UPDATE: The minimum investment requirement for the Portugal Golden Visa Investment Fund increased to €500,000 from January 1, 2022. For more information, consult our Portugal Golden Visa changes guide here.
Portugal offers spellbinding experiences for avid travelers, foreign investors, and international families alike. Thanks to its golden visa program, it’s possible for expats to acquire residency by investment and even Portuguese citizenship in this charming nation. One of the best ways to get a Portuguese Golden Visa is via the Portugal golden visa investment fund option.
In this guide to Portugal’s investment funds for the golden visa, we cover the following:
- Benefits of the Portugal investment fund
- Key considerations to take into account before investing in funds
- Fund eligibility criteria
Portugal Golden Visa Investment fund highlights
The Portugal Golden Visa Program is a five-year residency by investment scheme. Qualifying applicants must invest a significant amount into the Portuguese economy to obtain a Portuguese residence permit. Portuguese citizenship is attainable after five years of holding your investment. Note that the golden visa investment fund option is one of many qualifying investment options. For more information about the Golden Visa benefits, investment options, and requirements, consult our Golden Visa Portugal Guide here.
A capital transfer in investment funds or venture capital funds to the amount of or greater than €500,000 is needed to procure legal residency in Portugal.
The funds themselves must be focused on the capitalization of companies registered under Portuguese law, with a minimum maturity of five years at the time of the investment and at least 60% of the value of the investments made in commercial companies on national territory.
Interestingly, Portugal Golden Visa Statistics point to an influx of investors rushing to invest in the Golden Visa this year, with enhanced interest in the funds investment golden visa option.
The rising popularity of the investment fund option for the Golden Visa
Property is usually the preferred route for investment in Portugal when it comes to applying for the Golden Visa. However, more and more investors are turning to the Portugal Golden Visa Investment Fund option, seeing it as a new way to acquire legal residency.
Having ownership of a property can be attractive to some, especially when it can result in rental income or even a holiday home. In practice, this method may not suit everyone, as finding and purchasing the right property can be difficult and time-consuming. For extra clarity, consult our fund investment Portugal guide where we compare the traditional real estate investment route with funds.
Venture capital funds (or FCR – Fundo de Capital de Risco) are considered a qualifying investment for those wishing to apply to Portugal’s Golden Visa. With a minimum investment of €500,000 in an FCR fund that qualifies for Golden Visa, investors can now successfully apply for the Portugal residency by investment program and have immediate access to the program’s benefits.
The name Venture Capital may sound daunting and complicated but it is simply a designation of investment funds that are managed by corporate experts in the field who seek to invest in start-ups 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, healthcare, or real estate. Funds are regulated by Portugal’s regulator, the CMVM.
Benefits of the Portugal Golden Visa investment fund
There are a number of benefits for picking the investment fund option for the Golden Visa, that the other investment routes lack. Here you can find an in-depth overview of the key benefits.
|Benefits of the investment fund route to secure the Portugal Golden Visa|
|Lower investment||Compared to other investment routes, such as capital transfer, for which you need an investment of €1.5 million, the investment fund option allows you to obtain Portuguese residency from a €500,000 investment.|
|Low fees and taxes||Investment fund investments do not lead to large fees and taxes, such as the real estate option. Purchasing a property in Portugal requires an IMI transfer tax (average 6%), stamp duty (0.8%), and annual municipal taxes (ranging from 0.3-0.5% annually). In contrast, the investment fund route has none of these taxes.|
|A safe and secure investment||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. Alongside being registered by the CMVM, the Bank of Portugal, and the external Fund Management company also regulate the fund. In addition, the Portuguese Tax Authorities audit the fund. The thorough and high levels of regulation mean that the fund must comply with the Portuguese legislation and tax laws.|
|Tax-efficiency||While all real estate rental income is subject to a fixed 28% taxation, venture capital funds are a tax-efficient vehicle — dividends and capital gains returned to investors may be tax-exempt. Some cases allow for exemptions to withhold tax on income generated through the fund, especially if the investors are not tax residents in the country.|
|Diversification||The Portuguese legislation governs the funds to obtain a certain level of diversification. There are quotas as to what percentage a particular asset or investment in the fund may constitute of the total fund portfolio. This allows for diversification of investments within the fund, and an alleviation of risk for the participating investors.|
|Potential earnings||The annual yields and eventual capital gains may be significantly higher than other investment funds related to the Golden Visa program, depending on the focus of the investment fund.|
|Management delegation||The investment fund Golden Visa is professionally managed by experts in each specific sector. While being a real estate landlord can be a hassle, owning a participation unit in an investment fund is much more straightforward. The management burden is delegated to the fund managers. This may also be a disadvantage for control-loving investors, making it both an advantage and disadvantage of investment funds.|
Disadvantages of the Portugal Golden Visa Investment Fund
Investment funds also have some disadvantages to them, which are outlined below.
|Downsides of Getting a Portugal Golden Visa Through Investing in an Investment Fund|
|Lack of control||While also an advantage, in that the fund manager does all the work, the investment fund route requires the investor to trust his or her funds with an external fund manager that will determine the investment decisions and steer the strategy. Some investors may not like this lack of control.|
|Exit issues||Most investment funds will contractually ensure the participants that the fund will not be dissolved before a minimum number of years to make sure that the participant can achieve the time period where he or she is able to apply for permanent residency in Portugal. There can be some issues with this: (1) the resale of the participation unit before the fund dissolves is difficult in most cases (2) funds normally have extension periods, but these are managed by the fund managers and participants have no say, and (3) if the ultimate objective of the investment fund is to sell the portfolio at a target appreciation, then there will be no guarantee of what the corresponding market will be when the fund decides to sell.|
|Sharing the earnings||The potential yield and ultimate capital appreciation are shared between the managers of the fund. The management and performance fees will vary from fund to fund.|
|KYC burden||Participants will need to share some documents and critical information with the managers of the fund, including proof of income and source of income. Such Know-Your-Client (KYC) burden does not exist in real estate acquisitions.|