Spain VS Portugal -Best Country to Live and Work.
The world is brimming with possibilities; you can make a home anywhere you desire.
From finding comfort in an unknown land to exposing yourself to a cultural shock and
learning to empathize with the differences that unite us, expat life can be both exciting
and challenging.
Travelling to and settling down in another country brings with it its own set of inspiring
and unexpected adventures.
If you’ve got your list of possible destinations, it’s time to take a leap of faith, and land
in a new world that you think would best favor your lifestyle.
It’s decision time.Spain or Portugal?
The large, laidback landscape of uninhibited love?
Or its lively and vibrant little neighbor?
That is the question.
Read on for a breakdown of these two popular Iberian countries, which are located on the
Southernmost tip of the European Continent.
If you’re an expatriate who loves beaches, good food, great architecture, a little history
and a lot of football, the choice between these two countries will be tough!
However, consider all that’s awaiting you there, and by the end of this article, you’ll
hopefully be better prepared to decide on which country to spend the next few years
of your life.
Climate.
Holding an enviable position on the world map, Spain is the only European country to
share borders with an African country – Morocco.
However, weather conditions throughout the country are variable, to say the least.
Spain experiences four main climate zones as a result of its diverse land mass, which
includes mountainous terrain and an almost 5000 km-long coastline.
While the country gets colder as the altitude rises, the inland areas of Spain will experience
the hot summer Mediterranean climate.
Certain areas on the south-eastern coast of Spain and eastern parts of Canary Islands
have extreme hot and cold desert climates.
Further, the Canary Island regions are one of the driest places in Europe.
Portugal, on the other hand, faces a more uniform climate throughout, with summers receiving
cool and pleasant sea breezes, while the winters are wetter.
The climate of Portugal is characteristically Mediterranean, with warmer weather than the
rest of Europe.
It snows regularly in the north from October to May, and in central Portugal during winter.
In the south, snow is usually found at high elevations during the winter.
In an average year, Portugal receives 2500-3200 hours of bright sunshine.
So if you want to enjoy the European climate but from a safe distance, Portugal is your
answer.
However, if you’re looking for a rapid change of seasons, Spain is your best bet.
Cost of Living.
Over the past decade, Spain has lost many job seekers, as they have travelled away to
increase their skillsets elsewhere.
However, the country has recently begun a new journey, giving the economy a face lift.
Startups in the big cities have begun to crop up, there is a revival of factory based work
and the younger generations have rediscovered wine production and exporting.
Expats from around the world are now coming to Spain to work.
If you have an interest in the food and drink or hospitality industries, this could be the
location for you.
The cost of living as compared to the USA is an impressive 44 percent less, but there
is no compromise on the quality and standard of living, with easy and affordable access
to social activities and healthcare.
The public transport system of railways and buses is cost effective and comfortable, even
to travel across the country.
In contrast, Portugal’s economy is more confident, and currently has many opportunities.
The economy here is growing significantly thanks to increased tourism as well as the
country’s cork industry, which produces half the world’s commercially used cork.
The cost of living in Portugal is 48 percent less than that of New York.
The standards of basic health and education are reputable.
Food and clothing are reasonably priced.
When it comes to cost of living, both these nations are great for expats.
History and Architecture.
Spain has a rich cultural history, and is third on the UNESCO list of heritage sites,
behind only Italy and China.
The country’s buildings, paintings and influences go back to the 7th Century.
Living in this country would give you lots of opportunities for exploration of stunning
monuments, architecture and cultural influences from the times of the Renaissance, interspersed
with the beauty of the Baroque and the passion of the Gothic styles.
Modern day Portugal sports the colors and shapes typical of many a modern city.
However, this city was once a place full of fairytale castles, palaces, and grand monasteries.
Vintage furniture from those times can still be found in homes and hotels.
Narrow streets which were once pathways for nobilities are today secret walkways for you
to enjoy on a lazy evening.
Fountains and ornate terraces overlook modern architectural wonders.
