FIRE in Portugal – Pros And Cons
Portugal is becoming a popular place to FIRE (Financial Independence, Retire Early) these days.
A welcoming environment, good food, nice weather, great vibes, lower costs of living and attractive tax packages, among other reasons, make it a country worth considering before taking any firm decision on where to move to FIRE.
In this blog post, I express the pro and cons of living in Portugal. Bear in mind, though, that my experience in the country was sporadic and short. However, I got the impression that it was long enough to get an idea of how it feels to live in Portugal, what it’s like, what things I like and what things put me off.
But before I dig deeper into this, let me first explain the reasons why I moved, so you get a better perspective of my experience.
Table of Contents
My Story Of Moving To Portugal
After living in the UK for almost 7 years, in May 2021, my partner and I took the decision to relocate back to my hometown in Spain.
As I continued working remotely for my UK employer, I realized that if I stayed over 6 months, I’d need to declare my income to the Spanish tax authorities.
So, I reached out to our “gestor” (adviser) and asked whether moving abroad for the last two months would save me from becoming a Spanish tax resident, and therefore paying taxes.
He confirmed it would. So, soon after I received his confirmation; I made a coffee, took my laptop, searched for my appreciated calculator and began doing some numbers. I needed to get an overall idea of how much I’d need to pay if staying, against temporally moving abroad, and plan ahead accordingly. For the curious ones, I laid down all numbers on my September monthly update.
In short, I found out that I could save money by moving abroad and enjoying a new experience in Portugal. It was a no-brainer for us.
So, we booked a flat for two months in a resort village located near Faro via Airbnb. We paid €1,500 for this.
“Sunshine, here we come!?” Yes, that was the first feeling, to be honest! But I can tell you right now — Portugal is way more than just sunshine, that’s for sure.
Want to know more about it?
Then keep reading.
Pros of Portugal
1. Good vibes
For me, one of the most important things about living in a new place is to connect with its surroundings.
As the saying goes:
“You become what you surround yourself with”
Portugal in this matter is perfect to me. Portuguese people are polite, hospitable, friendly and speak good English. Communicating here is rather smooth. As soon as they notice you don’t understand their language, they switch to English straightway without showing you any grumpy faces. This is a big advantage to get by with the day-to-day tasks using English while you learn the new language. If you were to move to Spain instead, you would quite likely confront some communication issues at some point if speaking only in English.
2. Lower Cost Of Living:
Another pro of Portugal is the lower cost of living.
Portugal is one of the cheapest European countries to live in and offers a geoarbritage opportunity to retire early, or simply save more.
Is living in Portugal cheaper than in Spain?
Generally, it is, here’s a short comparison between the two:
|Consumer Prices in Spain are 12.16% higher than in Portugal (without rent)
|Consumer Prices Including Rent in Spain are 9.47% higher than in Portugal
|Rent Prices in Spain are 2.46% higher than in Portugal
|Restaurant Prices in Spain are 33.68% higher than in Portugal
|Groceries Prices in Spain are 17.16% higher than in Portugal
These values are based on Numbeo. The numbers for city comparison on this website can be rather inaccurate. Countrywide comparisons are generally more accurate, as in my experience they line up with our expenses.
However, renting or buying a property in Portugal is becoming more and more expensive, up to the point which property prices in Lisbon and Barcelona are almost identical.
Also, not everything is cheaper in Portugal, things such as transportation (+7%), clothes (+15%) and personal care items (+10%) are more expensive.
But overall, the cost of living index in Portugal is lower than in Spain, 47% vs 53%.
As I could notice, Portuguese people love food as much as Spanish. Portuguese cuisine is in fact similar to Spanish. The food is based on simple ingredients that are impeccably prepared. You’ll find many regional specialities across the country, emphasizing fish, meat, olive oil, tomato and spices. If you love Mediterranean cuisine, then Portugal is a good place to keep your food desires fulfilled!
I noticed some ingredients and products are imported from Spain, so in terms of quality food standards, I’d say Portugal stays among the top within the EU.
