Portugal Golden Visa Qualified Investment Fund – Rules and Regulations For Americans

Thinking of investing in the Portugal Golden Visa qualified investment fund but unsure where to begin? To ensure a smooth sailing process, start with our handy guide on rules and regulations you must factor in as an American citizen. 

What is the Portugal Golden Visa qualified investment fund?

The Portugal Golden Visa is an attractive residency by investment program, inviting qualifying applicants to invest in the nation in exchange for legal residency. The Golden Visa Portugal qualified investment fund is simply a route investors can take to acquire the Portugal Golden Visa (aka residency permit).

This is the last year investors can invest €350,000 in a qualifying fund for the Portugal Golden Visa, with immediate access to benefits that come with European residency in an exotic nation.

From 2022, Portugal Golden Visa changes will kick in, with the Portugal Golden Visa qualified investment fund option increasing to €500K.

For more information, consult our detailed guide on Investment Funds Golden Visa.

What are the advantages of the Portugal Golden Visa qualified investment fund?

  • Currently, it’s one of the more cost-effective investment routes to Portuguese residency
  • The funds are professionally managed by experts in each specific sector
  • The funds are regulated and comply with the rules set forth by the Portuguese Securities Market Commission (CMVM)
  • Fund managers are regularly audited by third parties

Portugal Golden Visa Qualified Investment Fund rules and regulations for Americans 

US Citizens or US tax residents are subject to specific rules when investing in the Portugal Golden Visa qualified investment fund. Below we’ve outlined some key considerations to take into account.

Consideration 1: FATCA Compliant Bank

One of the first steps toward acquiring a Portugal Golden Visa is to open up a bank account in Portugal. As such, we strongly recommend you consider a FATCA compliant bank.

FATCA basically stands for Foreign Account Tax Compliance Act. It’s the US government’s attempt to combat tax evasion by Americans holding accounts and other financial assets overseas. 

FATCA has a set of rules that influence how overseas financial institutions directly report to the IRS on assets owned by Americans. 

As an American considering the Portugal Golden Visa qualified investment fund, picking a FATCA compliant bank will decrease the risk of falling into a trap of being non-compliant with US tax authorities, saving you a headache in turn.

Consideration 2: PFIC

PFIC stands for Passive Foreign Investment Company. For the sake of income tax in the United States, Portugal Golden Visa qualified investment funds usually qualify as PFIC. A great deal of these funds provide the necessary PFIC annual information statements to facilitate the tax reporting of American investors.

However, it is worth flagging that investors can choose the Portugal Golden Visa qualified investment fund freely, irrespectively of whether PFIC reporting is provided or not. It is neither mandatory for funds to provide such statements nor necessarily a deal-breaker for American investors.

PFIC reporting provides the records of dividends and capital gains in a manner that facilitates tax reporting for Americans. Note that the financial performance of funds is not impacted by such reporting and investors are advised to evaluate funds with regards to:

  • Their risk-reward exposure
  • Experience of the management team in question
  • Other terms and conditions attached to the funds

Consideration 3: Tax treatment as a US citizen

Despite the fact that there is a Double Taxation Agreement between Portugal and the United States, if you are a U.S. citizen or a resident in another country, the rules for filing income, estate, and gift tax returns, plus paying estimated tax are generally the same whether you are in the US or Portugal. 

Your worldwide income is subject to U.S. income tax, regardless of where you live. Having said that though, you still may be eligible for Portugal’s special Non-Habitual Resident Tax regime and enjoy certain tax benefits. 

For more information, consult our NHR Portugal tax regime guide.

Consideration 4: COVID-19 travel restrictions for Portugal

While the Portugal Golden Visa application can easily be filed remotely, if for any reason you need to travel to Portugal beforehand, it’s important to stay on top of COVID-19 related travel restrictions. 

As of May 1, Portugal is in a country-wide State of Calamity.  Please note specific restrictions based on conditions in each municipality.  Information on these measures and levels of risk for each municipality is available here.

Note: All authorized travelers arriving from the United States must present a negative COVID-19 test conducted within the last 72 hours before boarding and at the airport. Passengers without a negative test must do mandatory testing at the airport at their own expense upon arrival, in addition to a mandatory 14-day quarantine by Portuguese health authorities.

Furthermore, some FATCA compliant banks only allow you to open a bank account in person, so it’s important to do your homework and understand which bank is flexible with remote opening.

For more information, check out our coronavirus and Portugal Golden Visa article

Get in touch with Global Citizen Solutions

We are an experienced investment migration consultancy firm, focused on pairing investors with their dream investments for residency or citizenship purposes. 

At Global Citizen Solutions, we’ve mapped out all the funds that qualify for the Portugal Golden Visa and developed a data-based system with strict criteria to help you decide which fund is for you. 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 Portugal Golden Visa Qualified Investment Fund

What rules do I need to be aware of as an American applying for the Portugal Golden Visa qualified investment fund?

Because one of the first steps in the Portugal Golden Visa program is to open a bank account, Americans interested in the investment fund route should consider a FATCA compliant bank, on top of tax treatments, COVID-19 related travel restrictions, and so forth.

What does PFIC mean?

PFIC stands for Passive Foreign Investment Company. For the sake of income tax accumulated in the United States, Portugal Golden Visa qualified investment funds usually qualify as PFIC.

What is a FATCA compliant bank?

FATCA basically stands for Foreign Account Tax Compliance Act. It’s the US government’s attempt to combat tax evasion by Americans holding accounts and other financial assets overseas. Some Portuguese banks are FATCA compliant, meaning they’re in touch with the US authorities, and can help you properly account for all your tax activities.