Portugal for Taxation
18 September 2017
Portugal has become one of the favorite destinations of French expatriates. Thanks to the NHR (non-habitual residence) status, retired expatriates are exempt from tax for ten years provided they spend at least 183 days a year in Portugal and have not been a tax resident in the last five years. This is a very attractive measure, targeted at wealthy pensioners - the country has neither ISF nor taxes on inheritance - and the most modest, who see their purchasing power multiplied (+ 30% in Lisbon, + 45 % in the rest of the country).
Since 2013, 25,000 French people have settled in Portugal, according to the Francophone Chamber of Commerce and Industry (CCIFP) and they are every year more numerous to cross the course. 80% of them retired but also entrepreneurs (liberal professions, technicians, architects, engineers, artists, health professionals, etc.), who also benefit from the status of NHR and are taxed only 20 % on their income generated and received in Portugal.
In addition to its sunny climate, the country has many advantages: the real estate prices are very low compared to those of the Hexagon. They average an average of 2,500 euros per square meter in Portugal, for good quality goods, ie one third of French standards. They are higher in the historic center of Lisbon: for new goods or completely renovated programs, prices oscillate in Baixa between 4,500 and 6,000 euros per square meter, those of Chiado between 6,500 and 10,000 euros per square meter, while 'in Benfica, they are around 3.500 euros per square meter. Today's buyers have good prospects for capital gains: prices in the historic centers of Lisbon and Porto are in the process of catching up after the years of crises due to the lack of credit. "Valuations were more than 20% for the capital and 17% in Porto [average price: 1.481 euros per square meter] last year. The prospects for 2016 are also very positive, "says Cécile Gonçalves, manager of the agency in Portugal. The new owners can expect to see a good increase for the next two to three years (up to 10%) and then stagnate (up to 5%), according to Athena Advisers.
Favorable rental market
For the rental investment also, the market is favorable. Currently, there is a strong demand from new arrivals, retired or active expatriates who wish to rent quality goods in Lisbon, Porto and in the Algarve mainly. In Lisbon, Porto, Coimbra, Aveiro and other cities receiving students, the rental market is also very dynamic. Profitability in Portugal is currently good. For assets in consolidated areas and thus without risk, they range between 3% and 6% gross, according to Athena Advisers.
Before investing in Portuguese real estate, however, there is a need to be vigilant on certain points. For example, by buying a busy property, it is necessary to ensure that the type of lease is recent, because in the old ones, rents can be capped at very low prices which greatly limit the profitability of the property. Foreign investors are also strongly encouraged to buy new or rehabilitated homes: old properties often have structural problems, non-existent condominiums or are in default, and work to rehabilitate the common areas will be very complicated.
There are also legal differences: the withdrawal period does not exist in Portugal or the goods are sold there in "area bruta" (gross area), and not on the Carrez surface as in France. Also, it is recommended to go through specialists knowing the local and French specificities and who will be able to alert you on differences to avoid the surprises.