Portugal has been considered Europe’s tax haven for expats
Brits retiring in Portugal have enjoyed preferential tax treatment for their pension income. However, Portugal’s new ruling party have recently announced an amendment to tax exemptions for foreign residents.
Are you affected?
If you’ve already moved to Portugal, and gained non-habitual resident status before 2020, you will not be affected. Those already resident in Portugal will continue to enjoy their tax exemptions for the period registered.
Is Portugal still a good option?
While Portugal continues to offer a favourable tax regime, the recent changes mean that instead of zero tax on foreign pension income, future residents will be taxed. A taxation of 10% will be applied to pension income sourced from outside of the country, including UK pension income.
The 10% tax rate remains a benefit, and is clearly much lower than Portugal’s normal marginal tax rates. If you’re looking for a financially efficient EU residence, Portugal still leads the way for tax planners.
Only time will tell if the introduction of tax will put off expatriates considering a move. It may not be as attractive for those with a modest pension income, but for high earners, continues to offer some tax incentives.
Read our Retirement Options guide to help decide what’s best for your retirement planning.