Hello, I see that you have mentioned health services in Portugal several times.
While holding a Portuguese residence permit and spending more than 183 days per year in the country, the holder and family members will qualify for coverage through the country’s healthcare system. After five years and obtaining permanent residency/citizenship, one will automatically qualify for access to free healthcare in Portugal. As a Portugal Golden Visa holder residing in the country for less than half of the year, permit holders are considered temporary residents. Therefore, not yet qualifying for the resident/citizen insurance. The primary holder and family members will be required to take out private insurance for the five years prior to receiving citizenship/permanent residency. Fortunately, the cost is quite nominal at €400 EUR to €1,000 EUR per year.
Thank you for your very helpful post.
As I understand FEIE has to be earned abroad. As a retiree I will have to pay US taxes on my IRAs, two small pensions, SS and US sourced rental income. I would imagine I would also have to pay the US on interest and dividends of US based companies. If I buy rental properties abroad or earn interest or dividends on European companies than I expect the FEIE comes in handy.
I am not trying to go completely tax free but rather bring my taxes down as close as possible to what I would have to pay in the US. I pay over 12K a year for health insurance and have a huge deductible. If I can get cheaper health insurance abroad I would see that as a tax credit. My income right now does not include two small pensions that will kick in in 5 to 10 years, social security, or my IRA (though I could start distributions now). My income could double in about 10 years once those funds begin paying.
You’re right I could use a good tax planner who knows the US, France and Portugal.
I understand the French system better than the Portuguese taxes for retirees who have exhausted the NHR years. That is because I was thinking of living in France for 5 years to acquire citizenship there. I started filling out the visa form and chose family reunification only to discover my sister, who has a French passport and is married to a Frenchman is not considered family. Then I found out that France is not issuing retirement visas due to Covid. When I was doing research on this option I actually pulled out the French tax form that gives you tax credit for retirement income. It is added to your “taux effective” and as you point out you are given tax credits on your French income tax for retirement funds but my interpretation is that it is used to calculate your marginal rate. Therefore if your IRAs pensions, and social security total 100K a year any additional income, for example, US rental income, will be taxed at the difference of France’s marginal tax rate of over 100k. France’s marginal tax rate at the income is 41% (I believe) versus 24% in the US. However the French tax dividends and bonds at a fixed rate of 12.5%which is lower than the US BUT they also take out 17.5% for social charges. That could be problematic if you have a lot of income from muni bonds as I believe interest from these bonds is only tax free in the US.
I have also discovered that the practice of not taxing retirement income is not unique to France. Retirement income is generally not taxed by other countries.
“As a U.S. citizen retiring abroad who receives Social Security, for instance, you may owe U.S. taxes on that income, but may not be liable for tax in the country where you’re spending your retirement years.
However, if you receive income from other sources (either U.S. or country of retirement) as well, from a part-time job or self-employment, for example, you may have to pay U.S. taxes on some of your benefits. You may also be required to report and pay taxes on any income earned in the country where you retired.” Source: https://www.thinkholsinger.com/tax-implications-of-retiring-overseas/
The challenge I have trying to understand Portuguese tax system is that the moment you type expat taxes in Portugal you get NHR tax scheme explanation but nothing for retirees who have exhausted the NHR scheme. My guess is that most if not all European countries also give tax credits on US sourced retirement income.
There is also the question of social charges as previously mentioned. That gets rather complicated. I know when I lived in France many years ago and paid myself minimum wage from my SARL half my earnings went to taxes and social charges. Some of those charges were going to pay into the French SS system and some went to health care. I have read that I won’t need to pay social charges on my retirement income but on the other income I am not sure how that works out. I wouldn’t think I would have to contribute to a retirement system but I expect I would have to contribute to the health insurance. Here is how I understand it following the example above of income from retirement plans totaling 100K. Let’s say the additional income is dividends, interest and rental income. US sourced Rental income is too complicated for me to fully understand but I think it would be taxed at the French marginal tax rate 41% minus tax credit for what you have to pay the US. I am not sure how social charges are calculate but I believe it is similar. For interest and dividend income you won’t pay any tax to France since your US taxes would be higher than France BUT you would pay social charges of 17%. So if you have additional 10k in interest in US bonds you would pay the US 2.4K since your marginal tax rate is 24% and 1.7K in French social charges. For 10k in dividends you would pay 1.5K to the US and 1.7K in French social charges. Disclaimer: I am not a tax account but this is what I understand from my research.
