Portugal has got a great climate, beautiful coastlines, historic towns and offers a cost of living that is lower than in many other European destinations, which makes it one of the worlds favourite retirement destinations.Nearly 60,000 British people have made Portugal their home, the majority choosing to live in the southerly Algarve region.
The pace of life is calm, the weather is good, the facilities and amenities are of a high standard and there are a multitude of soft sandy beaches, breathtaking cliff walks, world-class golf courses, and fabulous restaurants. Add to this the bonus that a large proportion of the Algarve locals speak English and there are daily flights from Faro to many UK airports, the Algarve makes the perfect place to retire!
As wonderful as all this sounds there are some practicalities you should consider before moving to Portugal, including your healthcare, any pensions, your will and your financial/taxation situation.
Healthcare in Portugal
The Portuguese 'National Health Service' (Serviço Nacional de Saúde - SNS) is excellent, and most medical staff speak at least a little English.
General healthcare is free of charge, but a consultation at the accident and emergency department may incur a small fee (less than €10). X-rays, scans and other tests often require co-payment.
The health system is regularly ranked higher than UK by the World Heath Organisation with waiting times shorter and rapid-response times much faster than the UK’s.
There is of course always the option of private healthcare in Portugal. All private medical centres and private hospitals work with the international private medical insurance companies and there are reciprocal agreements in place with many UK insurers.
Your UK pension
In recent years, Portugal has put tax incentives such as the Golden Visa and Non-Habitual Residency Scheme in place, to attract wealthy retirees from around the world. But for those of us who don't fit in to the 'wealthy' status, making your move to Portugal successful long term requires a bit of forward planning and some expert financial advice too.
If you receive a UK State Pension you can choose to receive it into a UK or Portuguese account. One thing to consider is that if its paid into your UK bank account in sterling you will probably incur fees when transferring it or withdrawing it in Portugal, the amount will depend on the GBP/EUR exchange rate.
We suggest you use a currency transfer company to transfer money. Currencies do go up and down and currency brokers can often offer you better rates than banks on the transfer of regular transfers like pension, or even lump sums.
They can set up a regular payment plan for your transfers, meaning you will pay the same each month, so helping you budget.
In Portugal the taxation of pensions depends on what type of pension you have - State Retirement and Occupational Pensions; Government Service Pensions and Personal Pensions. If you have a complex pension situation, or multiple pension funds its really important to speak to a financial advisor before you leave the UK, for advice on the most tax-efficient way of arranging your assets, whether in the UK or Portugal, or both.
Wills and Inheritance
When you buy a property abroad, or relocate full time, it is even more important than normal that you make a will (and update it). It will save a lot of extra heartache, stress and possibly expense to those left behind.
By Portuguese law, if die resident in Portugal and don't have a will, all your assets will be distributed by the 'forced heirs'. However if you DO have a will the Portuguese Civil Code states that the will of a foreign resident is governed by that country's national law, so a will that is valid under UK law will be recognised by the Portuguese authorities.
Something to consider though is that the translation and legalisation costs of a non Portuguese will can run into several hundreds and the process can be prolonged so making a Portuguese will saves time and money in the long run, plus you do not have to leave it to 'forced heirs' to deal with.
Your Portuguese will (and you can have one in each country) will allow your chosen heirs to access the assets they inherit, not only real estate, but also others such as savings accounts. Your surviving spouse will not be able to access accounts unless recognized by the Portuguese authorities as the lawful heir.
Inheritance Tax (IT) in Portugal is very good. Not only does it only apply to Portuguese assets, it’s also only 10 per cent - and if you are leaving your estate to a spouse or your children it will be exempt from Inheritance Tax.
Portuguese taxes for retirees
When it comes to taxes, Portugal is just as complex as any other country, and is full of bureaucracy. However, it IS one of the most generous tax schemes in Europe.
Generally speaking, Portuguese residents are taxed on salaries, capital gains, real estate earnings and income from abroad. Foreign earnings may be covered under a tax treaty that will avoid you paying tax in both countries (a double tax treaty). Part time residency and other situations may mean that income tax is only to be paid on income in Portugal and not on income earned in other countries.
