At a glance: The best places for expats to live in Portugal are not limited to Lisbon, Porto and the Algarve. Seven alternatives reward serious consideration: Funchal (Madeira’s regional tax regime and international community), Braga (technology and universities), Coimbra (healthcare and central location), Évora (UNESCO Alentejo), Fundão and Castelo Branco (interior incentives and housing costs), and Angra do Heroísmo (the Azores’ reduced rates).
Most lists of the best places for expats to live in Portugal recycle the same three answers: Lisbon, Porto, the Algarve. Those markets are well documented, and they are also where housing pressure, contention zones for alojamento local and price growth have been most acute. The more interesting question in 2026 is where an internationally mobile individual obtains the better combination of cost, infrastructure, connectivity and tax treatment.
This guide examines seven cities and regions: Funchal, Braga, Coimbra, Évora, Fundão, Castelo Branco and Angra do Heroísmo. The selection is deliberate. Two are autonomous-region capitals with their own fiscal regimes (Funchal, Angra do Heroísmo). Two are interior cities covered by the State’s territorial-cohesion incentives (Fundão, Castelo Branco). Three are mid-sized university or technology cities with infrastructure disproportionate to their cost base (Braga, Coimbra, Évora).
One framing note before the list. Wherever an expat settles, the national legal architecture is the same: a NIF as the first registration, a residence pathway under Law n.º 23/2007 (D7, D8, highly qualified activity, ARI or EU registration), tax residence determined under Article 16 of the Personal Income Tax Code (CIRS), and, where eligible, the IFICI (the tax incentive for scientific research and innovation). What changes by location is the regional tax layer, the cost base and the daily infrastructure. That is what this guide compares.
1. Funchal, Madeira: the regional tax regime and the established international community
Funchal is the capital of the Autonomous Region of Madeira and, for an internationally mobile resident, the most fiscally distinctive city on this list.
Madeira applies its own regional tax rates. Regional Personal Income Tax (IRS) brackets run below the mainland schedule (from 8.75% at the bottom of the scale to 33.6% before the national top rates resume), and regional VAT stands at 4%, 12% and 22% against the mainland’s 6%, 13% and 23% (DLR n.º 6/2024/M). For entrepreneurs, the general regional IRC rate is 13.3% (10.5% for SMEs on the first EUR 50,000), and companies licensed in the Madeira International Business Center (MIBC) benefit from a 5% IRC rate under Article 36.º-A of the EBF, subject to substance requirements, for licences issued until 31 December 2026 with effects through 2033.
Beyond tax: year-round mild climate, direct flights to Lisbon, Porto and a widening set of European cities, private healthcare alongside the regional health service, international schooling in and around Funchal, and one of the most established expatriate communities in the country, anchored by decades of British, German and, more recently, digital-nomad presence. Housing in Funchal is no longer cheap by Portuguese standards (the luxury segment has grown visibly), but the total cost of a professional household remains below Lisbon.
Funchal suits: remote workers and entrepreneurs who want the regional tax layer working for them; retirees who want infrastructure without a metropolis; founders considering an MIBC structure.
2. Braga: technology, universities and the youngest demographics in the country
Braga is the centre of the Minho region and the core of Portugal’s north-western technology corridor. The Universidade do Minho feeds a labour market that includes international engineering and software employers, and the city consistently ranks among the youngest in the country demographically.
For expats, the practical case is concrete: housing materially cheaper than Porto, Porto airport within roughly 50 minutes, a full hospital network, and an employment market that can absorb a working spouse. For remote workers, the city offers metropolitan services at sub-metropolitan cost.
Braga suits: working families, technology professionals, and expats who want a city of scale without Lisbon or Porto pricing.
3. Coimbra: healthcare, the university and the central location
Coimbra is organised around two institutions: the university (among the oldest in Europe) and the university hospital complex, which is one of the principal healthcare concentrations in the country. For retirees, the healthcare density is the decisive argument; for families, the schooling and the scale of the city.
