RETIRING IN PORTUGAL: A COMPLEX TAX FRAMEWORK
The rules depend on the type of income, the existence of agreements with the country of residence and the retiree's personal situation.
Spending your retirement in Portugal has been very popular in recent years. Some 1.3 million French people are said to be involved. The main idea is generally to return to one's country of origin. But taxation can also be an argument. Some countries, such as Portugal, offer French retirees a highly attractive living environment.
No obstacle to paying your pension
The beneficiary of a retirement pension can receive it regardless of his or her country of residence. In this respect, there are no major obstacles to a new life in Portugal.
The only constraint is to provide an annual life certificate issued by the authorities in the country of residence.
To qualify for taxation in the host country, you must be a resident of that country for tax purposes. Only then can any tax treaty be applied. The solution is to live there for more than half the year. However, jurisprudence also requires that you have your centers of interest there. A investment in the country also offers additional security.
Taxing your pension in Portugal
This is where things get complicated, because everything depends on the country of destination. In the absence of an agreement with France, pensions are taxable in France with a withholding tax (and possibly in the host country). Rest assured, this is not the case in Portugal.
In 2009, Portugal introduced the non-habitual resident status. This allows French pensioners or pensioners from other countries to benefit from a tax exemption on their pensions for a period of 10 years. One of the conditions for taking advantage of this benefit is to have a private-sector pension.
But be careful: Private pensions, such as life insurance, are taxed in the country of residence. Public-sector pensions, on the other hand, remain taxable in France (except in certain countries if the pensioner is also a national of the country of residence).
Spending your retirement in Portugal - how will your income be taxed?
Of course, not all income is tax-advantaged. If a retiree in Portugal continues to receive other income in France, such as property income, this income remains taxable in France.
Your social security contributions
Retirees living abroad are exempt from CSG, CRDS and Casa.
For pensioners living in the EU or Switzerland, the rule is simple. A contribution is deducted at source from the French pension (3.2% on the basic private pension, 4.2% on supplementary pensions and 7.1% for self-employed workers' schemes). Retirees then benefit from affiliation to the scheme of their country of residence (due to agreements) and can also return to France for medical treatment.
Please note: Article 52 of the PLFSS 2019 changes the health insurance regulations for non-resident retirees. From now on, they will have to be able to prove 15 years of insurance cover in France. These to benefit from health coverage for unexpected or scheduled care upon their return to France.
A carefully considered choice
Spending your retirement in Portugal is not something to be taken lightly. The country's tax appeal can be an asset, but prospective exiles need to check that they meet all the conditions to benefit from it. It is also important not to neglect other aspects such as social security coverage.
To avoid unpleasant surprises, it's best to prepare your application carefully, don't hesitate to contact our tax specialists. Together we'll study your project.