Thank you for such a well thought out article. I agree completely! Not sure how this is going to help the housing crisis or their economy. It is obviously a band aid to appease people. I am also trying to find out how my taxes will be impacted. I was planning on moving with a D7 visa from California ( with my two dogs) but I have to rethink it now. The change in NHR certainly opens up the scope of my move and I can explore other countries but I would still like to know exactly how my taxes will be impacted before I jump ship. I have not been able to get a response or they want a lot of money for a consult ( which could also be a gamble). Does anyone have any tax referrals who may be able to help me with this?
Thank you, this is thoughtful and well-written. I agree that eliminating the NHR is not the real solution; a living wage for the average Portuguese and affordable housing would seem to be a better option. We just arrived and with a SEF appointment on 30/11, we will be able to make the NHR deadline. Let's see how this whole thing shakes out as it goes through the legislative process.
I've been in Portugal for 2 1/2 years. The NHR was definitely a contributing factor for me to move here. I also love the Portuguese language, wine, beaches, people and the weather, except in the winter. The cost of living is substantially lower than California and the cost of private healthcare is 90% less, with no deductible. Not only that but Portugal is substantially safer.
After the 10 year tax pass expires, I'll likely stay in Portugal less than 6 months a year, to avoid paying taxes here. But I'll continue to receive healthcare here.
This was very interesting. Unfortunately it definitely does seem like expats are becoming less popular in Portugal. My husband and I were already uneasy about the tax situation, so this definitely dampens our enthusiasm. We have some money saved but not so much that we feel like we could shrug it off if moving abroad turns out to be more expensive than staying in the U.S.
Oct 19, 2023·edited Oct 19, 2023Liked by Carol A. Wilcox
Carol, thanks for the post. A lot of good thoughts from you and your fellow readers.
We are currently not living in Portugal, however, we are or should I say we were planning on becoming Portuguese tax residents. It may or may not make fiscal sense at this time.
We found a cool calculator from mytaxes.pt, I used $42K or €39K a year in retirement income. Assuming a U.S. tax payer, married, filing jointly, and no other deduction except the standard deduction the IRS in the U.S. allows of ($27,700). Here is my quick math:
$42,000 less the standard deduction of ($27,700) = $14,300 taxable income at 10% or $1,430. That is an effective tax rate of 3.40%.
With the NHR, 10% tax on retirement income = about $4,200 per year
Without the NHR, €39,312, the calculator from mytaxes.pt came up with an effective tax of €8,634 or about 22%.
So without the NHR, the tax rate more than doubles.
My thoughts are at this point unless something changes, we will be Portuguese visitors under the 90 day tourist visa, and spend time in other non-schengen countries. €8,634 can buy at least two airplane tickets twice a year other parts of the world.
I really don't think it makes a lot of fiscal sense. Looking at our situation, in the two tax years we have been here the NHR, after offsetting U.S. income taxes, has saved us about €10,400 or €5,200/year. Projected over the 10 years of NHR it would be a savings of €52,000. However, the purpose of the NHR was to stimulate consumption and the IVA it generates. Looking at our consumption we paid IVA of about €10,000 of what I call "start-up costs", i.e. new car, house improvements, tools/furniture/appliances, import tax on a car we brought from Latvia. Then in the past two years of just normal expenditures we paid IVA of approximately €7,600 which projected over a 10 year period would be €38,000. So, in all, a 10-year net cost to the government of €4,000 because of our NHR break. However, we own our home outright and I think that most NHR users are renters. Using a monthly rental cost of €1,500 (may be low, may be high depending upon your location) taxed at 18% gives a yearly IVA of about €3,200 or a 10 year total of €32,000 which greatly negates any increased revenue from the elimination of NHR. Take into account that it is estimated that 59% of NHR recipients remain here after the expiration of NHR and then pay normal annual IRS taxes, along with the annual IVA they will pay and the government loses even more revenue if people choose not to come here because of the elimination of the NHR. This brief analysis does not take into account the number of jobs that NHR recipients create nor does it take into account the inflationary pressure NHR recipients put on the housing market. Those are calculations best left to economists, but from just this I think the move is more of a political one to appease the resentment many Portuguese people see as an unfair advantage given to foreigners. Perhaps the government could publish some accurate estimated numbers as to the gained income tax earnings of those who choose to immigrate here despite no NHR vs the estimated numbers of those who choose not to immigrate here because of the lack of NHR, as well as potential loss of jobs vs the possible improvement of the cost of housing.
