Yesterday — amid all the talking faces and social media gabbing about rising inflation, prices going up, the potential for recession, homeless shelters and food pantries being used more often by more people, the adjustments and do-withouts even the employed are forced to make, higher costs and the problems we’ll all soon be facing — I stopped to listen to my inner voice, that soul or conscience that asks me to consider not how we would be affected by all these dire predictions … but what impact they would actually have on others.

Specifically, the Portuguese.

You and I are privileged. We’ve retired on a comfortable enough income, public and/or private pensions, to not be that affected by economic downturns and political pressures. Sure, maybe we’ll put off that cruise and faraway vacation, or postpone the purchase of a new car. For many or most of us, we’re living on money earned remotely or Social Security payments from a lifetime of working abroad.

Come what may, our standard(s) of living won’t change that much.

But what about our Portuguese friends and neighbors?

The widow next door to us is somewhere between 90 and 100. She has only three teeth left, so understanding her speech is difficult beyond comprehending the language we’re learning. A couple of times, we’ve knocked on her door to bring her some homemade food–meals or desserts. She’s very stubborn, refusing our offerings by saying her “children” bring her food each week. Her door slightly ajar, I’ve followed my nose and peeked in. It’s obvious that mold and mildew live there with her. She has neither air conditioning in the summer nor heating in the winter–at least not according to our standards. Regardless of the temperature outside, her house is cold and barren. No kitchen cabinets, just a shelf or two. Old, worn-out furniture. mismatched and misplaced … wherever. Her husband died more than 20 years ago and she’s been living on a state pension (“social security”) of €250 per month. Even though her daughters bring her food, at least once a week she trundles to and from the mini-market several blocks away with her walker. We can shrug off that extra €15 euros we’re spending now on what’s in our grocery carts from our weekly excursions to Auchan, Continente, Aldi, Pingo Doce, or Intermarché. But she can’t. What does she do? She does without, putting on extra layers and several threadbare blankets over the sagging mattress of her cot-like bed set in the middle of her kitchen, opposite the rusty front door. She may be poor, but her pride is intact and her survival instincts are strong.

We live in the suburbs of a major city, a comfortable if not upscale vila of mixed housing–most are row houses of all shapes and sizes, although there’s plenty of upscale properties with huge houses and landscaped gardens behind magnificent gates (not fences) around the town. We moved here from a smaller village (aldea) of about 500 people, down from 1,200 or more during its glory days. Today, one corner market, two cafés, and a beautician who visits twice each week comprise its commercial corps. Except for three tremendous but decaying manor homes, still grand and stately, all of the other dwellings are attached. No, that’s not quite right: around the village’s outskirts are a number of quintas inhabited by daily commuters who work for the government (elsewhere) and dirt-poor people.

Friends of ours live on one of those quintas, shared with a zoo-full of beloved pets: dogs, cats, chickens, guinea pigs, and geese that bark and bite. He’s a construction manager (whatever that means) who’s held a number of positions over the years. I have no idea how much he makes, but I do know that she’s worked for the government more than 20 years and still earns little more than the average minimum wage. How are they getting by with the increased costs of … everything, including their wages?

It’s obvious there’s an increasing use of plastic — credit cards — with people borrowing now and paying later for many of their needs. I suppose those erstwhile professionals proficient in digital, artificial intelligence, and cloud-based solutions are Portugal’s middle-class. Others, who’ve inherited property from their families play the pyramid game by holding on and selling high.

Another Portuguese friend owns a business that sells electrodomésticos: refrigerators and ranges, washers and dryers, but mainly aircon and solar solutions to everyday customers and large installations. He’s got a great location right on the corner of one of the city’s primary streets, a loyal and growing clientele, and a handful of technicians working for him. Yet, in addition to not being able to escape “the busiess” 24/7, he’s got a huge nut to crack between rent, salaries, inventory, utilities, taxes, and an accountant responsible for assessing and reporting the complexities of his financial considerations.