I would love to see a side by side comparison and perhaps when I can understand it all I can try and do that myself. I do know that Spain is not an option unless I live in Madrid. Unlike France and Portugal, their wealth tax is not just on real estate assets but your liquid financial assets as well.
Thank you. That is very clear and what I thought. Do you by chance know some examples of private insurance. When I do a search I get all these US inrnace companies that want to charge you a lot mire than that. I fear there is a bit of scamming going on with US citizens since they know our costs are so high.
Ok. So, FEIE is “earned”, as in “salary”. The interpretation here is fairly loose - I think it’s “where your butt is” not necessarily “where the company is”. There’s stuff you can do here. So I understand. But this won’t apply to you since all of your income is passive. You have to consider the reason for FEIE - it’s for people who are working temporarily overseas.
I don’t know, but I don’t think there is a health insurance contribution unless you are employed in Portugal. It’s not like Costa Rica where everyone gets to pay Caja.
You might find this interesting if not especially detailed -
As for the rest, yeah, it sounds complex. Best I can say for that.
You might be complicating this whole thing. If you have a good income, I know in France, you can just apply for a Carte de Sejour - allows you to stay in the country therefore the EU for a year - by showing that your bank will transfer a certain amount of money each month. Just tell them you love France or want to learn French and the culture. (I’m sure that Portugal has something similar.) This should be easier to get if you purchase property. Renew each year. Then just stay. Income and taxes stay in the States.
According to the SNS FAQ for Foreign Citizens:
" Q: Who can obtain the SNS User Card?
A: Foreigners holding a residence or residence permit, or work visa."
Do you have an official source for that claim? It’s difficult to imagine any country letting immigrants who never paid for the SNS via income taxes to receive the same free care as the citizens who did pay via taxes.
https://www.dgs.pt/mobilidade-de-doentes/cidadaos-estrangeiros/perguntas-e-respostas.aspx
True, any country will give you a residence visa if you can show sufficient income. But if you want a passport and don’t want to pay for private healthcare you have to become a tax resident. I started an French company(SARL) and completed over 3 years in the early 90s but stupidly headed back to the US. My sister and french Brother-in-law joined me in Paris after my first year and raised two boys there. An American niece headed over there, landed a job at a top architect firm, married a Belgium and just gave birth. I started the process for a long term visa for France using my sister’s address but then discovered that I don’t qualify for family reunification and because of Covid they aren’t issuing retirement visas. Portugal is, but requires a signed one year lease if you don’t own a property. I am not comfortable with picking a place to live for a year sight unseen. Because of Covid, I can’t go to either country without a long term visa. I went ahead a purchased a refundable ticket with the hope that that will change so that I can at least head over on a tourist visa.
What’s the rush on the passport? Second, all you need is supplemental health insurance in Europe which once you are living there, shouldn’t be much(?) - though I haven’t looked into it so I might be wrong. When I was in France, I used their healthcare system several times and only paid for fees, 25 euro doctor payments, etc.
It takes the same amount of time to get permanent residence as it does a passport. I have read of the many advantages of having a passport over permanent residence but among them you can move from one country to the next like changing states in the US. Also I can vote ! I don’t intend to return to the US but even if I do I want the option to go back without dealing with more paperwork. As I outlined above I have a lot of family in Europe and my knowledge of the history culture and languages make it as easy for me to adapt to a new location there as it does in the US.
I will leave it to someone else give a list of the advantages of a passport over a permanent residency but for me it is uniquely personal and really about having all the rights and benefits of others citizens in a place I plan on living the rest of my life.
Okee doke. I was just curious.