Half the buildings in downtown Porto are crumbling. Fixing these up and making them available for housing is the obvious answer to the rental crisis, but not one that is being seriously pursued. According to my architect, many of the worst buildings are actually owned by the government.
I bought a renovation property in October 2021 under the Golden Visa program. It took until April of this year for me to get an appointment with SEF, and 6 months later I still do not have my temporary residence card. The house is not even close to finished, and I cannot afford to pay for a separate rental. Of course when they finally send me the card, I will be paying over 5,000 euro for the privilege of "staying in" the GV program - which as noted by others the government has already tried to dismantle. Initially the 5 years to citizenship clock was supposed to start 6 months or so after the house purchase - now it supposedly starts when I get the temporary residence card, which is ? The government offers no clarity with regard to situations like mine. My lawyers in Portugal have no answers, especially with a new agency taking over from SEF. So this and the end of the NHR are both major negatives for me, but since I bought the house and can't sell it I have no choice but to go forward.
Everyone falls into a different tax category here in the US, so I’m sure you’ll see different responses.
In our case after meeting with our Portuguese accountant (Bruno) and our Portuguese lawyer (João) we determined that upon moving to Portugal, based upon our sources of retirement income, our tax liability would triple if we were unable to obtain NHR status. We were one week away from our scheduled D7 meeting in Boston, but with no guarantees re: NHR status and a 10,000 euro non refundable payment due on the apartment we were leasing in Cascais, we decided to “pull the plug” on our plans to retire to Portugal. Immensely disappointed.
Please keep the videos of Paul and the band coming!
Our move is planned for late 2024, after our son graduates high school. We will absolutely meet with experts who can look at our situation (mix of passive and active income) and show us how much will be left over. We will likely compare to Spain. With the loss of NHR (tipping of the scales), all options are back on the table. We always knew & accepted that a move to Europe would involve higher taxes - in our view justified by receiving healthcare, education, and other benefits with those taxes. It’s a shame we’ve missed out on such a great incentive.
As we are preparing for a move to Portugal, we met yesterday with a tax accountant and reviewed our financial structures and tax liabilities without the NHR. The estimated taxes that we will pay in the US and Portugal are not enough to sway us from our plans to move and we are still very much excited about moving to Portugal. For us, it was helpful to get the facts and projections so we can decide based on the facts. Thank you for the great article.
Honestly, at this point, I wouldn't hold my breath on the whole citizenship-after-five-years thing. Given the government's apparent willingness to change the rules of the game midway, and its kneejerk reactions to various issues, I think we're one 'serious crime committed by a newly naturalized citizen' away from the government getting rid of the whole program. In fact, they just proposed getting rid of the citizenship by Sephardic descent program - which got a black eye after a Russian Oligarch gained citizenship last year while trying to avoid EU sanctions.
Additionally, PM Costa pointed to the fact that 59% of people stayed in Portugal after their NHR expired, but the program has only been around for 12 or 13 years, and 2 of those years were during the pandemic (when no one was moving anywhere), so that statistic - which really isn't all that impressive in the first place - is even less meaningful than it seems. I wouldn't be surprised if, as more and more people obtain citizenship and then leave for other EU countries, the government decides to change the rules (for example: requiring 10 years residency before citizenship as Spain does, or only offering an option of permanent residency rather than citizenship).
I certainly hope I'm wrong, but if I were assessing the potential benefits of moving to Portugal right now, I'm not sure I'd weight that item very heavily.
Thanks for your well thought out article. We love Portugal, too but having lived here only since June and without the arrival of my residency card yet, I may miss the deadline for applying for NHR. My husband (going for family reunification) will almost certainly miss it since he doesn't even have a meeting for it scheduled. We, too, are not wealthy enough to have our retired benefits taxed at 40% or more, when we paid zero in the US. But considering we've already sold everything there to make this move and we are still renting, it will be relatively easy to move again. As you said, there are other European countries that can still be considered attractive for some of us.
