Retirement in Portugal: Is It Still The Best Destination 2025?

Portugal has long been a favourite among retirees with its stunning landscapes, affordable cost of living and welcoming culture. One of the biggest concerns for those considering retirement in Portugal in 2025 is the discontinuation of the Non-Habitual Resident (NHR) tax program. This change has led many potential retirees to reconsider their plans of moving to Portugal.

Considerations Before Retiring in Portugal

1. Taxes: before and after NHR

Under the NHR regime, foreign pension income was taxed at a flat rate of 10%, compared to potentially higher rates in the retiree's home country. There's no scope for for favourable treatment of foreign pension benefits at the moment.

HOWEVER, with appropriate pension structuring and partnering with knowledgable and qualified professionals you can still acheive reduced taxation level.

Ingenium financial and our partners make it possible for you to acheive a highly favourable effective rate on foreign pension equal to or lower than the previous headline rate (10% or lower).

Financial planning is very important and need to be done in advance. Reach out for professional assistance at an early stage of considerations making Portugal your home.

2. Obtaining Residency

Obtaining residency in Portugal may initially seem complicated and overwhelming, but the process is actually straightforward if you follow the correct steps. Portuguese immigration rules provide clear guidelines, and proper preparation is crucial for a smooth transition. You should start your application from your home country well in advance of your move to ensure compliance with legal requirements. While there have been delays in processing residency applications, the situation is improving. SEF (Serviço de Estrangeiros e Fronteiras) has transitioned into AIMA (Agência para a Imigração e Mobilidade Administrativa), bringing significant reforms, including hiring more staff, digitising services, and addressing backlogs more efficiently. These improvements make obtaining residency smoother and more predictable than before. Our partners offer a comprehensive service to assist with your legalization process in Portugal, ensuring all paperwork is correctly handled to minimize delays and complications.

Key Factors Attracting Retirees to Portugal

1. Affordable Cost of Living

Despite tax changes, Portugal remains an attractive option due to its affordability compared to other Western European nations. Everyday expenses, housing, dining, and utilities are significantly cheaper, allowing retirees to enjoy a comfortable lifestyle on a modest budget. Portugal offers excellent value for money, helping pensioners make the most of their savings.

2. Pleasant Climate

With over 300 days of sunshine a year, Portugal boasts one of the best climates in Europe. Retirees seeking warmth and sunshine will find the Algarve region particularly appealing, thanks to its mild winters and sun-drenched summers. The Mediterranean climate promotes an active and enjoyable retirement lifestyle.

3. Safety and Stability

Safety is a major concern for retirees, and Portugal consistently ranks high on global safety indexes. It is one of the safest countries in Europe, with low crime rates and a politically stable environment. Portugal has a secure and peaceful atmosphere, making it an ideal place for retirees seeking a stress-free lifestyle.

4. Cultural Richness and Natural Beauty

From the historic streets of Lisbon and Porto to the breathtaking coastlines of the Algarve, Portugal offers a diverse cultural and natural landscape. Retirees can explore historic sites, enjoy beachside living, and immerse themselves in local traditions. Whether one prefers an active lifestyle or a relaxed pace, Portugal caters to all preferences.

You might fint the following article from The Portugal News of interst regarding this subject.

Retirement in Portugal: is it Still a Good Destination?

Despite changes to the tax regime, Portugal remains one of the best retirement destinations globally. With its affordable cost of living, world-class healthcare, pleasant climate, safety, and rich cultural experiences, the country continues to offer an unparalleled quality of life. Proper financial planning and understanding the new tax regulations can help retirees maximize their benefits while enjoying everything Portugal has to offer.

For those still considering retiring in Portugal, consulting with financial and legal experts can help navigate tax policies and residency requirements. While some may hesitate due to tax changes, Portugal continues to provide a fantastic retirement lifestyle for those seeking a vibrant and fulfilling experience.

Text author: Phil Morris

21 February 2025

Frequently Asked Questions

Tax efficient savings and investments

How to pay less tax in Portugal?

