Malta is one of four European countries that offers favorable taxation of pension income to expat retirees.
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In July, rumors began circulating that Portugal would bring back its non-habitual resident (NHR) tax regime.
Launched in 2009, the NHR gave tax breaks to people who became tax residents of Portugal. You could enjoy a lower income tax for certain jobs and receive much of your foreign income tax-free for up to 10 years if you qualified.
This made Portugal even more attractive to expats in general and retirees in particular, who could initially receive their pensions tax-free while living in Portugal. Later, a 10% flat tax rate on pensions was introduced.
The NHR program ended in January 2024 (although there’s a transition period in place until the end of 2025). Its cancellation came about amidst heightened tensions during Portugal’s housing crisis, which the NHR contributed to, according to its detractors.
Before his sudden departure from office, Portugal’s then Prime Minister António Costa labeled the NHR program “a measure of fiscal injustice that is not justifiable,” citing the fact that a number of expats benefitted from NHR status for 10 years and then left Portugal without contributing to the economy.
Portugal now has a center-right government under the Social Democratic Party, and it has announced plans to reinstate the NHR program, albeit in a watered-down format.
According to Finance Minister Joaquim Miranda Sarmento, this new iteration of the NHR is designed to attract highly skilled foreign workers. It will include a 20% flat rate of income tax for salaries and professional income.
Pensions, capital gains, and dividends will not be included, as the program is no longer designed to attract expat retirees.
The Social Democratic Party has a steep hill to climb to get these plans passed by Portugal’s parliament, where it lacks a majority.
Whether or not they pass, however, the takeaway for prospective expats should be to act on these kinds of opportunities (whether they’re special tax regimes or residency offers) while they’re available.
The policies that create them are not set in stone; they change often, usually in alignment with whichever political party is in power.
If you missed the opportunity to become a NHR tax resident in Portugal when the policies were most favorable for retirees, the good news is that there are other options available in Europe. Here are four countries currently offering special tax regimes to expat retirees.
Greece
Since July 31, 2020, Greece has offered a non-dom regime for pensioners, which allows for favorable taxation of pension income.
Those who qualify pay tax on their foreign-sourced income at a flat rate of 7%. Non-dom status is available for up to 15 years.
To qualify, you can’t have been a tax resident in Greece for five out of the past six years. You also need to be from a country that has an agreement for cooperation in tax matters in place with Greece.
Italy
Italy introduced a flat tax regime for new resident retirees with its Italian Budget Law for 2019.
Under it, foreign pensioners’ individual income (from non-Italian sources) is taxed at a 7% flat rate for up to 10 years. This rate applies to all income, so long as it’s not sourced in Italy.
You can qualify if you haven’t been a resident of Italy in the five years prior to applying. You must also receive pension income from a non-Italian source.
Importantly, this regime only applies to Italy’s southern regions (Abruzzo, Apulia, Basilicata, Calabria, Campania, Molise, Sardinia, and Sicily). You need to move to a municipality with less than 20,000 inhabitants in one of those regions to qualify.
Cyprus
If you become a tax resident of Cyprus and your pension comes from a non-Cypriot source, you can choose to be taxed in Cyprus in one of two ways:
Your pension is included in your worldwide income and taxed according to personal income tax rates, which range from 0% to 35%.
Your pension is taxed separately at a flat rate of 5% for amounts over 3,420 euros ($3,796).
Malta
Malta offers the Malta Retirement Programme, which is a residency program that comes with tax benefits. Specifically, it applies a 15% flat tax rate on foreign pension income.
To qualify, your pension must be at least 75% of your chargeable income, and you must receive this pension in Malta.
You must also own or rent property in Malta. If you own, your property must be worth at least 275,000 euros ($305,196). If you rent, your annual rent must be at least 9,600 euros ($10,654).
If you select a property in the south of Malta or on the island of Gozo, however, the qualifying investment amounts are lower. In that case, the minimum amount for a property purchase is 220,000 euros ($244,157), and the minimum annual rent is 8,750 euros ($9,711).
Other requirements to qualify include being in receipt of stable and regular income, holding an EU health insurance policy, and being able to communicate in one of the official languages of Malta (English and Maltese).
You can’t be domiciled in Malta at the time of application, and you can’t intend to be domiciled in Malta within five years of your date of application.
Domicile is distinct from residency. It’s a complex common law concept, so it’s best to seek guidance from Maltese tax and residency experts prior to applying to the Malta Retirement Programme.
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Publish date : 2024-09-23 07:02:00
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