What are the Advantages of Portugal Golden Visa Funds?
If you are a non-EU-EEA or a Swiss citizen desiring to obtain EU residence, the Portugal Golden Visa Funds is an increasingly popular way to do that. You may be wondering what the fuss is all about. In this article, we seek to answer the most frequently asked question – what are the advantages of Portugal Golden Visa funds?
The Portugal Golden Visa Fund is a residence permit program that allows investors across the globe to legally reside in Portugal by making substantial investments. Before this program was introduced, investors would obtain their residence permits via investing in real estate. Unlike the real estate route, the Golden Fund route is fast and tax efficient.
This program was introduced in 2012 by the Portuguese government. it has been a success over the following years with thousands of investors from various parts of the world benefitting. The fund is popular because it allows investors to have permanent residency and citizenship (after 5 years). The Portuguese government also benefits immensely from foreign investment in the economy.
Nine Advantages of Portugal Golden Visa Funds
Reasonable Investment
From the entry fee and exit costs to low tax and low ongoing costs, the Portugal Golden Visa Fund offers a more reasonable investment opportunity than the real estate path. The minimum amount for the Golden Fund is €500,000. Compared to other funds which require a minimum of €1.5 million, the Golden Fund is affordable.
Lucrative Fees and Taxes
If you choose the real estate route, you'll be required to pay for stamp duty, annual municipal taxes, and a huge IMT tax. However, with the Golden Fund, you’ll only pay for the transaction costs.
Safe
Portugal is a stable, politically neutral, and safe EU member state. Additionally, the fund is regulated by different state authorities like the Portuguese Tax Authorities, the Portuguese Securities Market Commission, and the bank of Portugal. These regulatory authorities ensure high levels of compliance.
Tax Benefits
With the fund, you don’t need to pay any taxes on your fund proceeds. Also, withholding taxes don’t apply here, unlike the real estate route where rental income is taxed at 28%.
Diversification
Legally, with the Golden Fund, investors can’t invest more than one-third of their investment in a single asset or company. This encourages investors to invest in three or more different companies or assets. Diversification in the long term helps with lowering risks. With real estate, however, investors can only buy one property.
Dual Citizenship
Portugal is one of the few EU countries that allow dual citizenship.
Professional Management
In real estate, you may have to hire a property manager or manage the property on your own. