Portugal's expat boom: 500 000 new arrivals in 5 years

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Published on 2023-06-13 at 13:00 by Ameerah Arjanee
Portugal is currently one of the most attractive destinations for expats. Great aspects of expat life in this country include the existence of multiple types of visas, relatively low cost-of-living expenses and real estate prices, an attractive tax regime, and sunny Mediterranean weather. It should be no surprise that the Ministry of Labor has revealed that the number of expats in the country reached a stunning 650,000 in April, a 364% increase in 5 years.

The larger expat workforce is boosting Portugal's economic growth and tourism industry

Portugal's Minister of Labour, Solidarity and Social Security, Ana Mendes Godinho, recently revealed that the number of expats in the country has grown by a remarkable 364% over the past 5 years. Data from SchengenVisaInfo supports her claim, showing that while Portugal had 150,000 expat workers in 2015, it now has 650,000. 

Minister Godinho highlights how their presence in Portugal benefits the local economy. In an interview with the TV channel RTP3, she revealed that these expats are now 10% of all active participants in the Social Security System, to which they now contribute €1,800 million. This has helped boost the average local salary, which rose by about 8% in the first four months of 2023. 

The presence of expats also stimulates tourism both by adding more workers to the tourism industry and by attracting more foreigners to visit the country. Portugal introduced a tourist tax in 2023, which only in the first four months of the year has already generated €2.14 million. This money is used to minimize the ecological impact of tourism in towns/cities and improve their cleanliness and security. 

The Secretary of State for Tourism, Commerce and Services has introduced an initiative to increase the number of workers in the tourism industry by 20%. Of course, this includes foreign tourism professionals who'd like to work as expats in Portugal.

The Minister of Labor, Godinho, has been enthusiastic in asserting that their country needs “to have this capacity to have foreign workers working in Portugal” and to retain that expat talent in their organizations. 

Portugal has affordable housing in semi-rural regions and a relatively low cost of living

One major driver of expatriation to Portugal is the relatively affordable cost of living and buying a house there. But even its big cities are less expensive than other global metropolises. In the Cost of Living 2023 study by the consulting firm Mercer, the capital, Lisbon, ranked among the least expensive cities for expats to live in. Living there costs about 40% less than living in London or Amsterdam. 

The country has no restrictions for expats looking to buy property, not even in the major cities. However, the best property deals are found outside big cities and popular coastal spots. In the seaside resort cities of Algarve and Albufeira, buying a house should cost around €500,000. However, in inland and semi-rural areas, you can get a spacious house for as little as €100,000-€200,000. Forbes reports that American expats have been showing a great level of interest in these semi-rural houses, especially as buying a home in the US is often much more expensive. 

There are even €1-house deals in semi-rural regions. These are houses in areas with low population density and in need of the economic boost that expats can bring. The houses are sold at a symbolic price because they are run down, and the owner is simply trying to give them away to someone who can repair and renovate them. Of course, these also tend to be old houses built in the 1970s to 1990s. Expats should calculate if the effort and money required to repair these houses make the purchase worth it and contemplate whether they should be happy living in a relatively quiet area. Luckily, Portugal is small enough that you can still easily drive to more bustling regions within a few hours.

Portugal has multiple visa options for expats

The variety of pathways to enter Portugal as an expat are also very attractive. Prospective expats can choose which type of visa fits their profile and needs best. In late 2022, the country launched a brand new Digital Nomad Visa to tap into the post-Covid work trend of remote working. It also has a Golden Visa and a Green Visa for investors and a D7 Visa for those who live off passive income. 

The income requirement of the Digital Nomad Visa is to make at least €2,800, or four times the local minimum wage, per month. Applicants can bring their spouse and children, and they can also study at Portuguese educational institutions with this visa. Meanwhile, the D7 visa is perfect for retirees who live off a pension or other forms of passive income like rent. They need to earn at least €760 a month, which is fairly low.

The Golden Visa and Green Visa are two types of investor visas. Due to pressure from the European Union, Portugal has had to make its requirements for the Golden Visa stricter, but the visa hasn't been completely written off. Applicants need to make a significant investment that is beneficial to the Portuguese economy. The investment can take different forms. They can create at least 10 jobs for Portuguese citizens, purchase at least €1 million in shares from a Portuguese company, contribute at least €250,000 to the arts or heritage sector, invest €350,000 in scientific research, or buy €400,000 worth of property in a low-density area, among other options.

The Green Visa is a more ecological alternative to the Golden Visa. Here, prospective expats need to invest €500,000 in environmental projects. Examples of such projects are organic farms, renewable energy plants, ecotourism companies and projects for carbon neutrality.

The Non-Habitual Resident (NHR) Program allows expats to save money on taxes

The NHR Program is an attractive tax regime for new expats in Portugal. It gives expats great tax exemptions for their first 10 years in the country. During that time, most of the income they derive from abroad is exempt from taxes. One exception is foreign-sourced pension income, which is taxed at a 10% rate. 

Those who are self-employed or in high-value professions enjoy a flat income tax rate of 20% on their locally-derived income regardless of how much they earn. Normally, the standard income tax rate can be as high as 40% for high-earners. The list of high-value professions includes doctors, managers, higher-education professionals, qualified construction and handicraft workers, linguists, journalists, scientists and tech workers.

During these 10 years, expats are also free from the wealth tax levied on assets like real estate and personal trusts and from inheritance tax. Neither do they have to pay taxes when sending gifts to their relatives, nor are they charged fees when transferring their cash to Portugal. When applying for the NHR Program, expats must have a valid residence permit and a domicile (home) in Portugal, but they must not have been residents for a long time, i.e., the past 5 years. The scheme is for new expats who've recently acquired tax residency in the country after living there for at least 183 days.

All of these advantageous visa and fiscal policies, combined with the low cost of living and warm weather, explain why Portugal has seen a tremendous rise in expat workers moving to the country in recent years.