Thank you for such a well thought out article. I agree completely! Not sure how this is going to help the housing crisis or their economy. It is obviously a band aid to appease people. I am also trying to find out how my taxes will be impacted. I was planning on moving with a D7 visa from California ( with my two dogs) but I have to rethink it now. The change in NHR certainly opens up the scope of my move and I can explore other countries but I would still like to know exactly how my taxes will be impacted before I jump ship. I have not been able to get a response or they want a lot of money for a consult ( which could also be a gamble). Does anyone have any tax referrals who may be able to help me with this?
Thank you, this is thoughtful and well-written. I agree that eliminating the NHR is not the real solution; a living wage for the average Portuguese and affordable housing would seem to be a better option. We just arrived and with a SEF appointment on 30/11, we will be able to make the NHR deadline. Let's see how this whole thing shakes out as it goes through the legislative process.
I've been in Portugal for 2 1/2 years. The NHR was definitely a contributing factor for me to move here. I also love the Portuguese language, wine, beaches, people and the weather, except in the winter. The cost of living is substantially lower than California and the cost of private healthcare is 90% less, with no deductible. Not only that but Portugal is substantially safer.
After the 10 year tax pass expires, I'll likely stay in Portugal less than 6 months a year, to avoid paying taxes here. But I'll continue to receive healthcare here.
This was very interesting. Unfortunately it definitely does seem like expats are becoming less popular in Portugal. My husband and I were already uneasy about the tax situation, so this definitely dampens our enthusiasm. We have some money saved but not so much that we feel like we could shrug it off if moving abroad turns out to be more expensive than staying in the U.S.
Carol, thanks for the post. A lot of good thoughts from you and your fellow readers.
We are currently not living in Portugal, however, we are or should I say we were planning on becoming Portuguese tax residents. It may or may not make fiscal sense at this time.
We found a cool calculator from mytaxes.pt, I used $42K or €39K a year in retirement income. Assuming a U.S. tax payer, married, filing jointly, and no other deduction except the standard deduction the IRS in the U.S. allows of ($27,700). Here is my quick math:
$42,000 less the standard deduction of ($27,700) = $14,300 taxable income at 10% or $1,430. That is an effective tax rate of 3.40%.
With the NHR, 10% tax on retirement income = about $4,200 per year
Without the NHR, €39,312, the calculator from mytaxes.pt came up with an effective tax of €8,634 or about 22%.
So without the NHR, the tax rate more than doubles.
My thoughts are at this point unless something changes, we will be Portuguese visitors under the 90 day tourist visa, and spend time in other non-schengen countries. €8,634 can buy at least two airplane tickets twice a year other parts of the world.
Very interesting article! I think the likelihood of us moving to Portugal is less than 50%, but I love the country and would always enjoy visiting!
I really don't think it makes a lot of fiscal sense. Looking at our situation, in the two tax years we have been here the NHR, after offsetting U.S. income taxes, has saved us about €10,400 or €5,200/year. Projected over the 10 years of NHR it would be a savings of €52,000. However, the purpose of the NHR was to stimulate consumption and the IVA it generates. Looking at our consumption we paid IVA of about €10,000 of what I call "start-up costs", i.e. new car, house improvements, tools/furniture/appliances, import tax on a car we brought from Latvia. Then in the past two years of just normal expenditures we paid IVA of approximately €7,600 which projected over a 10 year period would be €38,000. So, in all, a 10-year net cost to the government of €4,000 because of our NHR break. However, we own our home outright and I think that most NHR users are renters. Using a monthly rental cost of €1,500 (may be low, may be high depending upon your location) taxed at 18% gives a yearly IVA of about €3,200 or a 10 year total of €32,000 which greatly negates any increased revenue from the elimination of NHR. Take into account that it is estimated that 59% of NHR recipients remain here after the expiration of NHR and then pay normal annual IRS taxes, along with the annual IVA they will pay and the government loses even more revenue if people choose not to come here because of the elimination of the NHR. This brief analysis does not take into account the number of jobs that NHR recipients create nor does it take into account the inflationary pressure NHR recipients put on the housing market. Those are calculations best left to economists, but from just this I think the move is more of a political one to appease the resentment many Portuguese people see as an unfair advantage given to foreigners. Perhaps the government could publish some accurate estimated numbers as to the gained income tax earnings of those who choose to immigrate here despite no NHR vs the estimated numbers of those who choose not to immigrate here because of the lack of NHR, as well as potential loss of jobs vs the possible improvement of the cost of housing.
