Azores and its low taxation and high quality of life within Europe

The Azores Islands, a Portuguese archipelago in the middle of the Atlantic, are emerging as an increasingly attractive destination not only for their stunning natural beauty and high quality of life, but also for their interesting tax advantages. If you are looking for a change of life that combines tranquility, nature, good connectivity, and economic benefits, the Azores could be your ideal place. In this article, we will explore the reasons why this Atlantic paradise is becoming the choice of many.

Portugal has implemented a series of tax regimes designed to attract talent and investment, and the Azores Islands directly benefit from them, offering a particularly attractive tax environment.

The Tax Incentive for Scientific Research and Innovation (NHR 2.0), in force since January 1, 2024, represents a significant opportunity for highly qualified professionals, researchers, and entrepreneurs who decide to establish their tax residence in Portugal. This regime offers tax benefits for a non-renewable period of ten consecutive years.

Under NHR 2.0, income derived from employment or self-employment for qualified professionals is taxed at a flat rate of 20%, a considerable reduction compared to general progressive rates that can reach up to 53%. Furthermore, foreign-sourced income is generally exempt from tax in Portugal, although it must be declared to the Portuguese tax authorities.

Eligible professions and sectors under NHR 2.0 are focused on high value-added and export-oriented activities, including higher education teaching, scientific research, qualified jobs in productive investment, highly qualified activities defined by ordinance, R&D personnel, and roles in certified startups. It is important to note that jobs or other activities carried out in the Azores or Madeira are also included, under terms defined by a regional legislative decree.

In addition to national incentives, the Azores Islands enjoy specific tax benefits that make them even more attractive. Value Added Tax (VAT) in the Azores is lower, standing at 16% for "normal" VAT, compared to the mainland. Personal Income Tax (IRS) is also slightly lower. For companies, Corporate Income Tax (IRC) in the Azores and Madeira offers lower tax structures, with additional cuts forecast up to 17% by 2028.

Companies operating within the free zones of the Azores can access additional tax incentives, fostering investment and economic development in the region.

The Portuguese government has launched programs such as "Work Inland" (Trabalhar no Interior) to support those who choose to live and work in rural areas. Although specific details for the Azores require further investigation, there are regional initiatives that complement these efforts. The "+ Habitação" program seeks to transform housing, and subsidies are available for renovation and construction in the Azores, which can cover up to 75% of the investment.

To facilitate connectivity, the mobility subsidy has been extended, offering reduced fares for flights between the Azores and the mainland, as well as between the different islands of the archipelago. This not only improves accessibility for residents but also promotes regional integration.

The Azores Islands offer an exceptionally high quality of life, ideal for those seeking a slower pace of life in harmony with the natural environment. The pace of life here is notably calmer, with less stress and traffic compared to large cities, contributing to greater overall well-being and better mental health.

The lush nature is one of the greatest advantages of living in the Azores. Its wild and virgin landscapes are perfect for outdoor activities such as hiking, trekking, and exploring rich marine life. The numerous natural pools and beaches, although predominantly volcanic, add a special charm to the archipelago. Furthermore, the Azores are a less crowded destination, allowing for a more authentic experience and a strong sense of community.

In general, the cost of living in the Azores has traditionally been lower than in many other regions of continental Europe. Prices vary between islands, but remain reasonable. For example, the estimated monthly cost for a single person in Ponta Delgada is approximately €1,106, while for a family of four it amounts to about €2,662, excluding rent. Housing is affordable, with options starting from €25,000, and basic food and service prices are moderate.

However, it is crucial to note that increasing foreign investment and the tourism boom are beginning to put pressure on the cost of living, especially in the real estate sector. An increase in housing prices has been observed, which can create challenges for local residents and those with wages that cannot compete with the purchasing power of foreign investors. This phenomenon, often associated with gentrification, is an important consideration for those planning to move to the islands long-term. Regional authorities are looking for solutions to address this "housing crisis," but it is a factor to consider when evaluating future affordability.

