The Italy vs. Portugal comparison that most Americans are working from is out of date. Portugal's Non-Habitual Resident tax regime is gone. Portugal's real-estate-based Golden Visa route is closed. Italy tightened its Jus Sanguinis citizenship process in March 2025, restricting claims to children or grandchildren of Italian-born ancestors. What was true two years ago is materially different from what is true now. This dispatch is the current comparison.
What changed in Portugal
Portugal spent approximately a decade as the destination of choice for Americans seeking European second residency, driven primarily by two features that no longer exist in their original form:
The Non-Habitual Resident (NHR) tax regime offered qualifying new residents a flat 10% tax on foreign pension income and tax exemptions on certain foreign-source income for the first 10 years of residency. For Americans with significant pension income or foreign investment income, this was a substantial financial advantage over remaining in the US tax system alone.
NHR was closed to new applicants at the end of 2023. It was replaced by IFICI (Incentivo Fiscal à Investigação Científica e Inovação), which is targeted at researchers, technology workers, and highly qualified professionals in specific sectors. It is not available to retirees or passive income recipients. If your Portugal strategy depended on NHR, that strategy needs to be rebuilt from scratch.
The Golden Visa real estate route allowed non-EU nationals to obtain Portuguese residency by purchasing qualifying real estate. Portugal ended this option in 2023 as part of a broader response to housing affordability pressures. Investment-based Golden Visa options remain available, but they require investment in qualifying funds or other non-real-estate instruments, not direct property purchase.
What changed in Italy
Italy's Jus Sanguinis (citizenship by descent) pathway was dramatically tightened by a March 2025 decree. Previously, Americans with Italian ancestry could claim citizenship going back multiple generations — great-grandparents, great-great-grandparents — by proving an unbroken line of Italian citizenship.
The 2025 decree now generally restricts citizenship claims to the children or grandchildren of Italian-born ancestors. Great-grandchildren and beyond must apply through standard naturalization, which requires years of continuous residency. Immigration lawyers described this as a "gut punch" for the large population of Italian-Americans who had been in the process of gathering documentation for descent-based citizenship claims.
This does not affect the Elective Residency Visa pathway, which has no citizenship component and remains unchanged.
The current comparison
| Factor | Italy | Portugal |
|---|---|---|
| Primary passive income visa | Elective Residency Visa (ERV) | D7 Passive Income Visa |
| Income threshold (single) | €31,000/year | ~€820/month (€9,840/year) — significantly lower |
| Tax regime advantage | Flat tax option (€100,000/year) for HNW | NHR closed; IFICI not applicable to most Americans |
| Citizenship pathway | 10 years residency; Jus Sanguinis now restricted | 5 years residency; language test required |
| Bureaucratic consistency | Variable by consulate | Historically more consistent, but slower |
| English prevalence | Moderate; varies by city | High; Lisbon/Porto widely English-speaking |
| Cost of living | Moderate to high (varies significantly by region) | Rising rapidly; Lisbon now expensive |
| EU access | Full Schengen area | Full Schengen area |
The income threshold difference matters
Portugal's D7 visa has a substantially lower income threshold than Italy's ERV. At approximately €820 per month for a single applicant, the D7 is accessible to a broader range of Americans — including those with more modest passive income, Social Security, or smaller investment portfolios.
Italy's €31,000 annual threshold filters out a significant portion of potential applicants. If your passive income is below that number, Portugal is the more viable European option, not Italy.
For Americans with income well above Italy's threshold, the income requirement is not the relevant differentiator — lifestyle, cost, bureaucratic process, and tax considerations are.
Italy's flat tax: who it is actually for
Italy offers a flat tax regime for new residents: a fixed annual payment of €100,000 covers all Italian tax on foreign-source income, regardless of how large that income is. For an American with, say, €500,000 in annual passive income, paying €100,000 in Italian tax instead of the marginal Italian rate (up to 43%) is a significant saving.
For someone with €80,000 in annual passive income, paying €100,000 flat is obviously worse than the marginal rate. The flat tax is designed for high-net-worth individuals with substantial foreign income. It is irrelevant to most Americans who qualify for the ERV based on the minimum threshold.
The citizenship argument
Portugal's citizenship pathway requires 5 years of legal residency (reduced requirements possible with cultural or investment ties), passing a Portuguese language test at A2 level, and a clean record. Italian citizenship requires 10 years.
For Americans for whom eventual EU citizenship is a goal, Portugal's shorter path is a genuine advantage. For Americans for whom the second base itself is the goal — a functional legal presence in Europe, not necessarily citizenship — the citizenship timeline is less relevant.
The post-2025 Jus Sanguinis restriction eliminated what had been Italy's most attractive citizenship pathway for Americans with Italian ancestry. If you had a grandfather born in Italy, you can still pursue descent-based citizenship. If you had a great-grandparent, you now need to go through the 10-year residency route instead.
How to actually decide
The honest answer is that the decision is more personal than analytical. Both countries offer functional pathways to a second European base. The bureaucratic complexity is comparable. The EU access is identical. The cost of living varies more by city than by country.
Where the decision typically resolves:
- Income below ~€31,000/year passive: Portugal's D7 is likely the only viable European option.
- Income well above €100,000/year: Italy's flat tax regime is worth serious analysis.
- Italian ancestry (parents or grandparents born in Italy): The Jus Sanguinis pathway adds a citizenship dimension to the Italy case that doesn't exist for Portugal.
- Priority: English-speaking environment: Portugal, particularly Lisbon, has a significantly more established English-speaking expat community.
- Priority: cultural depth and historical infrastructure: Italy.
- Priority: fastest citizenship path: Portugal, at 5 years vs. Italy's 10.
For Quiet Departure clients, we currently execute primarily through Italy — not because it is objectively superior for every situation, but because we have the deepest operational familiarity with the Italian process and the local network to manage it correctly. For clients whose situation makes Portugal the more appropriate choice, we will say so in the Briefing.