The End of the Portuguese Golden Visa
The recent measure to end the golden visas in Lisbon and Porto announced for the 2020 State Budget aims to “favor the promotion of investment in low-density regions, as well as investment in urban requalification, cultural heritage, high-value activities environmental or social, productive investment and job creation ”. In this sense, it restricts investments in real estate with a view to obtaining a residence permit to the territory of the Intermunicipal Communities (CIM) of the Interior and the Islands of the Azores and Madeira and foresaw increase the minimum value of investments and the number of jobs to create.
With this decision, the intention was to relieve the pressure from the real estate market in areas such as Lisbon and Porto, encouraging the diversification of this type of investment, to other geographical areas of the country. However, the great focus placed, by certain market agents, between the relationship between the attraction of investment in real estate and Golden Visas, led the market to devalue the opportunity of the Venture Capital Funds (FCR), also qualified for those who intend to apply for a Golden Visa in Portugal, with only one investment minimum of 350 thousand euros In fact, there are several benefits for an investor who opts for FCR, namely the minimum value of the investment to be made through the acquisition of units in these funds - 350 thousand euros. In fact, given the minimum value of other types of investment, such as, for example, capital transfers (1 million euros) or classic real estate investment (500 thousand euros), the minimum amount required for FCRs is among the lowest program.
On the other hand, in relation to other types of investment eligible for Gold Visas with the need for an equal or less financial contribution, the acquisition of units in the funds is much simpler and faster. The request for proof of investment is carried out quickly by the management entity of the respective fund, attesting the viability of the capitalization plan and the maturity of at least five years. In addition, this investment model contributes, albeit indirectly, to the development of the national industrial and commercial center, since at least 60% of the capital is invested in commercial companies based in the national territory. For the investor, there is still an additional benefit in terms of cost reduction, since, in this model, there are usually no indirect costs associated, contrary to what usually happens in real estate investment, which incurs IMT, IMI costs and other administration and condominium expenses.
December 2020 Update
In August, the investment resulting from the granting of a Residence Permit for Investment (ARI) reached 57,694,424.11 euros, which represents a 30% decrease compared to the same month of 2019 (82.5 million euros).
Compared to July (56 million euros), investment raised through ‘gold’ visas rose 2.8%.
Last month, 107 ‘golden’ visas were issued, of which 97 were due to the acquisition of real estate (25 when purchasing for urban rehabilitation) and 10 through the capital transfer criterion.
The purchase of real estate totaled an investment of 50.1 million euros in August, of which 9 million euros correspond to the acquisition for urban rehabilitation.
The total amount invested through capital transfer was 7.5 million euros. Of the total ‘gold’ visa concessions in August, 36 came from China, 12 from Brazil, 10 from Russia, eight from South Africa and seven from the United States.
Compared to July (56 million euros), investment raised through ‘gold’ visas rose 2.8%.
Until now in 2020, the amount raised by this instrument totaled 496 million euros, 10% less than the accumulated investment in the same period of 2019.
Between January and August, 915 ‘golden’ visas were issued.
The Golden Visa Portugal Investment Funds
In October 2018, the Portuguese Parliament approved a new law which allows investments through venture capital funds (or FCR — Fundo de Capital de Risco) as a qualifying investment for Portugal’s Golden Visa. With a minimum investment of €350,000 in an FCR fund, investors can now apply for Portugal citizenship by investment and take advantage of all its benefits.
The name Venture Capital may sound complicated but it is simply a designation for investment funds that are managed by corporate experts in the field who seek to invest in real estate projects or medium-sized projects with strong growth potential. Each fund has a specific well-defined investment mandate and may focus on sectors such as energy, industry, technology, or real estate. Funds are regulated by Portugal’s regulator, the CMVM.
Funds are specifically managed by experts in each sector, you can obtain residency with a Portuguese fund investment, and many investors are exempt from paying tax in Portugal. Funds are also regulated by the Portuguese Securities Market Commission.
When analyzing the eligible Portuguese venture capital funds, you should take into consideration many factors like the investment mandate, the managers credentials, leverage and liquidity, and legal documents. Some funds offer limited potential for capital appreciation with a safer investment profile and others may have a more leveraged approach with an aim to provide investors multiples of the capital invested.
It is possible to get a residency permit in Portugal through investment funds. You must make a minimum investment of €350,000.
Usually the Investment Fund maturity is of 6 years as according to the Golden Visa Program the investment needs a maturity of at least 5 years.
You can apply for citizenship after 5 years if you make an investment in a qualifying fund.
Before investing you should be sure of the Funds eligibility for the Golden Visa Program and analyze its strategy, management aspects and legal aspects. Also important is the return of investment which is usually paid as dividends either every year or if the Fund follows an accumulation strategy in the end of the 6th anniversary of your investment.
Benefits of investment funds for Golden Visa
· The fund is professionally managed by experts on each specific sector.
· You can obtain Portuguese residency from a €350,000 investment.
· Venture capital funds are a tax-efficient vehicle — dividends and capital gains returned to investors may be tax-exempt.