How do these people earning less than my meager monthly Social Security payments afford to drive new cars, with minimum sticker prices of €25,000. Some of the same vehicles and models cost 150% or more here over their prices in other countries.

One thing the Portuguese have, especially those living in the campo, that we don’t are quintas that have been in their families for ages, where they work the land daily and reap its produce, sharing baskets full with others.

The Portuguese also patronize places different than we do because they know where to get the best buys. If only we’d ask them, they’d be likely to help … but it means that we must take our homework more seriously, practicing Portuguese.

Would you believe that we know “foreigners” (expats, immigrants, or whatever) who have lived here for ten to twenty years and still can’t understand the language? Why should they? They live in expat ghettos surrounded by others much like them, where Portuguese isn’t spoken except by those serving or selling to them.

Now that Portugal is firmly on the map as one of the best places to be if you’re looking to retire with a good quality of life at prices more affordable and politics more amenable than the places we’ve come from, (almost) everyone wants to live in Lisbon, Porto, Algarve, or the Silver Coast.

But it’s a small country with not enough properties to go around–especially in those areas.

So, locals are being forced out of their homes, unable to afford even their maintenance. Now, there’s a bidding war for the best located properties, no matter their condition, as many will be torn down and rebuilt. Is that what we refer to as “regentrification?” Such a fancy word for a shabby deal. Maybe replacing faulty with functional would be better …

Taxes are high here, starting with “sales” tax, which is 23%. The government takes a big bite of your pay, too, with some people paying as much as 50% of their income in payroll taxes. Then, there’s Social Security, which is next-to-impossible to figure out without the services of a knowledgeable and competent accountant.

Residents in Portugal for tax purposes — us! — are taxed on our worldwide income at progressive rates varying from 14.5% (€0-€7,112) to 48% (> €80,882) for 2021. That doesn’t include Social Security, for which we’re also responsible when working. In 2021, an additional “solidarity rate,” which varies between 2.5% and 5%, applies to taxpayers with a taxable income exceeding EUR 80,000. LOL!

Social security contributions are 23.75% of gross pay from employers and a further 11% from employees. Portugal does, however, have agreements with some other countries regarding social security ‘totalization,’ including with the United States. In the case of the US, employees of American companies sent to work in Portugal for less than five years only have to pay US social security. Those working “remotely,” however are deemed independent contractors and must pay both their income taxes and social security contributions.

That’s a lot of taxes! But the money is spent to provide free health care and education, and lower prescription drug costs (among other essential expenses) to residents.

The minimum wage in Portugal is regularly adjusted, and currently is €8400 per year. The monthly level varies because many employees in Portugal receive 14 paychecks each year (the 12 months of the year, a holiday payment in June, and a Christmas payment in December), in which case the minimum is €600 (approx. £540, $710) per payment. For employees paid 12 times a year, the minimum is €700 (approx. £630; $830) per payment. There is no mandatory custom for wage growth or bonuses. 

Portugal has the sixth lowest average gross yearly salary among Organization for Economic Cooperation and Development (OECD) states. That comes to about 28,410 dollars per year (24,557 euros). A far cry from the United States, which leads with 69,392 dollars per year (59,981 euros), or neighboring Spain, with its 39,922 dollars per year (34,508 euros).

Nonetheless, if you’re committed to living frugally, you can live for less in Portugal. Many locals and retirees get by on less than 750 Euros a month. A couple can live in one of Portugal’s smaller or interior cities for about $1,700 a month.

Of course, there are some who make much more than the “average,” as shown here:

The top 10 careers with the highest salaries in Portugal:

But let’s get real. Not many make that kind of money in Portugal.

Average wages in Lisbon are considerably higher than the official minimum salary. The average salary in Lisbon is around 1050 euros, the highest in Portugal.

The Construction Union of Portugal (SCP) has stated that “there is no shortage of manpower” in the construction sector, but rather a lack good salaries. “There is no shortage of manpower; people are not choosing to work in the sector because they can earn three or four times as much abroad,” said the organization’s president, Albano Ribeiro.

