With new pension tax, Portugal is also a paradise for Belgians to retire

With new pension tax, Portugal is also a paradise for Belgians to retire

Foreign retirees who do not pay taxes on their pension are in the crosshairs of the Portuguese government. Although in fact they are only taking advantage of an opportunity that the country itself created, they have been criticized for some time now. Retired Portuguese do have to pay taxes and therefore live on a smaller income.

However, a decade ago Portugal seemed like a good idea to attract pensioners from the other Member States of the European Union by granting them an exemption from tax on their pension. The foreign retirees would let the money roll and thus support the Portuguese economy, was the reasoning. The favorable measure is valid for a period of ten years each time.

A retired Belgian civil servant is taxed in Belgium and cannot live tax-free in Portugal.

Since then, many Belgians have moved to Portugal after their careers. Belgium has a double tax treaty with the Southern European country, whereby Belgian pensions that are taxed there are no longer taxed in our country. For retired Belgians, Portugal is therefore a kind of tax haven, as the country applies this tax exemption for retired EU citizens.

Retired Belgian civil servants do not benefit from the treaty between the two countries. The pensions of public sector employees are taxable in the state that grants them. A retired Belgian official is therefore taxed in Belgium and cannot live tax-free in Portugal.

Simple procedure

Enjoying the tax-friendly Portuguese climate as a retired worker is easy. You must obtain the status of ‘non-
habitual resident ‘(NHR). After that, you must stay in Portugal for at least 183 days a year.

The Belgian tax authorities do, however, ensure that you have actually moved to Portugal and not only set up a construction to receive your pension in a tax-friendly manner. So you have to become a real Portuguese resident. A direct debit is not enough. You must move effectively and clearly show your intention not to return to Belgium. The question is whether a tax-free pension is sufficient as a motivation to choose a life in Portugal.

May be discontinued from March

In addition, the Portuguese Socialist Party (PS) wants to get rid of the tax-friendly scheme for retired foreigners. She has introduced a bill to introduce a tax on foreign pensions.


The Portuguese government party PS wants to increase the tax on foreign pensions from 0 to 10 percent.

The favorable regime may already be abolished at the beginning of March. From then on, a tax of 10 percent will be levied on foreign pensions. It only applies to new retirees applying for NHR status after the new scheme has entered into force. “Anyone who already lives in Portugal remains exempt from tax on their foreign pension,” says Pierre Le Pahun, estate planner at Degroof Petercam Luxembourg. “So there is no retroactive effect.”

Nevertheless, it is also interesting under the new regulations to take your pension in Portugal. The 10 percent in question is still a lot lower than the Belgian pension tax, which quickly rises to 30 percent.

Own house

Becoming a tax resident in Portugal doesn’t require you to buy a house right away, you might as well rent one. If you do have your own home, it is beneficial for gifts and inheritances. Portugal does not levy gift or inheritance tax on real estate for transfers between spouses, unmarried partners (under certain conditions) and direct descendants. ‘You do pay a stamp duty of 0.8 percent on donations of real estate located in Portugal,’ says Hanne Martens, lawyer at Cazimir.

Those who already live in Portugal remain exempt from tax on their foreign pension. There is therefore no retroactive effect.

Pierre Le Pahun

Estate planner, Degroof Petercam

Inheritances and donations of real estate that are not made directly or between partners are subject to a tax of 10 percent. In the case of a donation, the stamp duty of 0.8 percent is added to that and you pay 10.8 percent. The Southern European country also has no wealth tax. “There is an annual tax of 0.8 percent on rural real estate and 0.3 to 0.45 percent on other real estate,” says Wim Vermeulen, partner at Cazimir.

In 2017, an additional tax was added for homes with a tax value of more than 600,000 euros. If a home is worth more than $ 600,000, an annual tax of 0.7 percent is levied on the value above that amount. For real estate with a value of more than 1 million euros, 0.7 percent must be paid on the tranche between 600,000 and 1 million euros and 1 percent on the amount above that.

A tax of 1.5 percent is charged on homes above 2 million euros.

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