Coimbra sits on the Lisbon-Porto rail axis, with both metropolitan areas reachable in well under two hours. Housing costs sit below both metropolises, and the student population keeps services and rental stock in continuous circulation.
Coimbra suits: retirees prioritising healthcare access, academics and researchers (a natural IFICI constituency, where the statutory conditions are met), and households that want central connectivity without metropolitan cost.
4. Évora: the UNESCO capital of the Alentejo
Évora’s historic centre is UNESCO World Heritage, and the city functions as the administrative and university capital of the Alentejo. It is the smallest of the non-island cities on this list, and the one with the most distinct regional identity: an agricultural hinterland, a serious wine economy, and a pace deliberately slower than the coast.
Practical points: Lisbon is around 90 minutes away by road or rail; the Universidade de Évora sustains services a city of this size would not otherwise carry; summer heat is genuine and should be experienced before committing. Housing in the walled centre is constrained (heritage rules apply); the surrounding parishes offer space at costs the coast has not seen in a decade.
Évora suits: retirees and remote workers drawn to the Alentejo, and buyers who want heritage property within commuting distance of Lisbon’s airport.
5. Fundão: the interior incentives, applied
Fundão, in the Beira Baixa at the foot of the Serra da Gardunha, has spent a decade building a deliberate policy of attracting remote workers and technology activity to the interior, and it shows: coworking infrastructure, municipal support programmes and a small but real international community in a town of modest size.
The fiscal-financial layer is the differentiator. Fundão is an interior territory for the purposes of the State’s territorial-cohesion measures, including the Emprego Interior MAIS mobility support (direct support of around EUR 2,633, with family supplements and transport costs bringing the package to roughly EUR 4,800, extended to workers moving from abroad and to remote work) and the increased IRS deduction for rents on relocation to the interior (up to EUR 1,000 for three years). Figures move with the annual budget cycle and should be confirmed at the date of the move.
Housing and daily costs are among the lowest of any credible expat destination in the country. The trade-offs are equally real: no airport nearby (Lisbon is roughly 2h30 by road), and services are those of a small town, deliberately reinforced.
Fundão suits: remote workers optimising for cost and calm, families seeking space, and anyone for whom the interior incentives materially change the arithmetic.
6. Castelo Branco: the district capital alternative
Castelo Branco is the district capital half an hour from Fundão, and the institutional counterpart to Fundão’s start-up posture: a polytechnic institute, district hospital, full administrative services and a larger housing market, with the same interior-territory incentive framework applying.
For expats comparing the two: Castelo Branco offers more services and more housing stock; Fundão offers the more developed international remote-work community. Both sit in the same cost band, far below the coast. The district has been among the more successful in attracting relocations from the coast under the State’s interior programmes, and the same supports extend to arrivals from abroad.
Castelo Branco suits: households that want interior costs with district-capital services, and retirees who prioritise healthcare proximity over coastal location.
7. Angra do Heroísmo: the Azorean option
Angra do Heroísmo, on Terceira, is one of the three capitals of the Autonomous Region of the Azores and a UNESCO World Heritage city. Like Madeira, the Azores operate their own regional tax layer: regional VAT at 4%, 9% and 16%, a reduced regional IRS table, and a general regional IRC rate of around 13% (figures to be confirmed against the regional legislation in force for the year of the move).
Terceira’s specifics: an international airport (Lajes) with Lisbon and inter-island connections and a long-standing transatlantic link, a resident American community historically connected to the Lajes base, and housing and daily costs below almost anywhere on the mainland coast. The trade-offs are island trade-offs: weather is Atlantic rather than subtropical, inter-island and mainland logistics require planning, and the labour market is thin outside public services, agriculture and tourism.
Angra suits: remote workers and retirees who want the lowest-tax, lowest-cost autonomous-region option and accept mid-Atlantic logistics; the comparison with Funchal is the structurally interesting one, and the answer turns on climate, connectivity and community scale, where Funchal leads, against cost, where Angra leads.
