Portugal is highly regarded as one of the world’s most globalized and peaceful countries, offering a high quality of life and a strong Human Development Index ranking. It is one of Europe’s oldest nations, known for its rich history, vibrant culture, excellent cuisine, beautiful beaches, and picturesque countryside.
Through its highly coveted Golden Visa, non-EU nationals can establish residence in Portugal, unlocking a plethora of lifestyle benefits and opportunities to expand their wealth. As a full member of the EU, Portugal offers a residence permit that provides visa-free access to Europe’s Schengen Area and requires only a stay of seven days per year in Portugal over a five-year period. Notably, Portugal also offers the shortest path to EU citizenship through its Golden Visa – following the submission of their application, investors and their family members can apply for a Portuguese passport after just five years.
So, how do you get your Portugal Golden Visa in 2024? Let’s find out.
Real Estate Is Out, Investment Funds Are In
It would be a massive undestatement to say that the past two years have been challenging for Portugal’s Golden Visa. For much of 2023, the Golden Visa remained on the verge of ending – facing a housing crises, the government contemplated its termination as the only solution. Ultimately, after much consideration and pushback, the government retained the program, albeit with major changes to the qualifying investment routes.
Since its inception in 2012, Portugal has issued over 12,500 Golden Visas, garnering a substantial €7 billion in foreign direct investment, 90% of which came through the program’s highly popular real estate option. In 2024 however, the real estate option is no longer available – instead, applicants can now obtain their Golden Visa through Investment Funds.
What Is an Investment Fund? What Is the Minimum Investment?
In the simplest of terms, an investment fund is a collective pool of capital, contributed by multiple investors, managed with the objective of generating returns through diversified holdings. To qualify for Portugal’s Golden Visa under this route, applicants must invest a minimum of €500,000 in investment funds, with a minimum holding period of 5 years. Additionally, the investment fund must also be registered and regulated by the Portuguese Securities Market Commission (CMVM).
What Are the Benefits?
From lower associated costs and enhanced tax efficiencies to the potential for higher returns and robust security measures, investment funds present a compelling alternative to traditional real estate investments.
Low Fees: Investing in investment funds generally avoids the substantial fees and taxes associated with real estate purchases. For example, buying property in Portugal incurs an IMI transfer tax (average 6%), a stamp duty of 0.8%, and annual municipal taxes ranging from 0.3% to 0.5%. In contrast, investments in funds do not attract these taxes.
Tax Efficiency: The tax structure of the fund and the investor’s status can significantly influence the tax efficiency of an investment in a fund. In some instances, income generated by the fund may be exempt from withholding tax, especially for investors who are not tax residents of Portugal. In contrast, all rental income from real estate in Portugal is taxed at a fixed rate of 28%.
Potential Earnings: The potential annual returns and capital growth of a fund, depending on its focus, can be considerably higher than those of other investment choices associated with the Golden Visa program.
Safe and Secure Investment: A registered Portugal fund is subject to regulation by several authoritative bodies: the Portuguese Securities Market Commission (CMVM), the Bank of Portugal, and an external Fund Management company. Additionally, the Portuguese Tax Authorities conduct audits on the fund. This comprehensive regulatory oversight ensures compliance with Portuguese legislation, tax laws, and adherence to the investment plan approved for the Portugal investor fund.
Diversification: Investors can spread €500,000 across multiple funds, reducing risk through portfolio diversification. Portuguese legislation mandates that funds achieve a certain level of diversification. There are specific quotas dictating the maximum percentage that any single asset or investment can represent within the overall fund portfolio. This requirement promotes investment diversification within the fund and helps mitigate risk for investors.
Professional Management: managed by experienced professionals, investment funds alleviate the complexities of direct property ownership.
Key Considerations for Investors
Regulation and Eligibility for the Golden Visa
The foremost consideration when selecting a fund is its registration and regulatory compliance.
The Portuguese Securities Market Commission (CMVM) is the regulatory body overseeing investment funds in Portugal. For a fund to be eligible for the Golden Visa, it must be registered with the CMVM. This registration is vital not only for eligibility but also for financial security, as investing in an unregistered fund can lead to significant financial losses.
Additionally, it’s crucial to ensure the fund’s investment strategy meets the Golden Visa requirements. Recent regulations stipulate that funds must not invest in residential real estate and must allocate at least 60% of their capital to Portuguese companies. Funds failing to meet these criteria, even if registered, do not qualify for the Golden Visa.
ROI and Type of Investment
Next, consider the fund’s investment portfolio. This is important not just for Golden Visa eligibility but also for understanding potential returns, risks, and liquidity.
Funds vary in their asset allocations and risk profiles. Ideally, one should seek a balance between low risk and high returns, supported by a flexible investment strategy.
Exit Strategy
Understanding a fund’s liquidation terms is crucial. Funds vary in their investment holding periods; some may require longer commitments, while others offer more flexibility.
Investment funds are typically organized as limited liability companies (LLCs). Investors can only invest during the fund’s formation and withdraw funds without losing interest once the fund is closed.
To qualify for a Portugal Golden Visa, investors must maintain funds in the investment for at least six years before obtaining citizenship. Early withdrawal may result in the loss of the residence permit, although investors who have already acquired citizenship can exit early if permitted by the fund’s conditions.
The fund’s lifecycle includes three stages: subscription, investment, and divestment. During the subscription period, funds collect money from investors and begin asset selection. Investments are made over the subsequent four years, with annual dividends distributed, and a management fee applied. Divestment occurs after 6-8 years, with profits distributed among investors.
Management and Experience
Contrary to what some might think, establishing a fund is relatively straightforward. However, the management of the fund introduces significant risk, particularly if managed by individuals or entities without extensive experience.
Choosing a fund managed by a seasoned team is crucial. Experienced managers understand market nuances and regulatory changes, positioning them to capitalize on opportunities and avoid common pitfalls, especially during economic fluctuations and high inflation.
Experienced managers are also better equipped to adapt to new compliance regulations, ensuring sustained profitability and security for investors.
Simply the Process with Soland
While investment funds offer several advantages over real estate, navigating the intricacies of this investment route and selecting the right fund can be challenging. At Soland, we simplify the process, providing expert guidance tailored to your risk profile and investment strategy. We work exclusively with approved funds that meet rigorous standards and regulatory compliance, ensuring a secure and profitable investment experience. Let us help you unlock the full potential of your investment with confidence and ease.