According to Ribeiro, in the last six years, 300,000 workers have left the sector, and 90,000 are currently needed to carry out public and private works in Portugal.

The Portuguese leaving Portugal for better opportunities are being “replaced” by people like us. We’re necessary to the country’s economic welfare and, by and large, are welcomed.

That’s one of the reasons we didn’t move to Spain — where we’ve had a vacation bolt for 15 years — instead of Portugal. All Schengen countries agree to use the same visa application for would-be immigrants and residents. But there are major differences in their interpretation.

For instance, the European Union and Schengen may agree that all visa applicants be self-sufficient, able to support themselves and their dependents.

In Spain, income requirements for a Non Lucrative Visa for people from the USA and UK are $30,453/€25,816 annually, plus $7,613/€6,454 for each additional family member. These minimum income requirements covert to roughly $2,550 per month for a single person or $3,150 for a couple. (An additional €537.84 per month is required for each and every dependent family member.) Most of the Spanish people we know outside the big cities don’t make anywhere near those amounts. In addition, Spain residency applicants cannot have loans or mortgages outstanding in the United States. We didn’t feel welcomed by Spain.

For residency in Portugal, however, you must show income or pensions amounting to 12 months at the minimum wage: €8,460 for the first adult; €4,320 for a second or more adults; €2,538 per child. Couples must document income of €12,780. A couple with two children require €17,856. You must provide 6-months of bank statements. There are no restrictions on whether you work — in Portugal or remotely — if you have or can find a job. Portugal, despite its bureaucracy, made us feel very welcomed by these numbers alone.

Quite a big difference between the two countries, huh?

Sometimes, less is more!

We all have our stories to pass to posterity about how we’ve suffered because of bureaucrats and the systemic bureaucracy of Portugal (and Spain).

We’re still dangling through ours with the Autoridade Tributária e Aduaneira—aka The Tax Man (IRS), an arm of Finanças (Portugal’s financial system).

For us, nothing really had changed much when filing last year’s income declaration this year. Except for one important item: We’d sold our house and bought another.

Our new Portuguese tax accountant sort of assured us that there shouldn’t be a problem, as we handed over about 100 pages of official forms documenting what we’d paid and what we’d spent on the property.

Sort of assured us?

Let’s put it this way: She didn’t have definitive answers for what was and wasn’t deductible from our house repairs and improvements. “Not to worry,” she began while rifling through and assorting our documents. “A friend of the firm will help us decide which box to check.” Which box to check? “Not to worry. I will see him today or tomorrow,” she nodded. “But, not to worry. It doesn’t really matter, since you purchased another house — a new primary residence — between the two years before your sale and two years after it.”

Honestly, we weren’t very assured when we left her office on 18 April—she simply didn’t inspire confidence. “When will our taxes be ready?” I asked, as she escorted us to the door. “Two weeks, I imagine … but, no matter, because the taxes cannot be accepted by Finanças before June. Not to worry.”

When we met with her again to pick up our taxes, they still weren’t ready. She had yet to speak with the friend of the firm (who we later learned worked for Finanças), so she still didn’t know which box to check on the form.

I should have suspected that something was amiss, as she hadn’t replied to my initial four emails and two telephone calls to schedule an appointment. I had copied her manager on all our correspondence, and assumed he knew that I was getting impatient. Not just to schedule an appointment … but for the courtesy of a response. Am I the only one who believes that waiting two weeks to respond is unprofessional (at best) and negligent (at worst)—no matter what country we’re talking about? Portugal is no exception. At long last, we were scheduled to meet with her on Wednesday of the following week.

In the meantime—sometime between 18 April and 22 June—we had done some research with Google to learn what could be deducted from the sales price of the house to avoid any heavily-taxed capital gains. Commission paid to the property agency? Yes. The four inverter aircon units we had purchased including installation? No. The new kitchen cabinets upstairs and down? Yes. The pellet stove we purchased with installation? No. The electrical work we had contracted for to upgrade the wiring throughout the house to prevent overheating (and circuit breakers flipping)? Yes. The new refrigerators, ranges, sinks, toilets, and commodes? No. The four windows (with screens) and two doors that replaced single-pane glass ones surrounded by rusty metal frames? Yes. The big bar we bought for our gathering room which required two men and two days to assemble? No.