How to choose: a framework, not a feeling
Strip the lifestyle commentary and the decision reduces to five variables:
- Tax layer. Two autonomous regions apply reduced regional rates (Madeira, Azores); interior territories carry relocation supports and increased deductions; the mainland coast carries the national schedule. The IFICI and the residence pathways are national and location-neutral.
- Connectivity. Direct international flights: Funchal and Terceira (island logic), Braga via Porto, the rest via Lisbon. Rail: Coimbra and Braga sit on the main axis; Évora connects to Lisbon; Fundão and Castelo Branco are road-first.
- Healthcare. Coimbra leads; Braga and Funchal carry full hospital networks; Castelo Branco has the district hospital; Évora, Fundão and Angra rely on smaller units with referral chains.
- Cost base. Fundão, Castelo Branco and Angra sit lowest; Évora and Coimbra mid; Braga mid; Funchal highest of the seven but below Lisbon.
- Community. Funchal has the deepest international community; Fundão the most deliberate remote-work cohort; Braga and Coimbra the university internationalism; Évora and Angra the smallest expatriate bases.
Frequently asked questions
What is the best place for expats to live in Portugal on a budget? Among these seven, Fundão, Castelo Branco and Angra do Heroísmo carry the lowest housing and daily costs, and the first two add the interior relocation supports.
Which Portuguese city has the best tax treatment for expats? Location does not change the national IRS architecture, but Madeira and the Azores apply reduced regional rates, and Madeira adds the MIBC for company structures. Personal eligibility for regimes such as the IFICI is determined by activity and statute, not by city.
Do I need a different visa for Madeira or the Azores? No. The residence framework (Lei n.º 23/2007) is national; the autonomous regions do not operate separate immigration regimes.
Is Funchal more expensive than the mainland? Funchal housing has risen and the luxury segment is visible, but a professional household’s total cost remains below Lisbon, and the regional VAT and IRS rates run in the resident’s favour.
Are the interior incentives available to foreigners? The Emprego Interior MAIS support has been extended to those moving from abroad, including remote workers, subject to the programme’s conditions. Confirm the conditions in force at the date of the move.
Which of the seven suits a retiree best? Coimbra for healthcare density, Funchal for climate and community, Castelo Branco for cost with district-capital services. The right answer depends on the weighting.
Where do I start, whichever city I choose? With the NIF, then the bank account, then the residence pathway, then tax-residence planning. The sequence is national and the first step is documented in our NIF guide.
Where MCS can assist
Madeira Corporate Services assists internationally mobile individuals across the full relocation sequence: NIF attribution and fiscal representation, residence pathway analysis (D7, D8, highly qualified activity, ARI), tax-residence planning under Article 16 of the CIRS, IFICI eligibility assessment, property transaction support and, for entrepreneurs, company formation including MIBC licensing in Madeira. We are based in Funchal and our regional depth is Madeira; for clients weighing the seven destinations above, we can assist, subject to scoping, with the fiscal and legal comparison that should precede the lifestyle decision.
The information contained in this article is provided for general informational purposes only and does not constitute legal or tax advice. Regional tax rates, interior incentive amounts and programme conditions move with the annual State Budget Law, the regional budget decrees and programme regulations, and should be confirmed at the date of any decision. References to the IFICI, the MIBC and residence pathways are summaries of regimes whose application depends on statutory eligibility conditions assessed case by case. Before acting on any matter described above, you should obtain professional advice based on your specific circumstances. Madeira Corporate Services accepts no responsibility for actions taken or not taken on the basis of this article.
Miguel Pinto-Correia holds a Master Degree in International Economics and European Studies from ISEG – Lisbon School of Economics & Management and a Bachelor Degree in Economics from Nova School of Business and Economics. He is a permanent member of the Order of the Economists (Ordem dos Economistas)… Read more
