. In addition, you are only subject to a flat rate of 20% tax rate on your Portuguese income. This is only valid for foreigners. For residents, the rate can reach up to 48%. So, it will be an advantage for foreign non-residents.

The requirements to apply for NHR are as follows:

• You should not have not been a tax resident in Portugal within the last five years, and

• You should have the right to residency in Portugal.

Also, not to mention that the UK has a Double Taxation Agreement (DTA) with more than 130 countries. Portugal is one of them. By this agreement, you don’t have to pay taxes twice on the same income if you live abroad. In addition to this, the following incomes will be tax-exempt under the NHR program:

• Real estate income and capital gains

• Gifts or inheritance to family members

• Wealth tax

Previously, the British could apply to the NHR program as EU citizens. However, after Brexit is in effect, they will lose their right to do so. Still, there are some ways to retrieve this right. One of the most popular ways is the Golden Visa Program. Under this program, individuals make certain investments in Portugal and apply for Portugal’s Golden Visa. It is a residency by investment program that comes with many benefits. These include the right to residency in Portugal, family inclusion, and visa-free travel to Schengen countries. If the individual fulfills the minimum stay requirement within five years, they can apply for permanent residency and citizenship. In this case, they can obtain the rights of dual citizenship, visa-free travel to 186 countries, and EU membership. In this way, British citizens can both regain their EU citizenship and own a house or conduct business in Portugal. Currently, UK citizens cannot apply for this program, but this will change after December 31st, 2020, when Brexit comes into effect.

Low Mortgage Rates

Deloitte Property Index 2020 released a report regarding countries’ standing in the real estate sector. It indicates that Portugal has the lowest mortgage rate in Europe. In 2019, the mortgage rate was only 1.06%. As a result of this, it has the best affordability rate for buying a house.

Great Healthcare Services

As indicated above, Portugal offers rapid response times. What is more interesting is that the average response time is seven minutes in Portugal, which is much faster than it is in the UK. This is important considering the possible emergency situations for the elderly.

Private healthcare in Portugal is very common among expats. British citizens can find many British doctors and dentists in private institutions in Lisbon. The private medical centers and private hospitals work with international private medical insurance companies. Not to mention, they can easily find English-speaking staff.

Normally, citizens of the 27 European Union countries can show their European Health Insurance Card (EHIC). In this way, they have access to free or reduced cost of healthcare in Portugal. However, considering Brexit, they can gain this right again with their Golden Visa.

Portugal also proved its well-developed healthcare system by overcoming the pandemic in a successful way. Forbes also supports this: “Portugal has been relatively spared from coronavirus with up to 40 times fewer people infected than anywhere else in Europe. Some regions, such as the Alentejo, have been almost ‘Covid-19 free’ so far with only one death linked to coronavirus.” Lagos is another region that has not recorded any coronavirus deaths. Forbes also selected Alentejo, Portugal, as one of the top 10 safest places to visit after the pandemic.

Great Climate and Better Lifestyle

As a Mediterranean country, Portugal offers a mild climate throughout the year. This creates a favorable environment for British retirees in Portugal who want to escape from the gloomy weather of the UK. It also offers various activities for retired people as well. They include golf activities, gatherings, sports facilities, and others.

Also, the cost of living is quite low in Portugal compared to other European countries. In fact, numbeo.com shows that consumer prices are 23.09% lower in Portugal than they are in the UK. The mentioned prices include the cost of rents, groceries, restaurants, and other basic costs.

In addition, they speak English widely in the main cities and tourist hubs. So, British retirees will not face trouble in communication as well.