Bottom line: If it could be moved out of the house and taken elsewhere, it wasn’t deductible. If it was fixed to the house, it usually was. Goodbye nearly €8,000 worth of what we thought were irrefutable deductions.

Now you know why when looking at homes to buy (or rent) in Portugal, website photos may show a furnished and equipped property. But once you sign on the line, all that’s left there when you move in are a few bare light bulbs hanging from electrical cords.

Although the accountant was “pretty sure” which box to check on our return, she still wasn’t certain. The “friend of the firm at Finanças” hadn’t yet consulted with her. But “no problem,” our accountant promised. “If there is a mistake, Finanças will advise us.”

On 4 July (not a holiday in Portugal), our taxes were filed.

Then came a period of electronic fun and games with Finanças:

• On 7 July at 07:56 AM, I was informed that my tax declaration had been received and considered “certa” (correct);
• On 7 July at 07:48 PM, I was further informed that my tax declaration had been selected for analysis (“because of the expenses involved in the sale of the house,” presumed our accountant);
• On 8 July at 15:58 PM, I was notified that “The expenses sent are not legible, but they do not seem to add up to the total mentioned in the declaration.” New, legible copies had to be delivered to Finanças;
• On 11 July at 02:14PM, our relationship entered a new phrase as the email salutations now read “Caro/a contribuinte” (dear taxpayer), followed by my full name and fiscal number. The email message was a word-for-word repetition of the one received on 08/07 at 15:58 PM;
• On 11 July at 07:21 AM, I received another email informing me that my declaration had been received and that it was correct;
• On 12 July at 08:15 AM, however, I was told that, regarding the notification sent on 11/07/22, I should be aware that, once the discrepancy found in the declaration had been corrected, “the process that gave rise to it has ended”;
• On 15 July at 07:21 AM, I was informed that the declaration received the day before was considered correct;
• On 15 July at 08:13, nonetheless, I was again told that “the discrepancy found in the declaration” had yet to be corrected;
• On 15 July at 12:39 AM, I was notified that, “following the procedure for the settlement of the IRS statements, for the year 2021, your income statement was selected for analysis, so you will soon be sent, via CTT, a notification informing you of the situation(s) to be verified by the Tax and Customs Authority services, as well as the procedures to be adopted with a view to resolving the same. It is further informed that the referred situation is, since this date, already perfectly identified in your personal area of the Portal das Finanças website.” Whatever in the world that meant!

I tried contacting our accountant … but you know how that goes.

To further complicate matters, since I am married and filing jointly, my lawfully wedded spouse also received a personalized copy of each message. Although my own tax status in Portugal for 2021 may be resolved through the Finanças looking glass portal, his isn’t.

See, while I am retired and my Social Security payments and pension income aren’t taxed in Portugal because we have Non-Habitual Residency (NHR) status which exempts me from being taxed here on that income – and there’s a treaty in place between Portugal and the USA precluding double taxation – he continues to work remotely as an independent contractor for his former employer in the USA. Which means that he must pay both Social Security and income tax to Portugal.

Naturally, nothing is simple here.

He earns the same amount every month and sends his pay stubs promptly to another accountant, who files the Portuguese paperwork and tells him how much to submit to the proper authority in a timely manner.

Which he did/does.

Although each month’s earnings may be the same in US dollars, the amount in Portugal differs according to the (then current) exchange rates for euros. So, of course, the annual earnings shown on his 1099-MISC differ from the amount he’s already paid taxes on based upon euros and shown in his fiscal records.

It’s what Portugal’s IRS and Finanças consider a “discrepancy.”

Guess what that means in terms of us?

Bruce Joffe is publisher and creative director of Portugal Living Magazine. You are invited to read our current and past issues on this page of its website. For those who prefer the feel of paper pages, paperback editions of the magazine are available at all Amazon sites.

