Many retirees opt to move to countries where the cost of living is lower than in their home country. Often, their retirement pensions do not meet expectations, leading some retirees to continue working, either out of necessity or personal preference. However, living abroad introduces specific rules related to various types of visas, which may not always permit additional employment alongside retirement. Let's have a detailed look at the situation.
Are “retirement visas” compatible with professional work?
Unless you are an EU citizen benefiting from free movement within the EU, you generally need a visa and residence permit to retire abroad. The exact name varies by country, but some thirty countries offer specific retirement visas, including Greece, Italy, Portugal, Spain, Costa Rica, Mexico, Argentina, Brazil, Malaysia, Thailand, Dubai, and Mauritius.
To qualify for these retirement visas, you typically need to meet certain conditions, such as having sufficient income (as determined by the respective states), having health insurance, and, for most retirement visas, not engaging in any professional activity within the country! This is because it is generally considered more advantageous to host retirees who bring in income without impacting the local job market. So, what options are available if you want to continue working to supplement your income?
One potential solution is to apply for permanent residency after living in the country for a few years. For instance, in Costa Rica, a retirement visa can be converted into a permanent residence permit after three years, allowing you to work. The specific conditions vary by country, often requiring a waiting period during which you cannot work.
Other options include applying for a different type of residence permit rather than a retirement visa. If you want to start a business or contribute economically to the host country, consider an "Investor Visa," also known as a “Golden Visa.” This visa allows foreigners over 18 (usually with no other age restrictions) to obtain a residence permit and sometimes even citizenship by investing in the country. Investments could include purchasing real estate, investing in local stocks and government bonds, or starting a business.
For example, Spain's investor visa has specific conditions for starting a business: it aims to create jobs, have a socio-economic impact, or contribute to science and technology.
If you prefer not to invest but want to engage in a more conventional professional activity, such as consulting, consider remote work or digital nomad visas if they align with your type of work. Countries offering such visas include Estonia, Panama, Spain, Thailand, Mexico, and Costa Rica. For example, Estonia's digital nomad visa is designed for people with a business that operates independently of their place of residence, with activities conducted remotely. You must primarily serve clients outside Estonia and demonstrate an income of €3,504 per month (before taxes) over the last six months.
As illustrated, the conditions can vary significantly. Generally, obtaining a work authorization for remote work that does not affect the local job market is easier, unless you are directly contributing to the economy through job creation with your business. For local employment, you will likely need to wait until you have a long-term residence permit. Each country has its own specific rules, so consult the official immigration website of your chosen country and study the requirements carefully, or seek advice from a visa and residence permit specialist.
More tips for optimizing your overseas retirement
If pursuing your professional career seems too complex, consider leveraging your retired status from a tax perspective.
First, you are advised to retire in a country that has tax treaties with your home country. These treaties help avoid double taxation: by the country where you receive your pension (and possibly other income) and by the country where you choose to reside. Check the list of tax treaties on your home country's tax office website. There should be a section on “international tax treaties” providing the necessary information.
Seek relevant information on the taxation policies in your new country of residence and ensure you understand where and how you will pay taxes. This depends on the conditions set by the governments and the specific tax treaties in place. Some countries, like Mauritius (for retirement visas), do not tax funds transferred to the island. However, you must declare your income sources, including your pension, in your home country.
Conversely, some countries will tax you on income from abroad. It might be beneficial to pay taxes in your host country if they have more favorable tax rates than your home country or do not impose wealth taxes. Assess your situation based on the destination and prevailing regulations. In some cases, your pension amount might be adjusted if you pay taxes abroad.
Also, consider the transfer of funds between currencies. Exchange rates can fluctuate significantly, which might reduce the value of your pension. Can you use an international bank with branches in both your home country and your retirement destination? This could facilitate fund transfers and minimize currency exchange fees. Is it possible to open a multi-currency account? This would help manage different currencies effectively and reduce conversion fees.