There is a lot of information online but check with a reputable tax accountant to ensure you’ve got it right for your personal situation.
In Portugal there is an annual property tax (IMI), the equivalent of council tax, which is based on the rateable value of your home. As a rule of thumb wherever you are, the more facilities there are, the higher the charges for IMI.
Remember you will need to inform HMRC that you are no longer tax resident in the UK and also that you will need to register as a tax payer in Portugal. You need to complete a registration form called the “fiche de inscricao” and then submit it via your local tax office, but a financial advisor can help arrange all of this for you.
Portuguese tax residents are required to submit an annual income tax return early in the following year after their arrival. The deadline for the Portuguese income tax annual return depends on the type of income you receive, but for retirees (rather than employees) it is typically April 30th. The tax year follows the calendar year and ends on the December 31st. Beware that failing to correctly submit your Portuguese tax return and payment on time can be costly.
Starting your new life
Moving somewhere new is always going to be a challenge. One important thing is to meet new like-minded people, who can support you on your new adventure. There are many clubs and associations in Portugal, all with international members, from amateur dramatics, cycling and motorbiking, to bowls, running clubs and general social groups. If you play golf, you’ll quickly find yourself part of an expat social scene.
Portugal is a very friendly nation but the Portuguese language is not easy to learn, so joining a group or club of international members will help you learn some basics.
You’ll find plenty of people ready to help you with the day to day things like registering for utilities and healthcare - expats living nearby, various societies and forums, social media groups etc.
If you have purchased your Portuguese home through an estate agent you may find they are happy to help and advise, especially as many are expats themselves and have been through the process.
If you bought your property you will already have a Portuguese bank account, but if not you will need to open an account with a Portuguese bank of your choice. To do this you will need your passport, a Portuguese fiscal number (which you can obtain at the local Finanças), proof of income and proof of address.
You will also need to apply for residency or “residencia” by registering at the local council office/town hall (Camara) or SEF office (Servico de Estrangeiros e Fronteiras).
For this you will need your passport, plus additional documents to prove you have sufficient funds to support you/your family, proof of address etc.
Driving in Portugal
You can drive in Portugal using your valid EU driving licence from your own country for up to 90 days if you are not a resident. After 90 days you must apply for your residencia and when that is issued you have 30 days to register your driving licence with the Portuguese driving authorities (IMTT). As a foreign driver you must carry your documents with you at all times when driving (your driving licence, motor insurance, IPO (similar to MOT), fiscal ID card, and Certificado de Matricula (vehicle registration certificate).
Living Costs in Portugal
For most people one of the appealing aspects to living in Portugal is its affordability, that day to day living is cheaper than in the UK.
If you eat fresh produce and buy Portuguese wine, rather than buying lots of expensive imported goods, your food budget will be noticeably less than in the UK. You will find this more so in non-tourist towns and villages, the more popular tourist areas obviously price their goods a little higher.
Car prices and petrol costs are more expensive than many other parts of Portuguese life (and there are toll fees on motorways), but public transport options are cheap and reliable. If you drive you will also need to pay road tax (IUC), which is substantially lower than in UK.
If you live on a development with common areas that need to be maintained, such as swimming pool, gardens, lifts and security guards, you will also need to pay condominium charges.
Having a private swimming pool comes at a cost (pumps, filters, pool cleaning), but the hourly rate for household help (gardeners, pool cleaners and house cleaners) tends to be lower than in the UK.
Buildings insurance and contents insurance tend to be similar to those in the UK, and utility and internet bills tend to be roughly the same.
Other things to consider
In Portugal, life insurance may be required for a mortgage, but if you purchse a property without a mortgage you may wish to retain foreign life insurance while you are resident in Portugal - check that your existing life insurance policy is valid abroad?
If you are over 65 you can apply to your local Junta de Freguesia (civil parish) for a Cartão Senior (pensioner card). This entitles you to certain discounts on public transport and certain entertainments.
