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11 Apr 2023
The cost of living in Portugal compared to the US can vary greatly depending on the region and the person’s lifestyle.
In general, Portugal is considered to be a more affordable destination for expats and retirees compared to the United States.
This is mainly explained by the lower cost of housing, food, healthcare, transport and taxes.
Housing is one of the largest charges for most people, and in Portugal, this cost is significantly lower compared to the US.
Renting a one-bedroom apartment in the city center in Portugal costs on average from €500 to €800 per month, while in the US, the same type of apartment can cost upwards of $1,500 per month.
The cost of purchasing a home in Portugal is also significantly lower. The average price per square meter is aprox €2,000 compared to around €4,000 in the US.
Food is another area where the cost of living in Portugal is significantly lower compared to the US.
Basic groceries such as fresh produce, dairy products, and meat are much more affordable in Portugal, and eating out at restaurants is also cheaper.
A meal at an average city restaurant in Portugal can cost around €15, while in the US, it can cost upwards of $25.
Healthcare is also cheaper in Portugal compared to the US.
Portugal has a public healthcare system that is widely considered to be one of the best in Europe. While the cost of healthcare in Portugal is still lower than in the US, it is important to note that the quality of care may not be as high as in the US.
For those who prefer private healthcare, private insurance can be purchased in Portugal, and it is still significantly cheaper than in the US.
Transportation costs in Portugal are also lower compared to the US.
Public transportation is widely available and affordable in Portugal, with the cost of a monthly pass around €30. In the US, the cost of public transportation can vary greatly depending on the city, but it is generally more expensive than in Portugal.
The cost of owning and maintaining a car in Portugal is higher on the fuel price side but generally lower on the maintenance side.
The tax regime in Portugal compared to the US is generally considered to be more favorable, with lower personal income tax rates, lower corporate tax rates, and lower property tax rates.
However, the tax regime in Portugal can still be complex, and it is important to seek the advice of a professional tax advisor to understand the tax implications of living or doing business in Portugal.
For more detailed information on taxes in Portugal we recommend the PWC website.
Here are a few key differences between the two countries’ tax systems:
For tax purposes, residents of Portugal are subject to progressive rates ranging from 14.5% to 48% on their income in 2023.
For taxpayers with taxable income over EUR 80,000 in 2023, an additional solidarity rate of 2.5% to 5% will be in effect.
Capital gains and investment income are subject to different rates.
In 2023, non-residents will pay a flat tax of 25% on their taxable income.
The personal income tax rate in the US varies depending on the amount of taxable income, from 10% to 37%.
The corporate tax rate in Portugal is 21%, which is the same as the federal corporate tax rate in the US of 21%.
In addition to the federal corporate tax, some states in the US also impose their own corporate taxes, which can vary widely. The state corporate tax rates can range from 0% to 9.99%, with the highest state corporate tax rate being in Pennsylvania at 9.99%.
Portugal has a standard VAT rate of 23%, while in the US, there is no federal VAT.
Some states in the US have implemented their own sales tax, which can range from 2.9% to 10.5%.
Portugal has a property tax (IMI) that ranges from 0.3% to 0.5% of the property’s taxable value.
In the US, property tax rates vary greatly from state to state and can range from 0.3% to 2.5% of the property’s value.
Portugal has an inheritance and gift tax of 10% for direct descendants and 21% for other heirs.
In the US, inheritance and gift tax is a federal tax, with a top rate of 40%. Some states have their own inheritance and estate taxes, which can range from 0% to 16%.
The cost of living in Portugal is lower than in the US for several reasons, including:
In conclusion, the cost of living in Portugal is lower than in the US due to a combination of factors, including lower housing costs, cheaper food, lower healthcare costs, lower transportation costs, and lower taxes.
These factors can make Portugal an attractive destination for expats, retirees, and those looking for a more affordable cost of living.
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