To get you an idea, these are the prices of basic products as of December 2021:
|Average cost in Portugal (euros)
|Milk (1 litre)
|Loaf of bread
|Bottle of water (1.5 litres)
|Bottle of mid-range wine
|Meal for 2 people in a mid-range restaurant
|Pint of beer
Average cost in restaurants is also cheaper, I found lunch deals in cheap restaurants for €8, whereas in Spain you can hardly get anything below €11.
Menus on sea town restaurants are more expensive. To get you an idea, this is what we spent for a Sunday lunch in a restaurant with sea views in Albufeira:
- 40cl of Super Bock beer: €2.5
- Local Portuguese salad: €6.9
- Grilled Dorado: €12.9
- Salmon Wrap: €7.9
- Side chips: €2.5
- Small Bottle of Water: €1.4
- Large Coke (Coca-Cola): €3
Total for two people: €37.1
If you are the type of eater who prefers sweets far more than salty/savouries meals, then no worries, Portugal has got you covered on that as well. Pastel de nata is a popular Portuguese egg custard tart pastry dusted with cinnamon. It’s delicious, and I believe it should be mass-produced and shipped around globally!
Look at that 🙂 :
When it comes to the weather, Portugal can brag about it. It’s one of the warmest countries in Europe, with mild Mediterranean temperatures all year round in most of its territory.
The country is said to have over 300 days of sunshine a year. That and the mild temperatures makes it an attractive place to come and visit even during the colder autumn and winter seasons.
Although the country is relatively small, it experiences some variations in climate. In general, the south is warmer and dryer than the north. Mainland Portugal has a Mediterranean climate, with annual average temperatures of 10-12 °C in the north, mostly mountainous, and 16-18 °C in the southern lowlands.
Lisbon is the sunniest capital city of Europe and one of the sunniest overall places in Southern Europe, with more than 2,800 yearly sunshine hours despite the relatively high yearly precipitation.
These are the kind of temperatures you can expect if coming down to the south of Portugal in December:
Why you should consider moving to Portugal in two images: pic.twitter.com/jr4POJaPVo— Tony | Onemillionjourney ?? (@JourneyMillion) December 7, 2021
Portugal is also one of the European countries with the greatest diversity of natural landscapes.
Untouched, sparkling landscapes are all over the country. From the Azores to the north of Portugal, Madeira, Algarve, Évora, Parque Nacional da Peneda-Gerês, the cliffs around Lagos as well as its beaches, which are some of the best you can find in Southern Europe.
Altogether, it makes it a great place to go for a hike, connect with nature and refresh your mind.
As the saying goes:
“A walk in nature walks the soul back home.”
6. Non-Habitual-Resident (NHR) Special Tax Regime
Another attractive aspect of Portugal is the non-habitual-resident (NHR) special tax regime. Individuals covered by this regime can benefit from a special personal income tax (“PIT”) regime for a ten-year period:
- Employment and self-improvement income from a Portuguese source is taxed at a 20% flat rate (if derived from high value added activities)
- 0% tax on foreign income, that includes:
- Capital gains
- Rental income
- Self-employment and professional income
- 0% tax on wealth.
- 10% Inheritance tax rate on Portuguese assets (except for spouses, descendants and ascendant, who are exempt).
- Gift tax at 10% rate (except for spouses, descendants and ascendant, who are exempt).
- Annual Property municipal tax based on the registered value of Portuguese real estate at rates between 0.3% and 0.45%. On properties valued over €600,000 rates are between 0.7% and 1.5%).
- Municipal tax on the acquisition of Portuguese properties at rates up to 7.5%. Stamp tax duty at 0.8% is also due on the same amount.
7. Proximity With Spain
Portugal has only one neighbour — Spain. The Portugal–Spain border is 1,214 km (754 mi) long, and is the longest uninterrupted border within the European Union. Customs and identity checks between the two are rare. We crossed the border by car without any interruptions or cues, it was just literally as if you weren’t crossing countries, but just entering a new province.
As Spaniard, Portugal proximity with Spain is a stimulating pro. Would I feel homesickness, then Seville is only 2 hours driving from Faro, or If I crave eating espetos sardines grilled on the beach, driving to Malaga only takes 4 hours.
8. Healthcare System
Fortunately, our short stay didn’t involve any visits to the doctor or hospital, so it’s hard for me to compare it directly with the Spanish healthcare system.
