Portugal's very generous tax gift to French pensioners

Portugal has seen its conservative government deposed by a coalition of left-wing parties, including communists. This upheaval will not call into question the pension scheme enjoyed by European and French retirees moving to the country.

Should French retirees planning to spend their golden years in Portugal tremble? On Tuesday November 10, the Conservative government of Pedro Passos Coelho was overthrown by an alliance of left-wing parties including the Socialist Party, the ecologists, the Communists and the anti-austerity left-wing bloc.

However, Pedro Passos Coelho's government had introduced a highly favorable tax regime to encourage European retirees to come and stay in Portugal. Since January 1, 2013, any European retiree who has not lived in Portugal for more than five years before retiring can spend his or her old age here, and be exempt from paying tax on his or her pension. To do so, they must also have non-resident status in their country of origin, i.e. prove that they live in Portugal for at least 183 days a year. Finally, they must have worked in the private sector. Civil servants, on the other hand, remain taxable in the country where they were employed.

Ahead of Morocco and Thailand

This tax niche has had the effect of attracting more and more French retirees to Portugal. So much so, in fact, that according to a ranking carried out by retraite-etranger.fr at the beginning of the year, Portugal came top of the list of foreign destinations where French people decide to spend their retirement, ahead of Thailand and Morocco. What's more, 20,000 French people are expected to arrive in 2016, the vast majority of them retirees, according to the President of the Franco-Portuguese Chamber of Commerce and Industry, Carlos Vinhas Pereira, quoted by the JDD.

But could the fall of Pedro Passos Coelho's government and the probable arrival of a plural left-wing government call everything into question by repealing the tax regime? "There's no reason to be alarmed," replies Pascal Gonçalves, president of the Casa em Portugal (House in Portugal) real estate agency, which helps French people buy and invest in Portuguese property.

He points out that the program agreed last Sunday between the various left-wing parties makes no mention of this measure. In fact, it was the Portuguese Socialist Party that initiated the tax scheme for pensioners. "The Socialist government voted for it in 2009, and then it was the Right that unblocked it in 2013," he explains, recalling that Antonio Costa, the current leader of this bloc of left-wing parties, was already an active member of the Socialist Party at the time.

A windfall of 100 million euros a year

"It's a consensual measure on both the left and the right," he continues. But what about the far left? "The Communist Party has no intention of calling this measure into question. For them, the most important thing is that Portuguese workers earn more money. But they don't want there to be fewer foreigners in Portugal", replies the entrepreneur.

"Especially since there's no reason to go back on it since it has no negative impact. Indeed, retirees who come to Portugal for tax reasons would not have paid tax in any case if this scheme did not exist, as they would have stayed in France or moved to another country. "On the contrary, the spin-offs are positive, since they consume once they're here," adds Pascal Gonçalves.

The French alone benefiting from the tax regime introduced in 2013 are estimated to bring in 100 million euros a year to the country, according to figures from the Franco-Portuguese Chamber of Commerce quoted by the JDD. Pascal Gonçalves concludes that, when it comes to retirement, "the notion of borders is becoming less and less important".

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