Portugal Golden Visa program

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The Portugal Golden Visa program provides a fast track for non-European Union (EU) residents and investors to obtain a residency permit and citizenship rights. Since its launch in 2012, the Portugal Golden Visa program has granted many investors with an expedited residency permit, allowing free travel access within a majority of European countries (Schengen area).

There are many advantages and benefits to obtaining a Portuguese Golden Visa. In addition to the ability to live and work in Portugal, qualifying applicants can travel freely though Portugal and all 26 European countries included in the Schengen area. Visa benefits are extended to family members with no additional investment required. Applicants can apply for permanent residency and citizenship after only five years.

The purpose of this article is to provide a quick overview of some of the recent changes to Portugal's Golden Visa program.

Criteria for the golden visa

The Golden Visa is a residence program for investors who meet certain criteria and qualify for residency for themselves and their family members for a term of five years by making one of the qualifying investments. The Golden Visa program is celebrating its tenth anniversary this year, and it has already undergone changes since its inception in October 2012.

A month following the presidential veto of the "Mais Habitação" bill, the Portuguese Parliament has once again approved alterations to Portugal's Golden Visa program, slated to take effect in October 2023.

Under the new law there are avenues to explore and is possible to invest via:

1. INVESTMENT FUNDS OR VENTURE CAPITAL: Transferring capital equal to or exceeding €500,000 for acquiring participation units in investment funds (non-real estate collective investment entities) or venture capital funds focusing on capitalizing companies operating under Portuguese legislation, with a maturity of at least five years, and at least 60% of the investment's value in companies based in the national territory.
2. BUSINESS AND JOBS: Transferring capital equal to or exceeding €500,000 for establishing a business in the national territory, coupled with the creation of five permanent jobs, or increasing the share capital of an existing business in the national territory with the creation of five permanent jobs or maintaining ten permanent jobs for a minimum of three years.
3. RESEARCH ACTIVITIES: Transferring capital for research activities conducted by public or private scientific institutions affiliated with the national scientific and technological system, requiring a minimum of €500,000.
4. ARTISTIC SUPPORT: Transferring capital of €250,000 or more to support investment or artistic production, restoration, and preservation of national cultural heritage through public institutes, central or peripheral government departments, public sector entities, public foundations, private foundations with public utility status, inter-municipal entities, local business entities, municipal associative entities, and public cultural associations involved in projects related to artistic production or the preservation of national cultural heritage.

Advantages of investing through a fund for the golden visa

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• Reduced Tax Burden: Investing in a fund offers the advantage of lower tax rates compared to purchasing property, which typically involves substantial fees and taxes such as transfer tax, stamp duty, and annual municipal taxes.
• Enhanced Safety and Security: Funds registered in Portugal operate under rigorous regulation by four key authorities: (1) the Portuguese Securities Market Commission (CMVM), (2) the Bank of Portugal, (3) external Fund Management Companies, and (4) the Portuguese Tax Authorities. This oversight ensures compliance with Portuguese laws and regulations.
• Tax Efficiency: Unlike the flat 28% tax rate on rental income from real estate in Portugal, investing in a fund can provide tax advantages. In some instances, investors who are not tax residents in Portugal can even benefit from exemptions on withholding tax for income generated by the fund.
• Diversification Requirements: Portuguese legislation mandates a certain level of diversification for funds, imposing limitations on the percentage that specific assets or investments can represent in the fund's total portfolio. This diversification helps mitigate risk for investors.
• Potential for Higher Returns: Some funds have the potential to yield significantly higher annual returns and capital appreciation when compared to other investment options available under the Golden Visa program.
• Streamlined Management: Owning units in an investment fund is hassle-free, as the responsibility for management is delegated to fund managers.

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Which options will no longer be possible?

However, the following investment methods will no longer be available:

1. Capital transfers of €1.5 million or more.
2. Real estate acquisition valued at €500,000 or higher.
3. Real estate acquisition with construction completed at least 30 years ago or located in an area designated for urban rehabilitation, necessitating rehabilitation works with a total expenditure equal to or exceeding €350,000.

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Important notice for current applicants

It's essential to note the following:

• The new law won't apply retroactively.
• Portuguese funds directly or indirectly linked to real estate investments will no longer qualify for Golden Visa investments.
• This legislative amendment won't affect the possibility of renewing residence permits for investment activities granted under the existing legal framework.
• It won't impact applications for granting or renewing residence permits for family reunification.
• These changes won't affect individuals with a residence permit for investment activity and their eligible family members who wish to apply for a residence permit for investment activity, provided they meet the legal requirements.
• Future renewals will transition to a regular residence permit for Entrepreneurs (D2), with no minimum stay requirement of approximately 183 days per year, retaining the same minimum requirement as the Golden Visa program: a minimum stay of seven consecutive or non-consecutive days in the first year and 14 consecutive or non-consecutive days in the subsequent two-year periods.
• Applications for granting and renewing residence permits for investment activity through real estate investment, pending a decision from relevant authorities on the effective date of the new law, remain valid. Likewise, applications awaiting prior control procedures in municipal councils will also be converted into regular residence permits for Entrepreneurs (D2).

The adjustments made to the Golden Visa program are expected to bring about significant changes, especially considering that real estate investment was the predominant choice. Nonetheless, like any alterations, the market will need to adapt by not only offering alternative solutions but also introducing innovative projects in sectors where the country needs investment, such as the environment, technology, culture, and education.

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