Key economic indicators point to Portugal’s growth continuing to outperform the UK and the Eurozone over the coming years – further fuelling a wave of affluent families and entrepreneurs looking to relocate or invest in Portugal.
Portugal’s welcoming approach to inward investment, combined with the lifestyle and cost of living on offer, has made it an enticing prospect for the wealthy keen to escape the political and economic gloom at home.
According to one recent migration report, an estimated net of 9,500 millionaires will leave the UK by the end of 2024 – a figure only eclipsed by China. On the flip side, Portugal will see one of the biggest influxes – adding a net of 800 millionaires to its ranks according to Portugal Pathways, an organisation that supports private wealth coming to Portugal.
Portugal’s promising economic outlook
In addition, the economic outlook for Portugal is looking far more promising than the UK and the Eurozone. A report from the European Commission (EC) says Portugal’s GDP growth, is expected to be 2% in 2024, and forecast to rise to 2.3% in 2025 compared to the UK’s more sluggish forecast growth of 1% and 1.2%, according to the KPMG UK Economic Outlook 2024 report.
According the same report, Portugal is also outshining the rest of the Eurozone which forecasts GDP growth of 0.8% in 2024 and 1.2% in 2025. Portugal is expected to see inflation decrease from 2.3% in 2024 to 1.9% in 2025, according to the European Commission.
The British Chambers of Commerce predict that inflation in the UK will decline from 2.6% to 2.2% during the same timeframe. The broader Eurozone inflation is forecast to shift from 2.5% to 2.2%, according to the European Central Bank.
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“Significant surge in interest since the UK budget”
Paul Stannard is Chairman and Founder of Portugal Pathways, which supports and guides private wealth and affluent families and entrepreneurs wishing to navigate residency, investment, tax, and property research in Portugal. He explained: “What we have seen is a significant surge in interest since the recent UK budget announcements on capital gains and inheritance tax, as well as national insurance contributions. UK people and British business owners are looking at Portugal both as a place to relocate their families and, more often, set up business or investment portfolios due to its growing reputation for life and investment opportunities.”
A recent report on Portugal’s attractiveness from Ernst & Young (EY), revealed 84% of investors, CEOs and entrepreneurs surveyed plan to establish or expand operations in Portugal over the next year. EY’s UK equivalent report found that just 68% plan to invest in the UK and 72% for the rest of the Eurozone. The EY report on Portugal adds that it “presents itself as an attractive, stable and safe investment destination within the European context”.
Stannard adds: “This is further fuelled by continued demand for the country’s popular Golden Visa residency-by-investment program.”
Portugal’s Golden Visa scheme
The Golden Visa has been a driving force in bringing high-net-worth-individuals (HNWIs) to Portugal through a minimum €500,000 investment in approved regulated alternative funds that are approved for Golden Visa by the Portuguese government or invest in a start-up that creates up to six jobs in the country. This now excludes real estate for Golden Visa purposes.
The Golden Visa’s advantages include freedom of movement within the 29 countries that comprise the European Schengen area, a path to Portuguese citizenship after five years, family inclusion, and a minimum stay requirement of just seven days per year in Portugal.
Stannard adds: “Portugal is one of the safest and most secure places in the world. It welcomes inward investment, entrepreneurs and talent wishing to take advantage of the tax incentives, culture, cost of living, and lifestyle. With more than 300 days of sunshine, it obviously trumps the UK for weather and sardines.”
Portugal also has a strong luxury property market, which is in high demand as the country continues to attract wealthy buyers and investors to Portugal. According to Property Market-Index, Portugal’s real estate market is set to grow by 5.8% in 2024, compared with a 2.5% decline in the UK. While other nations continue to struggle, economically and politically, Portugal is proving a haven of stability, investment and growth.
With the impact of Chancellor Rachel Reeves’ Budget altering the landscape for many entrepreneurs and investors, an increasing number are eyeing up Portugal.
“Lower cost of living than the UK”
Christina Hippisley, General Manager of the Portuguese Chamber of Commerce in the UK, said: “Portugal is seen by many as offering a more welcoming environment in terms of taxation, as well as a lower cost of living than the UK. Portugal has always appealed to wealthy businesspeople due to the quality of life on offer.”
The EY report added that in a recent survey of 200 global executives, 77% of respondents expected Portugal’s attractiveness to improve over the next three years, compared with 49% three years ago. The confidence comfortably eclipses both the Eurozone and the UK which had confidence ratings of 67% and 59% respectively.
Chris Marson, who manages the RTi Family Office, based in the UK, added: “What high-net-worth-individuals (HNWIs) are looking for is the opportunity to invest in somewhere with enormous potential – and Portugal provides that. Portugal’s government is known for its welcoming approach to entrepreneurs and skilled workers to help fuel its economy, and the cost of living is one of the best in Europe right now.”
While we await full details of the evolution of Portugal’s Non-Habitual Residency (NHR) tax regime, it looks destined to continue to appeal to those who can create wealth and opportunity for Portugal.
What does Portugal’s tax regime look like for foreigners?
The existing NHR tax regime will officially close to new entrants in March 2025 and looks set to be replaced by the Fiscal Incentive for Scientific Research and Innovation (IFICI) tax regime, dubbed NHR 2.0 tax regime.
It is expected to be a highly incentivised tax rate for highly skilled professions, entrepreneurs and young talent for professional income, capital gains, as well as some passive income streams. The finer details are due to be set in stone before the end of 2024.
The previous NHR tax scheme offered 10 years of tax benefits, and the new NHR 2.0 tax regime is expected to follow suit. The draft also outlines significant benefits, including the fact that most foreign-sourced income, capital investment income, royalties, capital gains, and real estate income carry a tax rate of 0% in Portugal.
Significant tax incentives will also be offered on professional income up to the first €220,000 per annum. Also, people under the age of 35 will be offered a 0% tax on professional income, which is another boon for both attracting and keeping talent in Portugal and entrepreneurs building enterprises in Portugal.
However, the new NHR 2.0 tax regime will no longer offer low taxes on foreign pensions. The Portuguese government has indicated it hopes it will fuel economic growth by ensuring highly skilled professionals and young talent find the red carpet laid out for them in terms of tax incentives.
