Portugal Golden Visa Investment Fund: The Ultimate Guide

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 changes 2022

From 1 January 2022, the Portuguese Golden Visa will undergo an extensive makeover. Investment options will significantly change, including the investment amount needed for the Portugal investment fund Golden Visa. Specifically, a capital transfer in investment funds or venture capital funds to the amount of or greater than €500,000 will be 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 already point to an influx of investors rushing to invest in the Golden Visa this year before the changes kick in 2022, with enhanced interest in the funds investment golden visa option.

You still have this year to enjoy the current investment conditions. For more information, check out our Portugal Golden Visa changes article.

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 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 €350,000 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 Portugal investment fund golden visa

There are a number of benefits for picking the investment fund option for the golden visa.

• The investment fund golden visa is professionally managed by experts in 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 which means managers will only be compensated if the fund performance is above a certain percentage
• 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

Golden Visa Portugal investment fund profile and diversification

The overall level of security of risk of a Portuguese venture capital fund or ‘Golden Visa Portugal investment fund’ will depend on many factors including investment mandate, managers’ credentials, leverage and liquidity, and legal documents.

Some funds may offer limited potential for capital appreciation with a safer investment profile while others may have a more leveraged approach with an aim to provide investors multiples of the capital invested. For example, high-growth companies focused on technology have a different profile to property development projects that tend to have a more predictable cash-flow curve.

Funds may offer the opportunity of an early exit but as a rule of thumb, usually, the investor should expect to realize all gains after five to ten years.

The risk-return profile of these funds will vary according to the sector exposure and portfolio diversification (i.e. how many companies comprise the fund’s portfolio).

Examples of risk-return levels based on sector exposure and portfolio diversification

What should a Golden Visa applicant consider when investing in a Golden Visa Portugal Investment Fund?

If you are interested in applying for the Portuguese Golden Visa through a Venture Capital Fund (FCR), you must carefully make your decision based on two important criteria:

• Fund eligibility for the Portuguese Golden Visa
• Fund credentials including fund strategy, management pedigree, and legal obligations

Portugal investment fund golden visa: fund eligibility requirements

Not every private equity fund in Portugal qualifies for the Golden Visa program. You need to make sure the chosen fund fulfills all the necessary technical requirements as listed by the Portuguese border service “Serviço de Estrangeiros e Fronteiras” (SEF) and that the investment fund is regulated by the Portuguese CMVM.

A few questions the investor should consider before investing in Golden Visa funds:

• Is the fund regulated by the Portuguese authorities?
• Is the fund fully eligible for the Portuguese Golden Visa according to SEF?
• Does the fund have the right attributes to safeguard the investor’s Golden Visa status? As a Golden Visa investor, you will need to maintain your investment in the Golden Visa fund for a minimum of five years when you are able to apply for permanent residency and citizenship in Portugal.

How are the Portuguese Golden Visa Investment Funds regulated?

The funds are regulated by CMVM (The Portuguese Securities Market Commission) who require funds to comply with the following requirements including but not limited to:

1. Report the valuation of their net assets on a semi-annual basis. That means investors may have their participation unit price revised every six months
2. Employ independent accredited accounting firms such as PwC, KPMG or EY for annual audits.
3. Disclose their fees in the PPM/management regulation document. That means investors should have clarity on the management entities’ fees and custodian bank charges.

Portuguese golden visa investment fund credentials

Once we’ve established that the fund is appropriately regulated and is an eligible Golden Visa instrument, the second phase of due diligence is required on the fund credentials.

The three main aspects of analyzing a Portuguese golden visa qualified investment fund include:

Fund investment strategy: Does the fund investment strategy make sense? What is the term of the fund? How does the fund plan on paying back investors?

Fund manager credentials: Do the managers have the right experience and credentials?

Fund legal: Are the legal documents appropriately drafted to safeguard the investor’s investment?

Real estate fund types eligible for the Portuguese Golden Visa

Portugal is known for its real estate market potential and stable growth in recent years which has attracted thousands of foreign investors. It is no surprise to find a whole variety of investment funds in this sector ready to take advantage of the market conditions. Both local and foreign investors find plenty of options on where to invest.

We at Global Citizen Solutions are constantly monitoring the real estate market and the opportunities this thriving sector brings. Regularly check back in to see what fund types are on offer.

Portuguese Golden Visa Funds with Real Estate Exposure

If you’re looking to invest in funds to qualify for the Portuguese residence permit, you’ll notice that a big portion of the eligible investment funds is concentrated on real estate. Within this sector, each fund can be broken down into a particular segment such as residential, commercial, hotel developments, logistics, and even agriculture.

The expected return across such funds varies to some degree. While some funds explore the development and rental of properties, others are engaged in purchasing real estate, revamping them fully, and selling at a margin. While the former offers the possibility of dividends derived from their rental activities, the latter offers a higher potential for capital growth.