Half the buildings in downtown Porto are crumbling. Fixing these up and making them available for housing is the obvious answer to the rental crisis, but not one that is being seriously pursued. According to my architect, many of the worst buildings are actually owned by the government.
I bought a renovation property in October 2021 under the Golden Visa program. It took until April of this year for me to get an appointment with SEF, and 6 months later I still do not have my temporary residence card. The house is not even close to finished, and I cannot afford to pay for a separate rental. Of course when they finally send me the card, I will be paying over 5,000 euro for the privilege of "staying in" the GV program - which as noted by others the government has already tried to dismantle. Initially the 5 years to citizenship clock was supposed to start 6 months or so after the house purchase - now it supposedly starts when I get the temporary residence card, which is ? The government offers no clarity with regard to situations like mine. My lawyers in Portugal have no answers, especially with a new agency taking over from SEF. So this and the end of the NHR are both major negatives for me, but since I bought the house and can't sell it I have no choice but to go forward.
Hi Carol,
Everyone falls into a different tax category here in the US, so I’m sure you’ll see different responses.
In our case after meeting with our Portuguese accountant (Bruno) and our Portuguese lawyer (João) we determined that upon moving to Portugal, based upon our sources of retirement income, our tax liability would triple if we were unable to obtain NHR status. We were one week away from our scheduled D7 meeting in Boston, but with no guarantees re: NHR status and a 10,000 euro non refundable payment due on the apartment we were leasing in Cascais, we decided to “pull the plug” on our plans to retire to Portugal. Immensely disappointed.
Please keep the videos of Paul and the band coming!
Mel & Nina
Our move is planned for late 2024, after our son graduates high school. We will absolutely meet with experts who can look at our situation (mix of passive and active income) and show us how much will be left over. We will likely compare to Spain. With the loss of NHR (tipping of the scales), all options are back on the table. We always knew & accepted that a move to Europe would involve higher taxes - in our view justified by receiving healthcare, education, and other benefits with those taxes. It’s a shame we’ve missed out on such a great incentive.
As we are preparing for a move to Portugal, we met yesterday with a tax accountant and reviewed our financial structures and tax liabilities without the NHR. The estimated taxes that we will pay in the US and Portugal are not enough to sway us from our plans to move and we are still very much excited about moving to Portugal. For us, it was helpful to get the facts and projections so we can decide based on the facts. Thank you for the great article.
Honestly, at this point, I wouldn't hold my breath on the whole citizenship-after-five-years thing. Given the government's apparent willingness to change the rules of the game midway, and its kneejerk reactions to various issues, I think we're one 'serious crime committed by a newly naturalized citizen' away from the government getting rid of the whole program. In fact, they just proposed getting rid of the citizenship by Sephardic descent program - which got a black eye after a Russian Oligarch gained citizenship last year while trying to avoid EU sanctions.
Additionally, PM Costa pointed to the fact that 59% of people stayed in Portugal after their NHR expired, but the program has only been around for 12 or 13 years, and 2 of those years were during the pandemic (when no one was moving anywhere), so that statistic - which really isn't all that impressive in the first place - is even less meaningful than it seems. I wouldn't be surprised if, as more and more people obtain citizenship and then leave for other EU countries, the government decides to change the rules (for example: requiring 10 years residency before citizenship as Spain does, or only offering an option of permanent residency rather than citizenship).
I certainly hope I'm wrong, but if I were assessing the potential benefits of moving to Portugal right now, I'm not sure I'd weight that item very heavily.
Carol, thanks for the Lexigon reference I had not read that. As always, enjoyed today’s post.
Thanks for your well thought out article. We love Portugal, too but having lived here only since June and without the arrival of my residency card yet, I may miss the deadline for applying for NHR. My husband (going for family reunification) will almost certainly miss it since he doesn't even have a meeting for it scheduled. We, too, are not wealthy enough to have our retired benefits taxed at 40% or more, when we paid zero in the US. But considering we've already sold everything there to make this move and we are still renting, it will be relatively easy to move again. As you said, there are other European countries that can still be considered attractive for some of us.