For expats living in Portugal there are some tax saving solutions available for those who have ability to invest lump sum cash savings to generate future income.

The solutions tend to be what are known as Portuguese Compliant Investment Bonds. Can be introduced to you by an appropriately licenced Financial Adviser.

The solutions are fully allowable to all residents of Portugal and are compliant with the Portuguese tax code.

What is a Portuguese Compliant Investment Bond (PCIB)?

A tax efficient savings and investment wrapper approved by Portuguese IRS for use by residents of Portugal.

Owners can benefit from tax free growth and reduced level tax on income.

Need full explanation and advice prior to establishment.

How can an expat invest in Portugal?

Expats can invest in Portugal through regulated financial institutions using structures that allow access to both Portuguese and international investments.

Common options include bank investment accounts, brokerage platforms, and insurance-based investment structures such as Portuguese-compliant bonds (PCIBs). The most suitable option depends on residency status, tax situation, investment goals, and whether the individual plans to remain in Portugal long term.

It is important for expats to consider Portuguese tax rules, reporting obligations, and cross-border implications before investing.

Can I manage a PCIB myself?

No, the financial regulator requires the providers of PCIBs to insist on the appointment of an appropriate Financial adviser.

The FA will explain some of the most complex features of the PCIB and ensure that it is well managed going forward. The investment portfolio held within a PCIB can be created and managed in several different ways to suit the client’s needs. To ensure that the FA provided to you comes under the highest levels of scrutiny and protection, seek an adviser who works directly under a MiFID II licence.

If you are a resident of Portugal you may want to seek an adviser based in Portugal who is familiar with local taxation and for potential ease of communication.

What are the available tax-efficient saving structures for residents and expats in Portugal?

Tax-efficient saving structures in Portugal typically include insurance-based solutions, retirement plans, and carefully structured investment portfolios.

For residents and expats, Portuguese-compliant insurance bonds (PCIBs) are often used to defer taxation on investment growth, simplify reporting, and allow flexible investment management. Other options may include pension solutions (PPRs) or standard investment accounts, depending on personal circumstances.

Does a PCIB only allow investments inside Portugal?

No, a PCIB allows investments in a globally based portfolio, subject to minor constraints.

The investment strategy spreads capital across various asset classes, regions and currencies to reduce risk and enhance potential returns. A PCIB is typically located in either Ireland or Luxembourg.

As both countries are located within the EU, the PCIBs are fully compliant with Portuguese tax law (one of the qualifying criteria).

Sometimes people confuse these structures with golden visa requirements.

Is there a minimum investment amount required to open a PCIB account?

Yes, the minimum cash amount typically is €100,000 or currency equivalent.

There are several providers, and the percentage fee basis will typically reduce the more you invest.

Although the investment is made whilst being resident in Portugal, other major currencies aside from Euro can be used or held in the investment, such as USD and GBP.

Fees, licence, qualification

What is the average cost of using a financial advisor?

Using a financial adviser could cost approximately 1 percent p.a. There are also charges applicable to the use of a financial solution.

Only a MiFID II adviser is required to provide you with explicit, clear and transparent information in relation to your expected fees and charges. Some of the applicable fees provide added insurance relating to the advice you receive and indemnify your investment.

How should you choose a financial adviser as an expat?

Look for an adviser who is qualified to UK level 4 or EU level 5 or equivalent and works under a MiFID II licence.

An adviser with knowledge of both Portugal and your original home country would be advantageous.

Seek an adviser experienced in cross-border advice.

How to check the credentials of a financial planner?

You should familiarise yourself with the credentials of the individual providing the advice to you and understand how they are licensed and regulated.

You can engage with a Chartered adviser who works under a MiFID II licence.

Cross-border planning

Do I need a specialist in cross-border financial planning when living in Portugal?

Yes, cross-border financial planning is important for individuals with assets, income, or pensions in more than one country.

Do UK tax rules still apply after moving to Portugal?

It depends on assets that you are holding in the UK.

You could become tax resident in Portugal and therefore UK taxation is not applicable except in the case of UK property.

Special attention could be given to UK inheritance tax.