Capital Growth Funds

Funds which explore the residential market either by renovating buildings in prime locations like Lisbon or Porto or by building new properties will likely use the profits from one project to fund the next one within the life of the fund. That means all capital and profits are likely to be distributed upon fund liquidation once all projects are completed.

Say these projects take two to three years to be completed. A six or seven-year term fund will likely have two cycles of projects where profits may compound and get distributed at the end of the term.

Dividends and Growths Funds

Funds that invest in yielding generating assets such as retail parks, warehouses, and hotels may offer expected annual dividends once all the capital is deployed.

The expected dividend yield usually varies from 2% to 5% depending on the rental proceeds net off management fees. In addition, the net value of the assets may increase over the long term, and thus the value of the shares too.

Finance Real Estate 

Some funds have an alternative strategy where they focus on preferential cash flows at the expense of lower returns. Usually, such strategy involves the fund lending a great portion of its capital to the companies (SPVs) that hold real estate assets, while taking a smaller equity position in them.

In other words, the fund would acquire a percentage of the company shares (whose valuation is done independently), and then it would lend money to the company with a fixed interest rate. The real estate asset, project, or licensing may sometimes work as collateral in the absence of senior debt.

Therefore, the rate of return of such funds predominantly reflects the fixed income from such debt instruments.

Document Requirements for the Portugal Golden Visa Investment Funds

When applying for the Portuguese Golden Visa, there are numerous documents you must submit to the Portuguese authorities. Note that if any document is missing or incomplete, your application for the Portugal Golden Visa can be significantly delayed. That’s why it’s important to stay informed about all the necessary paperwork you must prepare beforehand.

Note that the documents listed below are not exhaustive and additional documentation requirements may be requested by the authorities.

General document requirements for the Portugal Golden Visa

• Passport or another valid travel document
• Proof of entry and legal stay in the National Territory
• Proof that you are covered by health protection, namely:
  • Document certifying that you are covered by the National Health Service, or;
  • Document showing that you are an internationally recognized health insurance holder for the period of legal residence requested
• Criminal record certificate from the country of origin, or the country (or countries) where you have resided for more than one year (certified by diplomatic representation or Portuguese consular office). The certificate cannot be older than three months and must be translated into Portuguese;
• Proof of your tax identification number, or equivalent, of the country of origin, of residence or fiscal residence;
• Completion of Application (using the approved model) containing the authorization for consultation of the Portuguese Criminal Registry;
• Declaration on Commitment to Honor, by which the applicant declares that he will fulfill the minimum quantitative and time requirements (five years) for the investment activity in the National territory;
• Present a negative statement debt issued, with a maximum advance of 45 days, by the Tax Authority and Customs and Social Security or, if not possible, declaration of the non-existence of registration with these entities;
• Receipt of payment of the ARI application analysis fee.

Golden Visa Portugal investment fund- documents required

You must demonstrate that you’ve made the investment with the minimum required amount and must respectively submit the following documents:

• Declaration by the credit institution authorized or registered in the national territory with the Banco de Portugal, attesting to the effective transfer of an amount equal to or greater than what is required;
• Certificate proving ownership of the participation units, free of charge and charges (issued by the entity responsible for maintaining a register updated version of the holders of participation units, under the terms of the Law, of the respective management regulation or contractual instrument);
• Declaration issued by the management company of the respective investment fund, attesting the viability of the capitalization plan, the maturity of at least five years, and application of at least 60% of the investment in commercial companies based in the territory national;
• Certificate of commercial registration, if the investment is made through a company single shareholder, demonstrating that the applicant is the partner, cf. Article 65a (13) of Regulatory Dec. 84/07, of 11/05, in its current wording.

Useful Industry Acronyms For The Portugal Golden Visa Investment Fund

Regarding the terms, it would be useful to understand some Portuguese specific acronyms used in this industry, such as:

UP (Unidade de Participação)

PU (Participation Unit) in English, is the equivalent of stocks or shares.

FCR (“Fundo de Capital de Risco”) – Private Equity Fund or Venture Capital Fund

SCR (“Sociedade de Capital de Risco”) – Venture Capital Fund

RG (“Regulamento de Gestão”) – Management Regulation a.k.a PPM (Private Placement Memorandum)
Also, an important entity to have in mind is CMVM, Portuguese Securities Market Commissions. It is the Portuguese equivalent to SEC (Securities and Exchange Commission).

CMVM is a legal entity governed by public law and is part of the European System of Financial Supervisors  (ESFS) and the National Council of Financial Supervisors. (Chapter 1, articles 1 – 3).

The importance of an informed decision

It is important that investors exercise careful consideration when selecting the correct fund investment. Legal documents, as well as the caliber of the managers, must be thoroughly scrutinized. Check out additional information on investing in Portugal for citizenship.

If you are interested in applying for the Golden Visa in Portugal, be it through buying a property or investing in a fund, we can help.

Get in touch today and schedule a free initial consultation.

Frequently asked questions about the Portugal investment fund for the golden visa