The two countries offer a choice between world-famous history or the hidden charm of cobbled streets;
you can decide which would suit you best.
Places to Visit.
If you decide to move to a new country, it is imperative to know all the places that
are worth visiting.
For those heading to Spain who enjoy nightlife, the beach town of Ibiza is always in high
spirits and has plenty of party spots.
Costa Brava, which has the most number of Michelin starred chefs from Spain, is a foodie’s
paradise, and the sights of the beautiful coastline are not to be missed.
Cantabria presents a marriage of mountains and beaches which are beautiful in both summer
and the winter.
If you’re visiting Portugal for the cobbled pathways and Gothic Cathedrals, head to Lisbon.
To experience what it feels like to stand proud at the top of a castle and then feel
humbled by the town sprawling and growing below you, head to Castelo de Vide.
Located at the foothills of the Serra Sao Mamede region, this quaint town in Portugal
is a must visit.
However, if you’re looking for a taste of the Mediterranean climate with its vast beaches
and fabulous cuisine, the Algarve is the place for you.
This region boasts vast groves of olives alongside whitewashed rural scenes which suddenly transform
into the wild coastal cliffs.
Portugal’s Golden Visa remains one of the best residency options in the world with the
option of full citizenship after 5 years.
You only need to spend 7 days in Portugal for the first year, and 14 days of the following
years.
These days are the total amount, you don’t have to be in Portugal for 14 days consecutively.
Residency.
The cost of residency in Portugal is not the most affordable, but it’s worth remembering
you are paying for E.U.
residency.
This allows you free entry and free movement between any other E.U countries.
Invest 500,000 Euros anywhere in Portugal and you are eligible.
If you choose to live in a low-density area, the minimum investment is lowered to 400,000
Euros.
There is a way to obtain residency by spending even less.
Buy an older (more than 30 years old) property in a “rehabilitation” zone, and the price
falls to 350,000 Euros.
A rehabilitation zone is an area the government have earmarked for investment and gentrification
in a city.
The cheapest way to obtain residency is by spending on an older property in a countryside
“rehabilitation” zone.
This lowers the price to 280,000 although you have to allow for the cost of refurbishing
the property and carrying out repairs whereas with Spain, you can jointly make your residency
application with your relatives, and they would obtain a residency card directly if
your application gets accepted.
Each year in Spain under residency counts for Spanish nationality.
Once you obtain your card, you will be able to freely travel throughout the whole European
Union.
As long as you have obtained your initial card, the subsequent renewals are easier,
so you can stay in the country for the long run.
Certain residencies, like the student visa, can be granted just after 20 days of submitting
your application.
Taxes.
In a context of increasing mobility within the European Union, Spain and Portugal are
popular destinations for, among others, pensioners looking for a milder (tax) climate.
There are however, in the long run, some tax measures that could reduce the attractiveness
of these two countries.
Spain for example, intends to combat tax competition between its Autonomous Regions by harmonizing
both its inheritance and gift taxes as its wealth tax through the introduction of a minimum
tax.
In Portugal, the Government has decided to amend its ‘non-habitual residents’ regime
(‘NHR regime) and to impose a flat rate of 10% on the pensions of foreign pensioners
coming to settle in Portugal as of 1 January 2021.
In Spain, inheritance and gift taxes are only due if one of the following conditions is
met: (i) the heir or donee is a tax resident of Spain or (ii) the assets are located on
the Spanish territory.
Both taxes fall under the competence of the Autonomous Regions, which are free to determine
the rates as well as any exemptions.
The standard progressive Spanish donation and inheritance tax rates vary between 7.65%
and 34% applies.
In addition, wealth tax (Impuesto sobre el Patrimonio) is also payable in Spain.
This tax is levied on the worldwide net wealth of Spanish residents and on the wealth of
non-residents in Spain.
The progressive standard Spanish wealth tax rates vary between 0.2 and 2.5%.
However, the Autonomous Regions are authorized to set their own rates and to grant a general
exemption for an amount up to EUR 700,000.
