Editor's note: There are many reasons why an American may seek to relocate to Europe, chief among them retirement, work opportunities or simply a better work-life balance. This is the third article of a four-part series in which we'll discuss key financial considerations Americans should keep in mind when considering a move to Europe. In addition to Portugal, we zoom in on France and Italy. Part one, an introduction to the series, is Considerations for Americans Who Want to Move to Europe.
Portugal is one of the most accessible countries for foreigners to obtain EU residency and citizenship. The safety, warm climate and growing international community of long-term residents draw many Americans seeking a change in pace and quality of life.
Portugal has the sixth-lowest average annual salary in the Organisation for Economic Co-operation and Development (OECD).
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The average salary in Portugal in 2024 was just over $20,000 per year, according to Instituto Nacional de Estatística. In the U.S., the median salary was about $62,000, according to the U.S. Bureau of Labor Statistics.
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This difference highlights the benefits many Americans perceive when they research Portugal as a relocation destination and hints at the cultural difference that exists between how the Portuguese relate to financial planning vs Americans.
The Portuguese banking system is far more centralized than the one in the U.S. Taxes are also much higher, with personal income tax brackets ranging from 12.5% to 48%. Savings and investment concepts are far less developed, with less focus on pensions and investing.
Most transactions occur via cash or debit card, and purchasing property has not historically been viewed as a wealth-building activity, although the country's struggle to balance a housing shortage with an exploding real estate market these past few years is changing that.
Where foreigners settle
Lisbon, Porto and the Algarve region are three of the most common places for foreigners to live in Portugal. In particular, the Portuguese capital, Lisbon, is one of the most expensive cities in Europe for rent.
All three areas remain significantly less expensive for renting than major American cities. Of course, prices can vary widely. The Algarve sees a wider spectrum of housing prices since the region comprises many different cities, some less well-known than others.
While the Portuguese are generally described as friendly, warm and hospitable, many Americans struggle to adjust to the Portuguese pace of life.
The lack of urgency around work can lead to everyday necessities, such as opening a bank account or securing an identification number, taking longer than an American expects.
Ricardo Jesus, a registered financial adviser born in the Algarve and now specialized in supporting Americans in Portugal, observes, "Part of moving to a new country is moving beyond initial excitements like fresh, new cuisine and learning to embrace its culture and way of living."
High-net-worth individuals encounter unique challenges
Americans moving to Portugal should take stock of their financial situation before making an international move.
High-net-worth Americans in particular face unique challenges. For example, they must ensure that their asset portfolio is properly structured for a tax residency in Portugal (if they will qualify as tax residents).
Carefully reviewing your asset allocations with a cross-border financial planner specializing in Portugal before your move is advised, particularly concerning real estate property ownership considerations.
"If you sell your house in the U.S. after becoming a Portuguese tax resident, you lose the U.S. exemptions and likely get taxed higher in Portugal," Jesus notes.
Americans who move to Portugal must continue filing a U.S. tax return. Tax returns filed from abroad come with additional considerations, particularly if you are self-employed/an entrepreneur, have a high income and/or have a high net worth.
"Portugal is a very high-tax jurisdiction, relying on an income tax rate that is higher than in most countries," notes Nicolas Castillo, founder of Rook International CPAs and Advisors.
"Although Americans moving abroad should brace for this impact, they can take solace in the fact that the foreign tax credit will allow them to write off most if not all of their U.S. income tax bill."
Before moving, consult with a cross-border tax specialist who can explain which expat tax provisions will apply.
This is a critical conversation for business owners, as the best business structure for your operations in the U.S. may not apply when you live in Portugal. While Portuguese tax rates are higher than those in the U.S., you may qualify for certain beneficial tax rates.
Prime Minister Luis Montenegro's political agenda prioritizes restricting immigration pathways, as evidenced by his government's repeal of a key migration policy aimed at restricting the number of non-EU migrants into the country.
More than just obtaining a visa required
For Americans, moving to Portugal involves obtaining a visa, but there's more to it than that. You must also apply for the visa and program that is best suited to your specific needs:
Passive income or retirement visa (D7). This is for retirees and investors who want to relocate to Portugal and who earn consistent monthly income from passive income sources. From 2009 until January 2024, the Non-Habitual Resident (NHR) program provided a highly beneficial tax break for foreigners moving to the country.
However, since January 2025, this program is no longer in operation. It has been updated/replaced with the Tax Incentive for Scientific Research and Innovation, colloquially referred to as NHR 2.0 but in fact having very different qualifying criteria compared to the original NHR.
Temporary Stay Visa (D8). More recently referred to as the Portugal Digital Nomad Visa, this immigration pathway allows qualifying remote workers to move to Portugal on a one-year renewable visa (up to five years).
Investor/Entrepreneur Visa (D2). Also referred to as the Portugal Golden Visa, the D2 visa provides both a permanent residency and citizenship pathway for qualifying individuals and their families.
What about investments and retirement accounts?
Moving to Europe does not necessitate moving your U.S. investment accounts out of the U.S. In fact, it's typically ill-advised to do so.
With respect to retirement accounts, you may be able to continue your contributions, and receiving distributions from accounts based in the U.S. is not a problem.
Retirement accounts. There is no like-for-like comparison for a 401(k) or IRA within Portugal's tax code. Subsequently, the typical expected benefits of Roth IRAs are not acknowledged; they can be treated like a taxable brokerage account or a traditional IRA.
Receiving Social Security. The U.S./Portuguese Totalization Agreement streamlines how you receive your Social Security and to which country you pay taxes on the taxable distributions. In the event you qualify as a Portuguese tax resident, you will pay Portuguese taxes on Social Security distributions.
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Capital gains on investment portfolios. Long-term capital gains tax is higher in Portugal than in the U.S. (28% in Portugal compared to a maximum of 20% in the U.S.).
Inheritance and trusts. Portugal abides by a strict heirship regime enforcing compulsory heirs (herdeiros legitimários), beginning with the spouse and the immediate descendants.
Trusts are transparent, and for U.S. expats will likely require increased emphasis on asset base and less on estate planning. In the context of cross-border planning, trusts may serve little to no purpose.
Many people view moving to Portugal as a long-term investment in a higher quality of life. However, just as you would take the time to properly prepare yourself for a move, it's important to perform the same due diligence on your finances.
Pre- and post-move planning is very important. Seeking professional advice from certified cross-border experts who specialize in serving the American community in Portugal ensures that you'll receive strategies tailored to your needs and goals.
In my final article for this series, I discuss the considerations and preparations associated with moving to Italy as a U.S. citizen.
Related Content
- Moving Abroad? You Might Need a Cross-Border Financial Adviser
- Where to Retire: Living in Portugal as a US Retiree
- You Don’t Want to Retire in Portugal: Here Are Three Tax Reasons Why
- The Pros and Cons of Retiring Abroad
- Want to Retire Abroad? Five Things to Know About Your Money
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