There’s a reason Portugal keeps climbing the list of top retirement destinations for Americans. With its sun-soaked coastline, high standard of living, modern healthcare, easy public transportation, and relatively low cost of living, Portugal delivers on the promise of a comfortable, culturally rich, and affordable lifestyle. However, for U.S. citizens considering relocating or investing in Portugal, the journey involves far more than a real estate purchase, investment, or visa approval. It requires a carefully structured plan that covers immigration, taxation, investment strategy, and estate planning.

This Insight examines the key considerations for U.S. expats considering a move to Portugal, whether as full-time retirees, part-time residents, digital nomads, or investors seeking the benefits of the Golden Visa program.

Portugal Residency Pathways: Golden Visa, D7 and D2 Visas

Portugal offers several attractive residency options for Americans, depending on lifestyle preferences, financial situation, and long-term goals. Three commonly used visas are the Golden Visa, the D7 Visa, and the D2 Visa.

The Golden Visa

The Golden Visa provides a path to Portuguese residency through qualifying investments. While real estate was once the most popular route, the 2024 reforms eliminated that option. Today, most applicants qualify by investing at least €500,000 in regulated investment funds focused on innovation, venture capital, sustainability, or other government-approved sectors. A key benefit is the minimal physical presence requirement—just an average of seven days per year in Portugal to maintain residency. After five years, investors can apply for permanent residency or citizenship, making it a strong choice for those seeking European access and passport diversification without the need for full-time relocation.

The D7 Visa

The D7 Visa is intended for financially independent individuals, including retirees and remote workers, who can demonstrate stable passive income or earnings. Qualifying sources include pensions, Social Security, investment income, or rental income. The minimum income requirement starts around €900 per month for individuals, increasing with the addition of dependents. D7 holders must reside in Portugal for more than 183 days per year, thereby becoming tax residents. It’s a popular option due to its accessibility—there is no significant investment requirement—and it provides complete access to healthcare, public services, and the Schengen Zone.

The D2 Visa

The D2 Visa is designed for entrepreneurs, freelancers, and independent service providers who wish to establish or relocate a business to Portugal. Applicants must demonstrate a viable business plan and show sufficient resources to support themselves and their venture. While there is no fixed investment threshold, authorities expect applicants to fund their business appropriately and contribute to the Portuguese economy. Like the D7 Visa, the D2 requires spending the majority of the year in Portugal, which leads to tax residency. It’s a compelling option for self-employed professionals and small business owners looking to build a life and business in the EU.

Portugal’s Tax Landscape: A Changing Environment

Once you spend more than 183 days in Portugal during a calendar year, or establish a permanent home and habitual residence there, you are generally considered a Portuguese tax resident. As a tax resident, you are liable for taxation on your worldwide income, which includes not only employment earnings but also pensions, dividends, capital gains, rental income, and more. 

Portugal applies a progressive personal income tax system, with rates ranging from 13% to 48%. An additional solidarity surtax, ranging from 2.5% to 5%, applies to income exceeding certain thresholds. This makes cross-border tax planning essential for individuals with significant investment or retirement income. 

Capital gains, dividends, and interest are generally taxed at a flat rate of 28%.  

U.S. Social Security benefits and other foreign pensions are treated as ordinary income under Portuguese tax rules, subject to the same progressive rates.  

U.S. expats living in Portugal are required to file their U.S. federal tax returns and pay tax if applicable. However, the Portuguese tax liability will likely be higher than the U.S. federal tax due. The system for Foreign Earned Income Exclusion and Foreign Tax Credits and the income tax treaty between the United States and Portugal are designed to eliminate double taxation of the same income by two jurisdictions. The best practice is to work with a cross-border CPA familiar with these rules when filing your tax returns.

End of NHR and the Introduction of IFICI

For over a decade, Portugal’s Non-Habitual Resident (NHR) regime was the centerpiece of its strategy to attract foreign talent and retirees. The NHR program offered significant tax breaks, including a 10-year exemption or reduced rates on foreign income, such as pensions and dividends, making it particularly popular among American expats. However, the NHR regime was officially closed to new applicants at the end of 2023. 

In its place, the Portuguese government introduced a more targeted initiative: the Incentivo Fiscal à Investigação Científica e Inovação (IFICI). There have been numerous questions about the interpretation of the new law, and the Portuguese government has recently introduced guidelines for the regime. This new IFICI tax regime is designed to attract individuals working in Portugal’s high-value innovation ecosystem, which includes scientific research, technology, and entrepreneurship. Qualifying individuals benefit from a flat 20% tax rate on eligible Portuguese-source employment or self-employment income, and, in some cases, may be eligible for exemptions on foreign income, subject to specific conditions. 