Some Autonomous Regions have increased their rates (e.g. 2.75% in Catalonia and 3.12% in
Valencia), while others have abolished them (e.g. Madrid) or introduced a lower tax (e.g.
the Canary Islands and Andalusia).
Initially, this wealth tax was temporarily reintroduced for the years 2011 and 2012.
Since then, however, its application has been extended annually.
As this tax seems to become applicable indefinitely, the differences in taxation between the Autonomous
Region may have a more or less significant impact on a taxpayer’s situation.
This may, in practice, even go that far that it could lead to a change of residence within
Spanish territory of the taxpayer.
In order to reduce tax competition between the Autonomous Regions, the Spanish Government
intends to harmonize inheritance and gift tax and the wealth tax by introducing a minimum
tax.
To date, no legal text on this subject has been published.
This is therefore an item to follow up, in particular as regards the date of entry into
force.
In Portugal the regime of non-habitual residents has been modified regarding to foreign pensioners
who settle in Portugal as from 1 April 2020.
The preferential NHR regime was introduced in 2009, In 2013 it was subsequently made
clear that the regime also applies to foreign pensions of pensioners.
In order to benefit from the NHR regime, the following conditions must be met: One must
become a tax resident in Portugal.
One must be registered for tax purposes with the competent Portuguese authorities; and
one must not have been taxed as a Portuguese resident during the five years preceding the
application for registration.
Once registration as a resident is completed, an application for the NHR regime must be
made by 31 March of the year following the establishment of residence in Portugal.
The NHR regime is attractive because, under the Portuguese tax law, an exemption is granted
for certain types of foreign income (dividends, interest, rent, pensions, etc.) which do not
originate from tax havens.
Certain types of income are de facto excluded from the preferential regime (e.g. capital
gains on shares).
However, this exemption becomes more interesting in so far as Portugal has, further to the
application of a double tax treaty, the power to tax and in so far as this income is not
taxed in its country of origin.
As regard to professional income which is obtained in Portugal under the NHR regime,
a “special” rate of 20% is applied to income from professions with “high added
value “, i.e. architects, engineers, artists, doctors, university professors, senior managers,
etc.
Until recently, the NHR regime was particularly attractive to pensioners who receive a non-Portuguese
pension and settle in Portugal as some foreign pensioners established in Portugal are exempt
from income tax for 10 years.
In practice, Belgian private sector pensioners are fully exempt from taxation on their pension.
Further to the application of the double tax treaty concluded between Belgium and Portugal,
Belgium retains the power to tax pensions granted to retired civil servants.
The power to tax pensions of private sector pensioners is, however, attributed to the
country of residence.
This favorable regime was strongly criticized by some countries such as Finland, France
and Sweden in light of the impact of the total exemption on pensions.
The Portuguese government has therefore decided to amend the NHR regime and to tax foreign
pensioners who settle in Portugal as from 1 April 2020 (i.e. with an application for
application of the NHR regime submitted by 31 March 2021 at the latest) at a flat rate
of 10%.
Despite this change, if you are a Belgian pensioner from the private sector, it is still
interesting to reside in Portugal and receive your pension there if this pension amounts
to approximately EUR 34,000 net per household per year.
Below this threshold, Belgium also offers a relatively favorable tax climate.
It is therefore important to take this into account when considering moving to Portugal.
Receiving significant movable or miscellaneous income (dividends, capital gains, etc.) can
also have an impact on your tax situation.
This should therefore also be taken into account.
Pensioners who have already settled in Portugal or will settle there before 1 April 2020 (with
an application for application of the NHR regime submitted by 31 March 2021 at the latest)
will continue to benefit from the NHR regime as applicable until then.
A lot of similarities are seen with Portugal and spain as both countries have low costs
of living.
Though Spain is still struggling to grow her economy, the case is different with Portugal
as her economy is strong and making wave across the globe.
Both countries have moderate taxation and getting a resident permit to any of them is
not much of a big deal.
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