Spain and Portugal Pas de Deux

We just returned from a two-week vacation at the property we’ve owned in southern Spain (Olvera) for nearly 15 years. Since leaving the USA in 2018, our primary residence has been in Portugal, divided between two properties –one in the central area (Castelo Branco) and the other near the Badajoz border of Portugal and Spain (Elvas). We’ve been legal/fiscal residents of Portugal for nearly five years–since the inauguration of Donald Trump. The pied a terre in Spain continues to be our vacation home.

When we were tourists traveling once or twice a year from the USA to Spain, we considered our “vacation bolt” the be-all-and-end-all of places we wanted to be. Now, because of our exposure to Portugal, we’re having second thoughts.

People often ask, “Why do you have property in both Spain and Portugal?” “Which country do you like better?” “What are some of the differences between the two?” “Which one is more or less expensive, all things considered?” “Why Portugal, not Spain?” (and vice-versa).

You can type any of those questions into Google and come up with a host of objective, credible answers. But I doubt that you’ll find much about the subtle differences between living in Spain and/or Portugal online. After all this time, we’ve only recently been able to pinpoint some of the subtle differences that impact and affect us.

Based on our observations and experiences in two comparable, interior towns — Olvera in the Spanish province of Cádiz and Alcains in the Castelo Branco district of Portugal — here are some of our impressions about one country and the other …

Spain caters to our spirit, Portugal to the soul. The first conjures up the Spanish word salido (outgoing, extroverted, uninhibited), while the latter is better described by its sorrowful saudade (longing, yearning, loss).

Think about how Spanish flamenco and Portuguese fado make you feel. Therein lie the differences — emotional, at least — between the two Iberian countries.

Too metaphorical and transcendental a description? Consider these for more specifics:

• Portugal may have bad drivers, but Spain has poor roads–not just in their physical condition, but in their safety zones. Highways and major roadways in both countries feature signage indicating that a single car distance between you and another signals danger, and that greater safety is achieved by maintaining two. But Portugal is very careful about the areas where you’re permitted to pass other vehicles … especially from the lane of oncoming traffic. Not so in Spain. It’s sheer terror trying to pass another vehicle in those short lengths of roadway before a curve or an incline blocks your vision of what’s coming at you ahead.

• While both countries are Roman Catholic, in name if not in practice, nearly all stores — including supermarkets and shopping malls — are closed Sundays in Spain, while remaining open in Portugal.

• Maybe you’re too young to remember John’s Bargain stores (which morphed into Big Lots), where closeouts and budget prices lured penny-pinching shoppers. Now we have Walmart and “warehouse” operations like Costco. Due to its major investments in Portugal, China is favored with many tax-exempt businesses. Every city and town in Portugal sports hole-in-the-wall and mega Chinese shops which are beginning to take root in Spain, as well. But in southern Spain, Andalucía especially, it’s the Moorish markets that lead in the whatever-you-need, something-for-everyone business. And while it’s an eye-opener to see just how many products we import from China, the truth is that few bargains are to be found in either the Chinese or Moorish markets.

• Along with supermarkets, shops, and weekly markets, both countries also allow vehicles to deliver bread, fish, and assorted sundries to homes. Although each typically follows the same routes, stops, and times, you can hear them coming by a series of short “toot-toots” in Portugal, whereas wheeled merchants in Spain can deafen you with their loud, long, insistent horns blaring. Honking is more habitual in Spain than in Portugal, where stopping to unload groceries, neglecting to move the instant a traffic light turns green, letting someone out, or having a word with a pedestrian is more allowable and less the cause of impatience and maddening disruptions requiring immediate retorts by holding down on the horn.

• The languages of both countries have quirky differences. In Spain, it’s the lisp and in Portugal it’s kind of like a shhhhhhhhhhhhhhhhh or, sometimes, a gargling sound. Ultimately, Spanish is easier to understand than Portuguese, whose pronunciation is much more difficult. Nonetheless, Spanish grammar and verb conjugation require far more expertise (and experience) than Portuguese.