What makes IFICI particularly relevant for internationally mobile professionals is its potential application beyond traditional R&D roles. Professionals involved in early-stage startups, entrepreneurial ventures, and strategic advisory roles, such as board directors, may qualify, provided their work supports innovation and knowledge-based economic development in Portugal. In practice, this could include founders who establish a tech company in Portugal or U.S.-based investors who take an active role as board members or executive advisors in Portuguese startups. 

Eligibility under IFICI requires certification from the Portuguese authorities, and applicants must demonstrate a clear link between their work and the program’s innovation objectives. Eligible applicants must apply for the IFICI in January following the year when they become a Portuguese tax resident. Because the regime is relatively new and interpretive guidance continues to evolve, advance planning and collaboration with both Portuguese legal and tax professionals are essential. 

While IFICI is not available to retirees or passive investors, it can be a powerful tool for Americans who seek a hybrid lifestyle with a tax-efficient European presence and who bring capital, expertise, or intellectual property into Portugal’s innovation economy. 

For American citizens who qualify for the IFIC tax regime, the U.S. federal tax liability will still be the “floor” of their worldwide tax burden due to the U.S. citizenship-based taxation.

Portugal Doesn’t Have Wealth or Inheritance Tax, but Plan Ahead

Portugal is one of Europe’s more estate-friendly jurisdictions:

  • There is no wealth tax.
  • There is no inheritance tax on transfers between spouses, children, or parents.
  • Transfers to other beneficiaries may be subject to a 10% stamp duty.

Real estate is taxed through property transfer tax and annual municipal tax, ranging from 0.3% to 0.8%. High-value properties may be subject to an additional tax if the assessed value exceeds €600,000 (individuals) or €1.2 million (couples). 

Importantly, Portugal’s inheritance rules use forced heirship, meaning specific shares of your estate must go to close relatives unless you override it, which U.S. citizen expats can do under EU succession rules (Regulation 650/2012), but proper planning is required. 

U.S. trusts are not always clearly recognized under Portuguese law but are generally better accommodated than in many other European jurisdictions. Existing U.S. estate plans should be reviewed and possibly restructured. 

For those settling in Portugal for the long term, it is important to have a locally drafted will that describes all the bequests and wishes.

Currency Planning Considerations 

While living in Portugal, currency fluctuations can meaningfully impact your cash flow and buying power. In recent years, we’ve seen examples of strengthening and weakening of the U.S. dollar. For U.S. retirees, it is optimal to maintain investments in the U.S. in USD-denominated investments. However, exposure to the local markets can mitigate some of the currency risk.  

Planning ahead for Euro liquidity can help avoid unnecessary conversions or poor timing. This can include building a Euro position over time to ease into the currency exchange rate ahead of the planned move and ensuring you have 6-12 months of your upcoming living expenses allocated to the same currency as the upcoming liability.

Preparing for the Move to Portugal with U.S. Tax Compliance in Mind 

Even after moving abroad, U.S. citizens remain subject to U.S. taxation and reporting obligations. This includes: 

  • Annual Form 1040 filings 
  • FBAR (FinCEN 114) for foreign financial accounts 
  • FATCA (Form 8938) for foreign assets above certain thresholds 

Proper cross-border tax planning is essential to avoid pitfalls. Roth IRAs, for example, are tax-free in the U.S. but may be treated as taxable accounts in Portugal. Similarly, HSA and 529 accounts may lose their tax-deferred status for residents of Portugal. Municipal bonds are also not ideal to own when living abroad, as the foreign jurisdiction will likely recognize the tax-free nature of municipal interest income.  

The solution isn’t to abandon your financial life in the U.S., but to integrate it properly with your new home country’s rules. Cross-border financial planners and tax advisors can help tailor the right approach.

Why Relocating to Portugal Still Works 

Portugal continues to offer an exceptional opportunity for U.S. retirees seeking European residency, a great lifestyle, and an affordable cost of living. However, the benefits no longer flow automatically via the NHR program. With the new IFICI tax regime, rules have changed, and financial structures that have worked well in the U.S. can sometimes produce poor outcomes in Portugal, if not coordinated with local laws.  

The Golden Visa remains a strong option for those seeking residency with flexibility and a pathway to Portuguese citizenship. For those who plan to live there full-time, the D7 Visa remains easily accessible. Either way, success depends on preparing the financial, tax, and legal foundation ahead of the move. 

Portugal delivers on its promise. With the right comprehensive financial strategy, it can be not just a retirement or investment destination, but an exciting new chapter. 

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