Business & Investment, Travel

Why Foreign Investors Are Moving To Portugal

“Where else could I have all this? In winter?” asked the former Swiss investment banker over coffee at Fabrica Coffee Roasters, gesturing towards Lisbon’s sunny Rua da Flores.

In 2017, the banker and his wife joined a steady flow of expatriates buying a home in Portugal and taking up residency there. They live just in the foothills of Sintra, an UNESCO World Heritage site. They sail, eat out, enjoy the local art and music and play golf, most often on the championship course at Penhe Longa, designed by Robert Trent Jones Jr, and the dunes of Oitavos. It can be idyllic, he said. “And,” he added, shrugging his shoulders, “it helps that Portugal’s tax regime is very attractive, particularly for higher rate taxpayers.”

So attractive in fact, that a Pwc report called Europe’s Best Kept Secret explains precisely why Portugal is a top tax choice.

In 2009, Portugal introduced a range of tax benefits for both EU and non-EU citizens. New residents from the EU/EEA/Switzerland or a holder of a residence permit are eligible for the Non-Habitual Residence regime (NHR) for the first ten years they are in Portugal. After that, they are subject to Portuguese rates of taxes, which at a top tiered rate of 48%, tend to be lower than elsewhere in Europe. Acording to Edge International Lawyers, residence means having a habitual residence in Portugal or spending more than 183 days in Portugal over the tax year between January 1 and 31 December.

“Interest in Portugal has increased significantly, coinciding with the emergence from recession worldwide and word getting out about those tax incentive,” comments Gavin Scott, tax-lead investment advisors Blevins Franks’ senior Partner, Portugal. “Pensions that may have been taxed in the countries in which they arise will not suffer tax in Portugal.”

This has proved particularly popular with British citizens, since many pensions, including former Civil Service ones, can be paid gross – i.e. without deducting UK tax – in the UK, with no tax due in Portugal over the ten tears of the NHR scheme.

For non-EU citizens, Portugal’s Golden Visa is very attractive. To qualify for the Golden Visa, you need to acquire real estate of 500,000 euros ($) or spend 350,000 euros on a property built over 30 years ago, or on one in an area of urban regeneration. The NHR scheme also encourages companies to base research and development in Portugal at a comparatily low tax rate.

This has helped attract direct foreign investment from outside the EU, with China now the mainsource of direct foreign investment, according to a report published by Reveal Portugal.

As non EU investors have to buy a home to qualify for the Golden Visa, while the NHR requires Portuguese residency, there are quite a lot of property buyers trying to snap up a limited range of properties. Scott says that better properties are selling in a matter of weeks, with a knock on effect on property prices.

This shows up in property prices around Lisbon and the nearby Silver Coast, the Algarve and Porto. Prices in these areas popular with foreigners have risen by 4.84% (3.26% in real terms) over the year to November 2017, according to Statistics Portugal.

Some governments don’t like it. Last year, the Swedish finance minister made her disapproval clear for citizens who were merely relocating to Portugal to avoid higher rates of tax.

Between 2011 and 2014, the numbers of Swedes buying property in Portugal tripled, according to Business Insider Nordic.

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