Retirement in Portugal: taxation for foreigners

March 11, 2020

Many of you want to move to Portugal, and many of you have questions about taxation in Portugal once you’ve settled there. Recently, there have been some changes to the taxation of pensions for foreigners(with RNH status) moving to Portugal: taxation has risen from 0% to 10%.

In this article, you’ll find some answers to your questions:

a video in which Maitre Katia Neves explains the new taxation,
a simplified outline of the new taxation and the dates to be respected,
a FAQ(frequently asked questions) where you’ll find the most frequently asked questions and their answers.

1. Video: changes in RNH status with regard to pension taxation

A few days ago, Greg Henriques, founder of the Villa Feria company, chatted live on the Vivre au Portugal Faceboook page with lawyer Maitre Katia Neves about the new taxation on pensions for foreigners living in Portugal. Just click on the photo below to view the entire exchange.

Video of the exchange between Greg Henriques and Maitre Katia Neves.

2. The diagram: the new tax on your retirement

Here’s an outline of the key points discussed during the interview with Maitre Katia Neves. The diagram highlights, in a simplified way, the new rules for taxing RNH pensioners in Portugal, along with the various deadlines.

Diagram: taxation of foreign (EU) pensioners in Portugal.

3. FAQ: 10 frequently asked questions and answers

1. I’ve lived in France for 40 years, have a French pension and want to move back to Portugal. I have dual nationality. Can I benefit from tax exemption?

-> Dual nationals are subject to the same rules and deadlines as foreign pensioners wishing to settle in Portugal. So, if you wish to benefit from tax exemption on your pension, you must become a tax resident in Portugal before 12.31.2020 and apply for RNH status before 03.31.2021. I’d also like to take this opportunity to remind you that for working people in this situation who want to return to live in Portugal, assistance has been set up under the “Regressar” program. More information on this program here.

2. I’m retired from the civil service. Can I benefit from the tax exemption for foreign pensioners in Portugal?

-> No, this is reserved for private-sector pensioners. Public-sector pensioners, even if they live in Portugal, will still have to pay tax on their pension in the country where they receive it(France for most readers here).

3. Since tax is deducted at source, do we pay tax twice: in France and in Portugal?

-> There is no double taxation. If you are a tax resident in Portugal, you will pay tax on your pension only in Portugal. The amount of tax potentially deducted in France will be returned to you.

4. After 2021, what will be the tax rate applied to pensions?

-> The tax rate applied to the pensions of RNH foreigners living in Portugal will be 10% for 10 years from 2021. This rate will also be 10% if you move to Portugal in 2022, 2023..

5. I obtained my RNH status in 2019. I am active and a tax resident in Portugal. I will be retired in 5 years. What will my tax rate be at that time?

-> If you obtained your RNH status in 2019, you will benefit from the tax advantages for working people in Portugal(capped at 20%) until you retire(5 years in your case ). Then, once you retire, you’ll be tax-exempt for the remaining period (5 years in your case).

6. I don’t pay tax on my retirement in France.If I move to Portugal in April 2020,will I have to pay the 10% tax?

-> If you become a tax resident in Portugal after March 31, 2020 under RNH status, yes, you will be taxed at 10% on your pension even if you were not taxed in France. In this case, from a tax point of view, it may be preferable to keep your tax residence in France.

7. Where is the French pension paid once I’m a tax resident in Portugal?

-> It’s up to you to decide whether you want to continue receiving your pension from your French bank account or from your Portuguese bank account.

8. I’m not retired, but I’ve just moved to Portugal as a working person. Are there any changes to the taxation of working people with RNH status in Portugal?

-> No, there are no changes for working people who settle in Portugal and benefit from RNH status. The tax rate remains capped at 20% for 10 years.

9. I am retired with RNH status. I’ve been living in Portugal since 2019 and benefit from tax exemption on my pension. But what about the income I receive from real estate in France?

-> The tax exemption only applies to retirement pensions, not to other income. Consequently, this exemption does not apply to income from your French property.

10. What steps do I need to take in France to inform the tax authorities that I pay my taxes in Portugal and am therefore no longer taxed in France?

–> You’ll need to inform your tax office that your new address is in Portugal, and you’ll also need to inform your pension fund. For more information, please consult this link from the tax department. Finally, if you’d like to find out more about the various steps you need to take before moving to Portugal, take a look at this article.

In conclusion

For foreigners wishing to settle in Portugal with RNH status, the tax rate on pensions has risen from 0% to 10%. We strongly advise you to get help with the formalities, especially if you are not fluent in Portuguese or English. Finally, we recommend that you don’t wait until “the last moment”, and that you take all the necessary steps(fiscal or otherwise) well in advance, both in France and in Portugal.