Golden Visa 2.0 – current state of play and beyond
The successful 10 years of the non-habitual resident (NHR) in Portugal has highlighted the importance of tracking carefully the interaction of immigration issues and tax issues.
At Kore Partners immigration discussion are taken as a key pre-step for any non-EU/EEA national wishing to take permanent tax residence in Portugal and several routes are currently available.
Portugal is not alone in the EU on providing incentives to attract foreign investment from non-EU/EEA nationals through the so-called residency by investment (RBI) schemes that are characterised by the provision of access to residency rights in return of specified investments. In Portugal, this procedure is called Golden Visa.
This briefing attempts to clarify some points of this interaction and at the same time address some difficult questions.
The current state of play
Under the current rules Golden Visa applicants must make at least one of the eligible investments either as an individual or via a 100% held limited liability company set-up in Portugal.
The eligible investments (from the most used to the least used) are: (i) purchase of real estate (with or without rehabilitation works); (ii) acquisition of units in Portuguese investment fund; (iii) transfer of capital via a bank deposit; (iv) incorporation or increase in capital of local company and job creation commitments; or (v) investment into R&D activities or artistic production, restoration, or maintenance of national cultural heritage.
Decree-Law 14/2021 recently amended the framework for residence permits by setting important limitations applicable as from 1 January 2022, namely by limiting residential real estate in the so-called inland or low-density municipalities and Azores and Madeira and increasing some of the minimum investment thresholds for investments currently in place. These new rules will only apply to Golden Visa applications submitted after 1 January 2022 but the impact is already being reflected in the investment decisions.
Click here for an infographic for eligible investments for 2022 onwards.
One of the normal misunderstandings that we encounter in practice relates to timings of the Golden Visa procedure. Here are some of the points:
The first misperception generally starts because only after the investment is concluded and all the necessary documents gathered (and those may also require time) then the 1st phase can be initiated through on-line application with the Portuguese Foreign Authorities and e-copy delivery of documentation. In this phase, the authorities will check, in general terms, if Investor is eligible for the Golden Visa program. This means the timing to market of the investment route is critical to reduce timings, specially in COVID-19 times of travel restrictions.
The second confusion arises sometimes on the pre-approval and what does that mean. The 2nd phase of the procedure may extend sometimes additional 2 months from initial filing and entails the pre-approval via appointment for physical interview for original documents delivery and collection of biometric data. Only after this step, the authorities will analyse in detail all the personal and investment documents delivered for a final decision.
The third confusion relates to the unclear timelines for final decision, which may take up to 6 or even 8 months from the 2nd phase. When concluded, the process results in the issuance of the residence permit valid for 2 years and to be renewed 2 times. It is generally here that investors are affected by delays mainly due to improper preparation from authorities to the high influx of requests. Recognizing delays and bottlenecks on the procedure should be key information to any investor.
What is also interesting to understand is what investors are seeking to obtain with the Golden Visa investment. This include:
Access to mobility. The first advantage has been naturally the visa exemption, during the residence permit validity, to enter in Portugal and to travel around Schengen Area, which includes 26 European countries.
Limited presence. The second advantage has been that the eligible investments come with a minimum stay requirement of 7 days in the first year and 14 days in each subsequent two-years period (consecutive or non-consecutive days).
Reunification procedure. The third advantage is that with this investment there is an opportunity to grant residence permits in the same conditions to family members such as spouse or partner, minor children, children up to 26 that are still studying and financially dependent and dependent ascendants.
Tax Residence option. The fourth advantage is that with the Golden Visa one may also opt to ability to live and work in Portugal and the apply for the special NHR tax regime. With links established in Portugal, the investor (and family) may apply for Portuguese citizenship after 5 (five) years of legal residence in Portugal.
What perhaps has not been much debated has been the ability of several applicants to make an investment with an adequate yield or liquidity. The fact that residential property in Lisbon and Oporto has represented more than 90% of investments demonstrates that investors were looking to secure the Golden Visa advantages but also locking-in yield.
With restrictions kicking in as from 2022 onwards for residential property in Lisbon and Porto, units of investment funds exposed to real estate property are gaining traction with investors, but at this stage it is still early to tell which will be the type of investments investors will favour. The shift for low-density territories affects liquidity and focus will likely transfer to commercial real estate.
Looking beyond
It is undeniable the positive outcome of the Golden Visa has had on fostering foreign direct investment in Portugal, with much of the public debate centred on imbalances created at on real estate residential prices. The Golden Visa 2.0 is more sustainable on that front.
Investors should still be aware that EU institutions have publicly criticised certain residence schemes, namely where “nationality is awarded absent any genuine link to the country or its citizens” and even recently proceedings were launched against certain jurisdictions. Indeed, there is a growing debate on the genuine link requirement as a condition for the acquisition of EU citizenship.
Portuguese immigration law goes well beyond Golden Visa and other instruments remain available adjusted to each profile and goals. The D7 Visa is an example of an instrument available for foreign citizens who wish to live in Portugal on their own income. Other instruments include, work visas, start up visas, student visas, highly qualified visas, tech visas.
On the nationality front, also other options remain available such as those allowing the descendants of Sephardic Jews forced into exile in the 15th and 16th centuries to seek nationality.
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© Kore Partners, April 2021
This briefing provides for general information and is not intended to be an exhaustive statement of the law. Although we have taken care over the information, this should not replace legal advice tailored to your specific circumstances. This briefing is intended for the use of Kore Partners clients and is also made available to other selected recipients. Queries or comments regarding this including joining our mailing list can be directed to kore@korepartners.com Download the Private Client Briefing