Portugal has long been a preferred destination for many American investors planning to move to Europe. It’s ranked number one on the list of hot destinations for US citizens who want to relocate abroad, whether to retire, establish a home base while they’re working remotely, or change their lifestyle. Portugal Golden Visa program is witnessing a surge in demand from American citizens, indicating a larger trend of US investors looking for international residency opportunities.
According to the Migration and Asylum (AIMA) report[1], the number of foreigners living in Portugal increased by 33.6% in 2023 compared to the previous year, totaling 1,044,606 citizens with a residence permit. During 2023, 2,901 Residence Permits were granted for investment activity, almost 20% of which were for citizens of the United States (567). Although Americans make up only a small percentage of the foreigners in this country, the number has grown to about 10,000 US citizens in 2022, up 239% from 2017, according to government data[2].
Reasons behind this surge
The popular explanations for this increase often focus on Portugal’s low cost of living, its temperate weather, beneficial visas, and minuscule crime rate. But the draw to Portugal goes even deeper. This surge can be attributed to various factors:
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Affordable cost of living
Many Americans have actively been researching residency or citizenship in more “affordable” countries — including Portugal — amid the high cost of living back home in the US. It is a low-cost, high-life country and retirement haven that can boost your pension. In addition, simply covering your housing, healthcare, and daily expenses is far lower than the expensive US, and you can get by comfortably without worrying about finances.
For instance, a one-bedroom apartment in Lisbon[3] would cost €1,000 per month, about $3,000 in New York City. Portugal’s healthcare system is one of the best in Europe and you get high-quality care at a fraction of the US cost. Health insurance is also lower in Portugal while the average cost in the US is much higher.
With this affordability and Portugal Golden Visa benefits, residency, visa-free travel in the Schengen Zone, and potential citizenship after 5 years, Portugal is the top destination for Americans looking for financial relief and a better life.
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Stability and retirement planning
Many U.S. individuals see Portugal Golden Visa as an optimal retirement solution, enabling them to invest in a stable European country with favorable residency benefits. The possibility of using funds such as an Individual Retirement Account (a tax-advantaged investment account designed to help employees save toward retirement) or 401(k) (a work plan in the US, which allows employees to contribute a portion of their wages to an individual account, where salaries are excluded from the taxable income) into a Golden Visa qualifying fund has made this option even more attractive. By doing so early, Americans can set up their entire retirement plan easily and without any hassle. If they apply for citizenship and relocate to Portugal they can renounce their US citizenship to get rid of US taxation that follows them around the globe.
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Stronger passport
The Portuguese passport, which ranks 4th worldwide, is even stronger in terms of global mobility than the US (which ranks 8th), providing visa-free travel to 190 destinations, four more than the US’s 186. A Portuguese passport holder can enter without a visa to the US, meaning that former US citizens can travel at any time to see their families and spend time in the US.
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High level of safety
Portugal is considered one of the safest countries in the world. Both urban and rural areas feel safe, making it a popular destination for tourists and expats alike. In contrast, the US has a more complex crime landscape. While crime rates in the US have generally dropped over the years, they are still much higher than in Portugal. Urban areas in the US have higher rates of violent crime, such as robbery and homicide. According to NationMaster[4], the overall crime rate is 81% higher in the US than in Portugal and violent crime with a firearm is 10 times more common in the US than in Portugal.
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Investment Diversification
Portugal stands out as an appealing option for investors looking to diversify their portfolios, enhance returns, and mitigate risks associated with domestic market volatility. This is due to its stable economy, favorable investment climate, and strategic location within Europe. Portugal has demonstrated consistent economic growth in recent years, with a 2.3% increase[5] in GDP in 2023, driven primarily by robust tourism and real estate sectors. This stability provides a solid foundation for foreign investments, offering US investors a reliable environment for asset diversification. The country offers a variety of investment options, including investment funds, as well as real estate, renewable energy, and technology sectors. Therefore, diversifying investments in stable international markets can help US citizens reduce portfolio volatility and exposure to country-specific risks.
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Plan B for US citizens
Amid the growing political uncertainties in the US, Portugal’s Golden Visa program has emerged as a popular “Plan B” for worried Americans, offering investors a pathway to European residency. The second citizenship is not just a backup plan but an investment in peace of mind, providing US investors with alternative residency options to secure their futures. The program is relatively affordable, allowing investors to apply for a passport after five years of residency.
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Attractive tax regime
Portugal provides an attractive tax regime for those who choose to relocate. According to Portuguese tax Law[6] in force since January 2015, an individual is deemed to be resident in Portugal for tax purposes if one meets either of the following conditions:
- Spends more than 183 days, consecutive or not, in Portugal in any 12 months starting or ending in the fiscal year concerned.
- Regardless of spending less than 183 days in Portugal, maintain a residence (i.e. a habitual residence) in Portugal during any day of the period referred above to use it and keep it as one’s primary residence.
As a rule, the taxpayer will become a resident in Portugal as of the first day of stay in the Portuguese territory and a non-tax resident as of the last day of stay in Portugal, with a few exceptions.
It is worth noting that US citizens who want to invest in a Portugal fund have to consider the Foreign Account Tax Compliance Act (FATCA), Passive Foreign Investment Companies (PFIC), and more. Citizens using IRA and 401k funds to invest in funds have to follow certain steps to do it right.
Property owners in Portugal must pay an annual tax rate known as Imposto Municipal Sobre Imoveis, or IMI[7]. The kind, age, and location of the real estate determine the IMI tax rate, which varies from 0.3 to 0.8 percent.
The rental income from Portuguese real estate is always subject to taxation in Portugal, regardless of where the investor lives. There is a 28 percent flat tax on net rental revenue. Investors can deduct IMI, maintenance and repair charges, and this tax amount.
For more information about the variety of visas provided in Portugal, the requirements, and the application process, please visit our website here.
[1] https://www.portugalresident.com/over-1-million-foreigners-officially-resident-in-portugal-as-figure-jumps-34/
[2] https://www.csmonitor.com/USA/Society/2024/0207/It-s-not-just-the-sunshine-Why-Portugal-attracts-US-expats#:~:text=Although%20Americans%20make%20up%20only,weather%2C%20and%20minuscule%20crime%20rate.
[3] https://www.portugalresident.com/over-1-million-foreigners-officially-resident-in-portugal-as-figure-jumps-34/
[4] https://www.nationmaster.com/country-info/compare/Portugal/United-States/Crime
[5] https://www.state.gov/reports/2024-investment-climate-statements/portugal/
[6] https://taxsummaries.pwc.com/portugal/individual/residence
[7] https://taxsummaries.pwc.com/portugal/corporate/other-taxes