The climate of the Azores is temperate maritime, characterized by mild temperatures and little variation throughout the year, making it a pleasant destination in any season. The average annual temperature ranges between 15 and 18°C. In winter, average temperatures are comfortably around 13°C, and in summer they reach 24°C, with no frosts, snowfalls, or temperatures below 5°C at sea level.

A peculiarity of the Azorean climate is its humidity and the speed with which weather conditions change, allowing one to experience "four seasons in a single day." Although January is the coldest and rainiest month, with an average of 21 rainy days, even at this time, days with temperatures up to 20°C can be enjoyed. The best time to visit and fully enjoy the islands is between May and October, when the climate is more stable and rainfall is less frequent.

The Azores Islands are increasingly connected to the rest of the world, facilitating the arrival and departure of residents and visitors. SATA Azores Airlines has been a fundamental pillar in this connectivity since 1975. The archipelago has 9 airports, one on each island, with Ponta Delgada Airport (João Paulo II) on São Miguel being the main entry point for most international flights.

Azores Airlines offers direct flights to various cities in Europe, the United States, and Canada, ensuring continuous connection with important urban centers. In addition, all islands are interconnected by air, allowing easy mobility within the archipelago. Initiatives such as the Stopover program also encourage travelers to explore the Azores on their way to other destinations, increasing their visibility and global accessibility.

The Azores Islands are a model of conservation and sustainability, recognized as one of the most sustainable destinations in the world. Their vast biodiversity and rigorous environmental preservation policies have created a unique environment and a solid foundation for self-sustainability.

The archipelago is home to an exceptional set of marine and terrestrial species, with a high number of endemic species. Marine biodiversity is particularly rich, with more than 500 species of fish, sharks, rays, whales, dolphins, and sea turtles. The natural landscapes are impressive, with numerous reserves, areas, and natural parks dedicated to environmental protection. Each island offers distinctive natural treasures, from spectacular lagoons to hot springs and natural pools.

The Azores have implemented strict policies for energy management, air quality, waste, and water, being the first archipelago in the world to obtain international certification as a sustainable destination. This commitment to sustainability extends to agriculture and fishing, which benefit from a pristine natural environment and careful resource management.

The Azores Islands are presented as a comprehensive destination that combines an exceptional quality of life, an enviable climate, robust international connectivity, and a deep commitment to sustainability, all complemented by an attractive tax framework. Whether you are looking for a change of residence for professional reasons, a quiet retirement, or simply a place where nature and modernity coexist in harmony, the Azores offer a value proposition that is hard to match.

With programs like NHR 2.0 and regional tax benefits, coupled with aid for settlement in less populated areas, the archipelago not only attracts professionals and entrepreneurs but also promotes balanced and sustainable development. The Azores are not just a place to visit, but a place to live, prosper, and enjoy a promising future.

To illustrate the tax attractiveness of the Azores Islands, especially under the NHR 2.0 regime, we present a comparative table with other traditionally tax-advantageous European Union countries. We will consider a scenario of personal income of €50,000 annually for a qualified professional and business profits of €50,000 annually for an SME.

Country/Region

Personal Income Tax (€50,000)

Corporate Income Tax (€50,000)

Azores (NHR 2.0)

20% (€10,000)

11.9% (€5,950)

Continental Portugal

Progressive (approx. 28-35% without NHR)

16% (€8,000)

Ireland

Progressive (approx. 20% up to €42,000, 40% for the rest)

12.5% (€6,250)

Malta

Progressive (approx. 25% for this bracket)

35% (€17,500) with refund system

Cyprus

Progressive (approx. 25% for this bracket)

12.5% (€6,250)

Note: Figures are estimates and may vary depending on deductions, exemptions, and individual circumstances. For Malta, the 35% rate can be significantly reduced through an imputation and refund system for non-residents, leading to a much lower effective rate.

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