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Forthcoming Changes to the Real Estate Route and Why Investment in Portuguese Venture Capital Funds is so Popular

Portugal

Background

The Portuguese Golden Visa is a very popular visa programme, with almost 10,000 visas having been granted to main applicants since the inception of the programme in 2012. To this number can be added 16,050 family members who have also benefited, in addition to the main applicant.

This represents a total direct investment of almost 6 billion euros in Portugal.

The top 5 nationalities applying for the Golden Visa are:

  • China
  • Brazil
  • Turkey
  • South Africa
  • Russia

Currently the following alternate investment routes are available to apply for a Golden Visa:

  1. Capital transfer with a value equal to or above 1 million euros;
  2. The creation of, at least, 10 jobs;
  3. The purchase of real estate property with a value equal to or above 500 thousand euros;
  4. The purchase of real estate property, with construction dating back more than 30 years or located in an urban regeneration area, for refurbishing, for a total value equal to or above 350 thousand euros;
  5. Capital transfer with a value equal to or above 350 thousand euros, for investing in research activities conducted by public or private scientific research institutions;
  6. Capital transfer with a value equal to or above 250 thousand euros for investing in artistic output or supporting the arts, for reconstruction or refurbishment of the national heritage;
  7. Capital transfer of the amount of 350 thousand euros, or above, for the acquisition of units of investment funds or venture capital funds, dedicated to the capitalisation of companies, where, at least, 60% of the investment is realized in Portuguese companies;
  8. Capital transfer of the amount of 350 thousand  euros, or higher, for the incorporation of a company, combined with the creation of 5 permanent jobs, or for the increase of the share capital of a company with the creation or keeping of working jobs, with a minimum of five permanent jobs, and for a minimum period of three years.

Recently the most popular route has been the investment fund option whereby individuals can obtain a Golden Visa, by investing in a Portuguese Venture Capital Fund.

What Has and Will be Changing?

The Portuguese Government, announced in January 2020, that changes to the Golden Visa, specifically the real estate investment route, would be introduced.

The change would not be drastic and would be designed to correct price distortions in the metropolitan areas of; Lisbon, Oporto and the whole Algarve region.

The advanced warning, has provided sufficient time for investors to adapt, plan and act.

The changes will now come into force on the 1st of January 2022.

  • Up until this date, any real estate acquisitions in the metropolitan areas of Lisbon, Oporto and the whole Algarve region (essentially, the Portuguese Coastal area), remain eligible for the Golden Visa.

Naturally, all Golden Visa investors who have already applied, via the property route, even in the above mentioned areas, will not be affected by this change.

Investment into Portuguese Venture Capital Funds – The Option of Increased Attractiveness and Interest

Since 2018 investors have started exploring the other investment routes, as a gateway into the Golden Visa programme, partially as a result of the increase in the sqm value, that led the Portuguese Government to introduce the changes detailed above.

Investor decisions have been almost unanimous and investment into Portuguese Venture Capital Funds has increasingly become the chosen route.

This investment route has some unique advantages compared to other investment routes – depending on the client’s investment appetite:

•          The investment does not trigger taxes similar to the ones that the client needs to bear when acquiring a property, such as transfer tax (on average 6%), stamp duty (0.8%), or the annual municipal tax (between 0.3% and 0.5%);

•          It is a considerably lower cost (350 thousand euros),  compared to the level of investment required by the other investment routes for a Golden Visa, especially now with the changes to the real estate route;

•          The investment is made into a Portuguese fund that is heavily regulated by the Portuguese authorities; the Portuguese Securities Market Commission (CMVM), the Portuguese Stock Market Regulator (“CMVM – Comissão do Mercado de Valores Mobiliários), the  Bank of Portugal, the external Fund Manager and the Tax Authorities – and, in addition the fund will be audited;

•          It is a tax-efficient investment, where several benefits are granted (for instance, the exemption of withholding tax on the payment of the income generated by the fund to the unit holders, as long as they are not tax resident in Portugal);

•          It requires a very light “footprint” in Portugal, allowing a quick exit from the investment if needed. Each fund has a dedicated 3rd party fund manager which, in addition to controlling the fund and reporting to the Portuguese authorities, takes care of the payments to the fund units, and assists should there be the need to sell the owned units;

•          The potential gains generated by this investment are substantially higher than other investment routes for the Golden Visa.

Venture Capital Funds are becoming increasingly popular, for a number of reasons as detailed above and it is an investment that also provides a family with the opportunity to live in Portugal, with the freedom to travel within the Schengen area. It offers interesting investment potential, at a time when interest rates in Europe are at their lowest.

Additional Changes Being Put in Place from January 2022

We strongly recommend that you act now, as changes are being put in place relating to Golden Visa rules, as of the start of 2022.

These changes will have an impact on the real estate route, and on the investment levels needing to be met, for each of the Portuguese Golden Visa routes. 

We will keep you fully updated on these changes in a separate Article.

Additional Information

Dixcart offers advice and assistance to individuals and families seeking to relocate to Portugal.

Dixcart services include:

  • Staff who can provide detailed information about the country, lifestyle and tax advantages that are available.
  • Assistance in organising visits to Portugal.
  • Advice regarding the efficient structuring of worldwide assets.
  • A comprehensive range of individual and professional commercial services once relocation has taken place.

For further information about relocating to Portugal, please speak to Carlos Santos: advice.portugal@dixcart.com. Alternatively, please speak to your usual Dixcart contact.

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