Why Real Estate Investors Love Portugal

Find out why Portugal is attracting a growing number of real estate investors, retirees, and expats from around the world.

A year-round Mediterranean climate. Dune-covered beaches with crystal blue waves. Irresistibly flaky pastel de nata tarts oozing with egg custard.

From its diverse landscapes to its fresh seafood-packed cooking, there’s a lot to love about Portugal. And as the sunny, seaside nation attracts international travelers at record-high rates, Portugal is also catching the eyes of savvy investors.

Touted as Europe’s best-kept secret, Portugal has become increasingly popular among investors, retirees, and expats from around the world.

Here are three reasons why Portugal stands out among European countries as a place to invest, live, and retire.

Portugal’s Golden Visa program
In an effort to attract foreign investors and property buyers, Portugal rolled out Europe’s first Golden Visa program in 2012.

By all accounts, the residency by investment program was a success – Portugal has since issued more than 6,000 Golden Visas to applicants and more than 10,000 to their family members. Since inception, the investor visa program has generated more than €3.7 billion.

So how exactly does Portugal’s Golden Visa work?
The residence by investment program allows any third-country national – essentially anyone who is not a Portuguese or EU/EFTA citizen – to gain residency in Portugal with a qualifying investment in the country.

The program has a number of different ways to make a qualifying investment and obtain a Golden Visa, including:

Investing at least €500,000 in Portuguese real estate
Investing at least €350,000 in Portuguese real estate that is at least 30 years old or situated in an area the government has targeted for rehabilitation or gentrification
Transferring at least €1,000,000 to Portugal
Creating 10 or more jobs
Transferring €350,000 to be invested in qualifying public or private scientific research
Transferring at least €250,000 to be invested in or used to support an artistic production or the renovation of national cultural heritage

As a Golden Visa holder, you and your direct family members qualify for permanent residency after five years of maintaining your investment.

After six years, you qualify for Portuguese citizenship.
To obtain residency and citizenship, you and your family aren’t even required to reside in Portugal – you only need to spend at least seven days in Portugal during the first year, and at least 14 days in each of the following two-year periods.

As a silver lining, with Portuguese residency, you enjoy visa-free travel to all 26 European countries in the Schengen area.

Portugal’s non-habitual residency regime
Another buyer-incentive program designed to woo international investors and professionals, Portugal’s non-habitual residency (NHR) regime was introduced in 2009.
The program allows eligible non-residents the chance to legally earn qualifying foreign-sourced income without paying taxes in Portugal.

How is this possible?
Part of it is thanks to the country’s 79 double-taxation treaties. According to the NHR tax regime, Portugal will not tax qualifying income from other countries as long as that country has the power to tax that income.

This is true whether or not your source country actually applies that tax, and almost all countries (with the notable exception of the U.S.) choose not to tax non-residents.
Under the NHR, sources of income that are eligible not to be taxed include foreign-source self-employment, capital gains, investment income, rental income, royalties, and occupational pensions.

Note that capital gains from the sale of securities are not exempt from taxation under NHR policies.

In addition to the opportunity to legitimately reduce your overall income tax, non-habitual residents enjoy a number of other tax benefits, including a tax exemption for gifts or inheritance to direct family and free remittance of funds to Portugal.

As a non-habitual resident, you also have the opportunity to earn Portuguese income taxed at a special flat rate of 20 percent.

You can apply for non-habitual resident status after achieving tax residency in Portugal. Residency can be established through the Golden Visa program.

To qualify for non-habitual resident status, you must not have been a Portuguese tax resident in the last five years. In addition, you must currently reside in Portugal and own or rent property in the country.

Portugal’s property market
Thanks in part to these two incentives, Portugal is one of the most dynamic property markets in Europe.

Spurred by growing demand and a thriving economy, Portugal’s housing prices have been climbing steadily since 2014. Last year, home prices soared in 23 of the country’s 24 urban areas.

Porto saw the highest growth, with property prices rising 15.6 percent during 2018. Portugal’s capital, Lisbon, saw solid growth as well, with home pricing climbing 7.9 percent in 2018.

Even as the property market flourishes, Portuguese real estate remains an exceptional value. The cost of real estate is currently around 30 percent lower on average than any other country in Western Europe.

With housing prices forecasted to continue climbing and the current weakness of the euro, now is considered by many to be an ideal time to invest in Portuguese real estate.
The Portuguese property market includes a wide variety of competitively priced real estate, from stylish modern lofts to luxury countryside homes.

Foreign investors do not face any restrictions on property ownership, and transaction costs are relatively low.

More than 300 days of sunshine a year, exceptional quality of life, beautiful beaches, and a low cost of living combined with buyer incentives and a thriving property market make Portugal an enchanting place to invest and retire.