• Perhaps it’s where we go and travel, but to our ears, English is spoken more frequently by the Portuguese than the Spanish. Maybe that’s because it’s not considered a “foreign” language (i.e., Spanish, French, Italian, Latin, etc.) in Portugal, but rather an integral part of every student’s curriculum from elementary school upwards.

• Taxes tend to be lower in Spain (where the ubiquitous IVA or sales tax is 21% v. Portugal’s 23%), except when it comes to buying property: Spain just reduced (for a limited time?) its transfer tax from 8% to 7% of the sales price plus an additional 1% in stamp fees. In Portugal, however, if your principal residence costs less than €100,000, you’ll pay just 0.8% in transfer taxes plus 1% in stamp fees. Do the arithmetic: On a €50,000 home purchase, you’ll pay €4,000 in Spanish transfer taxes and stamp fees compared to Portugal, where you’ll be assessed €900. That’s quite a difference there! Nonetheless, in addition to IVA, Portugal imposes a road tax initially and in perpetuity on any vehicle that you buy.

• Spain is five times larger than Portugal with lots more coastline, yet Portugal has historic majesties and jaw-dropping topography, as well as its charm.

• The density of buildings – a bunch of two, three, and four-level houses set atop and/or encircling one or more others – gives a sense of claustrophobia, of living in a maze, in towns like ours in Spain. Are the streets really narrower there, or is it just how we’re made to feel? Portugal’s streets in towns like Alcains aren’t much wider (apparently), but there just doesn’t appear to be as many buildings or cars crammed into the space. Whether it’s a measure of driving skill or the impossibly steep streets for parking, almost every car — old and new — has dents, scratches, bangs, and fender-benders which the folks in Olvera affectionately refer to as “Olvera kisses.” Somehow, for whatever the reason, Portuguese cars are found to be in far better condition.

• People in both countries participate in the “café” culture, sipping and gossiping daily. Yet they’ll probably be drinking coffee in Portugal, whereas wine is the preferred choice in Spain. Both beverages cost about the same.

• By and large, Spain has its tapas, extremely low-cost, smaller portion dishes with fixings (bread, olives, pretzels, potato chips, cheese, etc.) to share with others or enjoy by yourself. Two people, each partaking two separate tapas plus two wines or beers, will pay around €15 for a satisfying meal. Add an appetizer (entrada) or dessert, and you’re looking at a 20€ tab. Water and soft drinks are more expensive than beer or wines in Spain and Portugal. Both countries offer their Platos/Pratos de(l)/do día. Maybe it’s the butchering, but we much prefer the taste and the chew of Spanish meats and sauces.

• In terms of bread and desserts, Portugal wins, hands down. Spanish breads and rolls are dry and tasteless, while they’re a many splendored thing in Portugal. Yes, Spain does have its churros (which many believe the Portuguese have improved upon), but Portugal’s pasteis de natas are a classic creamy custard tart that’s incomparable in its own right.

• Garbage collection and recycling is handled very differently in Olvera and Alcains. In our Spanish town, every sort of refuse – glass wine bottles, plastic water bottles, metal cans of tuna and shaving cream, along with the usual kitchen and bath waste – are often put into the same plastic bag and hung outside one’s house, where it’s picked up by the bin men (not women) every single day (including Sundays and holidays). Few recycling “centers” are conveniently located to where many of us live. In Portugal, recycling is encouraged with billboard signage and online memes … and good deals are available on sets of home-based recycling bins. Trash isn’t picked up at your property, but at clusters of red, yellow, and green recycling bins next to plain-old-garbage receptacles within walking distance, where we deposit them.

I began this narrative with a musical headline–from Phantom of the Opera. I close here with another musical allusion, this one from Mary Wells:

“Well, I’ve got two lovers and I ain’t ashamed … two lovers and I love them both the same.”

Bruce Joffe is publisher and creative director of Portugal Living Magazine. You are invited to read our current and past issues on this page of its website. For those who prefer the feel of paper pages, paperback editions of the magazine are available at all Amazon sites.