Navigating Portugal’s Golden Visa Landscape: Investment Funds Take Center Stage
An article written by Diogo Romeiro IMCM, Managing Partner of Invest Citizenship
Both sides of Portugal’s Golden Visa market breathed a sigh of relief when the program weathered the longest storm, which began in February and was finally confirmed in October. One of the most significant changes was the removal of real estate in any form from the list of eligible investments for the Golden Visa program.
This alteration marks a transformative period for the Golden Visa market, shifting the focus of investments. Presently, participants face a crucial juncture as these changes compel them to adjust to the absence of real estate options. Property had been a popular choice for Golden Visa investments in Portugal, owing to its accessible minimum investment, familiarity, and clear exit strategies offered by many developers. However, in recent years, an increasing number of investors have been considering the investment fund option for legal residency.
Venture capital funds qualify as a Golden Visa investment with a minimum of €500,000. Opting for funds provides immediate access to the program’s benefits and is overseen by experts who identify growth opportunities in start-ups or medium-sized projects across sectors such as energy, industry, technology, and healthcare. Many of these funds are open to various investors, not limited to Golden Visa applicants. They represent the optimal choice for secure and profitable investments for numerous individuals and institutions.
Interestingly, about half of the existing funds, previously eligible for the Golden Visa, were focused on real estate investment. In the coming days, we will observe how many of these funds will establish new investment avenues based on their expertise. Additionally, it remains to be seen how many real estate players will navigate their way into the fund market.
What are the requirements for the Funds for the Golden Visa?
For the Golden Visa, funds must allocate a minimum of 60 percent of their capital to investments in Portuguese companies registered under Portuguese law.
These funds should have a minimum investment period of five years to align with the Golden Visa program’s requirements.
Furthermore, they must be regulated by the Portuguese Securities Market Commission (CMVM) and adhere to specific guidelines. This includes employing independent accredited accounting firms and reporting the valuation of their net assets semi-annually.
Notably, the latest changes prohibit funds from having direct or indirect investments in real estate.
What are the advantages of investing in funds for the Golden Visa program compared to other investment options?
Higher income potential: Investment funds offer the prospect of higher annual yields and capital gains compared to other Golden Visa-related investment options, contingent on the fund’s focus.
Secure investment: These funds are regulated by the CMVM and undergo regular audits, ensuring strict adherence to Portuguese legislation and tax laws.
Tax efficiency: Dividends and capital gains from venture capital funds might be tax-exempt, and in certain cases, income tax exemptions are granted to non-resident investors.
Passive investment approach: Funds offer a hands-off investment approach, managed by professional fund managers, relieving investors of active management responsibilities.
Diversification: Portuguese law mandates diversification within funds, reducing risk by limiting asset concentration in the portfolio.
What are the disadvantages of Golden Visa Investment Funds?
Limited control and decision-making: Investing in Golden Visa investment funds means relinquishing control to professional managers, which might be a drawback for those desiring more autonomy over their investments.
Potential lack of liquidity: Investment funds often have lock-in periods, limiting investors from selling their participation units swiftly, which might not be suitable for those needing immediate access to their capital.
Investment risks: As with any investment, Golden Visa investment funds carry inherent risks, including market and liquidity risks, and the potential for loss of invested capital. There’s no guaranteed buy-back in the exit strategy, and potential income depends on market conditions and the nature of the investment.
Can I invest in several Funds and still apply for the Golden Visa?
Yes. Investors can distribute the minimum investment of €500,000 among different funds, focusing on diverse sectors of the economy. However, it’s advisable not to invest in too many funds to avoid increased costs.
What are the additional fees or charges associated with investing in funds for the Golden Visa program?
Investing in Golden Visa funds may involve various fees and charges, including management fees, performance fees, and other associated costs. In addition to these, investors should account for government and legal fees related to the Golden Visa process, totaling around an additional €30,000.
How can I select the right fund for my Golden Visa investment?
Choosing the right fund demands careful consideration. Start by assessing your investment goals, risk tolerance, and investment horizon. Evaluate the fund’s track record, management team, investment strategy, and underlying assets.
Recently, Venture Funds have emerged as the most attractive option for investors due to their potential for high returns. By scrutinizing fund types, requirements, risks, and returns, investors can make informed decisions to enhance their chances of success in the Golden Visa program.