· Some funds offer a minimum return hurdle-rate (usually of 5%) which means managers will only be compensated if the fund performance is above a certain percentage.
· Some funds have the support of the Portuguese Government through subsidies or financed by the IFD.
· The funds are regulated and must comply with the rules stipulated by the Portuguese Securities Market Commission (CMVM), which means that fund managers are regularly audited by third parties.
STEPS for the Golden Visa Investment Fund application:
1. The Management company will receive from the investor a KYC Form; Subscription Form and personal documents.
2. The Golden Visa investor will obtain his Portuguese tax identification number (NIF) and open a Portuguese bank account (checking and securities account).
3. The investor will transfer the money from his foreign account to his Portuguese bank account.
4. The investor orders the bank transfer to the Funds bank account.
5. The Management company issues a declaration necessary for the Golden Visa application and the Portuguese bank issues two declarations (money transfer overseas and certificate of holding the Participation units (shares).
Note: “US Persons” (investors with American citizenship or being tax residents in the US) need to open their Portuguese bank account with a FATCA compliant bank account as for example: Bison Bank; Banco Atlântico; Banco Carregosa.
Documents for the Golden Visa Investment Fund application:
The Applicant must present supporting evidence in which he has made the investment of the minimum amount required, individually or through a shareholder limited liability company of which the Applicant is the shareholder. The following documents must be presented for the Golden Visa application:
• Declaration of a credit institution authorized or registered in the national territory within Bank of Portugal, attesting the effective transfer of the amount equal to or above the legally required.
•Supporting document attesting the ownership of the units of investment, free from any charges and obligations (issued by the entity responsible for keeping an updated record of the units of investment holders, under the law, of the respective management regulation or of contractual instrument).
•Declaration issued by the holding company of the respective investment fund, attesting the feasibility of the capitalization plan, the maturity of, at least, five years, and the application of at least 60% of the investment in commercial companies with head office in national territory.
Thoughts before investing in the Golden Visa Investment Fund
· Fund eligibility for the Portuguese Golden Visa.
· Fund credentials including fund strategy and legal.
· Fund return (yield) and maturity.
Our partners have been working with the portuguese golden visa investment fund options since 2018 when they started to be elegible for the Portuguese Golden Visa.
F.A.Q
1. What is the Portuguese Golden Visa?
The Portugal Golden Visa is a residence permit for investors of non-EU countries that would like to live, work, stay in Portugal and have access to the Schengen Area.
2. Which are the advantages of the Golden Visa?
A. No visa is required to enter Portugal.
B. Live and work in Portugal with a minimum stay period of 14 days in the first two years of residence permit validity and 21 in the block of three years.
C. Circulate in the Schengen Area (other European countries which are part of the Schengen Area.
D. Benefit of the family reunion program.
E. Obtain the permanent residency after 5 years.
F. Obtain the Portuguese citizenship after 5 years.
3. For how long is the Golden Visa residence permit valid?
After it is issued it is valid for two year. After the end of the two years it is renewable for periods of three years.
4. What are the personal requirements for the investor?
A. Not being an EU, EEA or Swiss citizen.
B. Not having been convicted of a crime punishable in Portugal by more than 1-year imprisonment.
C. Not having been banned from entering the Schengen Space.
5. Is it possible to extend the Golden Visa to family members?
Yes. Family reunion is possible. For children older than 18 years it is necessary to proof that they are single, economically dependent from their parents and still studying.
6. How can the investor and family obtain the Portuguese Citizenship after just 5 years?
Yes. It will though be necessary to prove a certain knowledge of Portuguese and connections to the Portuguese country.
7. How much are the costs SEF (Serviço de Estrangeiros e Fronteias) charge as a fee for the Golden Visa procedures?
Processing fee (application and renewal) — EUR 533.90 (plus EUR 83.30 per family member)
Issuance of the golden visa card — EUR 5,336.40
Issuance golden visa for family members — EUR 5,336.40
Renewal of golden visa card — EUR 2,668.20
B. Golden Visa Portugal Investment Fund Option
1. What is the difference between a normal investment fund and a fund for accumulation?
The normal investment fund will a pay yearly amount to investors usually in the form of dividends. An investment fund for accumulation will only distribute the returns in the end of the 6th anniversary of the Fund.
2. How long do I have to leave the money in the FUND?
The maturity of the FUNDS is usually of 6 years.
3. Are there any costs for the investor related with the investment in the fund?
Depends on the eligible investment fund.
4. Is it relevant from where the investment in the FUND is done?
Yes. It should come from the investors Portuguese bank account.
5. Does the investment of €350.000 include the legal process by the lawyer?
No. A lawyer should be hired for the legal process.
6. Does the FUND repay the total amount of €350.000 invested after his maturity?
The repayment is done like in any other fund. There are no formal guaranties.
7. Are the Investment Funds officially registered?
The investment FUNDS are registered fully regulated by the Portuguese stock exchange. Check all registered Funds at CMVM.
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