However, as I could read, whether you rely on the public or private sector, Portugal’s healthcare system is excellent. An indication of this would be high vaccination rates and high life expectancy (81 years vs 82 in Spain).
The healthcare system index in Portugal is also good-looking, 72, although is also remain below the Spanish index of 78.5.
EU citizens who retire early may qualify for free or subsidized healthcare for up to two years of residence. Alternatively, early retirees can pay voluntary social security contributions or get private health insurance in Portugal. There’s a lot more about this on expatica.
Cons of Portugal
Driving in Portugal is not as enjoyable as driving in Spain, in my opinion. While there’s no doubt that the Portuguese road infrastructure is well interconnected and maintained, most conventional roads are narrow, with driving speed limits of 70 km/h on many sections. Driving from one place to another takes longer than I am used to in Spain.
You can always choose to take the motorway, but that will come at a price, as tolls aren’t especially cheap. For instance, driving from Faro to Lisbon will cost you around €25 extra on tolls. In Spain, you barely pay any, in fact, we travelled around the whole country in September 2021 and paid €0.
Also, the driving habits of some local people can make your driving experience a bit less enjoyable. As an example, I noticed many drivers get too close to the backside of the car and forget to keep the recommended safety distance. I also witnessed dangerous taking overs and drivers watching their phones in high transited areas.
In addition, both fuel and car prices can be between 17% and 22% more expensive than in Spain, according to data.
Nonetheless, it must be pointed out that car parking is generally for free, at least down south, so that’s a good point.
2. Card payments
If you fancy going out for a stroll and stopping on a sunny terrace for a coffee plus a sudden use of the toilet, make sure you always carry cash with you, as many establishments won’t accept cards as a paying method.
Paying by cash is not as practical as paying with a contactless card, phone or watch. I used to be the type of person who would always carry some cash with me for the “just in case” situation, but since the pandemic started, I got used to paying with Google Pay on all establishments to help stop the spread of the virus.
3. Poor Housing and Internet Quality
The housing quality in Portugal is generally poor. Houses and apartments are typically poorly insulated and almost never have central heating of any kind. Internet quality and speed can also become frustrating. As I worked remotely, I earned the nickname of the “frozen guy” after some interruptions during Teams meetings.
At first, we thought the poor housing and internet quality maybe only in our building, as it was a holiday apartment type. However, after spending some days visiting Lisbon, we noticed no variation in the quality standards.
Winters, albeit short, can become chilly bad!
Although the Portuguese economy has been steady and expanding continuously since 2014, the GDP per capita remains low. Portugal ranks 58th, that’s below the EU average and Spain (48th). The purchasing power of Portuguese people is low, the PPI is 46 vs 69 in Spain.
This can be taken as a disadvantage, but it will depend on everyone’s situation. In my opinion, as long as your income is not linked to the Portuguese economy, then I can’t see why it should be a disadvantage. But, if your plan is to follow a Barista FIRE strategy, plan on working part-time or starting a local business, then moving to Portugal should be considered carefully.
Portuguese is a beautiful sounding language, and even though you can get by using English, speaking Portuguese is a must if you want to connect with local people and make the move a more enjoyable experience.
I believe Portuguese can be learnt easily, especially if your native language is Latin derived. However, this will take time and possibly money, so again, depending on one’s plans, this may be a bump on your personal road.
Is Portugal A Good Place To FIRE?
From my personal point of view, whether Portugal is a good place for you or your family to FIRE will largely depend on your personal situation and interests.
Despite my short stay, my global impression is that Portugal is a well-rounded place to FIRE. Since I have plans of selling my flat and removing roots from Spain in the short term, relocating to Portugal remains on the table as an option. I loved the energy of the city of Lisbon, and also the quietness and warmer weather in the south during the winter. This makes it a perfect country to find your balance between having energetic activities and relaxing experiences.
However, I would need to amass a lot of wealth before I could seriously consider Portugal before Spain to FIRE for the long term, and since I still got 8 years left before reaching financial independence, a lot of things can happen on the way. Will the NHR special tax regime still be valid? What about the health care system? Will still work well?
What do you think?
Does Portugal look like an interesting place to FIRE to you?
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