A guide for South Africans who want to live in Portugal

 ·9 Feb 2019

Portugal has become a top destination for South Africans looking for offshore alternatives, says Sable International.

With its friendly investment and residence programmes, European lifestyle and easy Mediterranean climate, it’s a destination of choice for South Africans trying to get into the European Union. And in the face of economic and political uncertainty in South Africa, immigration agency Sable International has experienced a 300% jump in enquiries.

Andrew Rissik, MD of Forex and International Projects at Sable International, says Portugal is a good option, but it’s not all plain sailing becoming a Portuguese resident and people need to do their homework.

“South Africans like Portugal because it’s a first world country and it’s part of the EU. But it’s still a relatively poor country that is improving economically. There’ve been really solid capital gains in the last 3-4 years, and good rental yields. We see it as a very stable economy – Portugal has been upgraded recently by all the credit agencies, unlike South Africa.

Most importantly it’s a very tax-friendly jurisdiction. One needs to consider when investing offshore, what the tax implications are, what makes a country an attractive investment and the process of investing,” said Rissik.

In 2012, Portugal was bailed out with all the so called PIGS countries (Portugal, Ireland, Greece and Spain) unlike Greece and Spain, Portugal put together a whole lot of interesting incentives to attract investments and to modernise and stimulate the economy, the Golden Visa being one of them, primarily aimed at non-European investors buying real estate.

“For a minimum investment of €350,000, a non-European could qualify for Portuguese residency on fairly easy terms, provided certain conditions were met. This could then lead to Portuguese citizenship – the prospect of EU citizenship combined with a solid property investment, is very attractive to many South Africans at the moment,” said Rissik.

“The incentives included an attractive tax scheme, established to draw people from places like Sweden and France (which have high tax jurisdictions) to become tax residents in Portugal where they wouldn’t have to pay tax on their worldwide earnings for 10 years,” said Rissik.

The plan has worked and the Portuguese economy has been stimulated by people coming in, buying property and then often bringing their families in and settling there. Tourism is being very heavily driven by the government with airport taxes having been dropped, and Portugal is now a popular tourism destination for Europeans and South Africans.

“However despite the incentives, investing in Portugal is still complex – we’ve specialised in investment in the country and from hard experience we understand that obtaining residence in Portugal is at least a five-year process – there are no short cuts.

“There are risks on the residency and immigration side and on the real estate investment side of it. It’s a relatively simple programme, but if you’re trying to become a European citizen, there’s complexity and you need to know how to follow the process to the letter,” said Rissik.

Minimum residence requirements on Golden Visa

The Golden Visa was promulgated by the Portuguese government since it was first started in 2012, the opposition have come into power and they’re backing it heavily. It’s something that’s working really well for Portugal, but it is a programme that has been fitted in to existing Portuguese residency and nationality law.

In most countries, if you become either a permanent resident or a citizen, it’s normally through living there. This is quite a unique programme in that you only need to spend seven days a year in Portugal.

“We’ve noticed the government in Portugal has made a lot of changes to the law in order to accommodate non-resident residents,” said Rissik.

“The overwhelming feeling from all the lawyers that we deal with and the people that we talk to in Portugal is that the Golden Visa is working for the country and they will do what they can within the law to try and make it as easy as possible.”

How to become a Portuguese resident

In order to become a Portuguese tax resident and to take advantage of the non-habitual tax programme, investors need to legally be able to reside in Portugal and spend 183 days or more in Portugal.

“If you’re non-European then you can do this through a Golden Visa and go and live there for at least six months of the year, and you need to financial emigrate from South Africa and become a Portuguese tax resident,” said Rissik.

Tax considerations when buying property in Portugal

In terms of the Golden Visa, it’s a very simple tax situation. In order to own a property in Portugal, you have to have a local bank account and a local tax number. In Portugal, as a non-resident investor, you will pay 28% on your net income. If you’re renting your apartment out and you make €30,000 per year income, you’re going to pay 28% source based tax in Portugal.

“As a South African resident tax payer, you would declare that on your income tax return and you would get a credit for the 28% that you’ve paid in Portugal – this is because of the treaty between Portugal and South Africa,” said Rissik.

“Unfortunately there are some dubious schemes out there – My advice for anyone going offshore is to engage with an advisor you trust, who has the experience and understands the requirements.”

Read: How many South Africans have moved to Portugal on a special ‘Golden Visa’

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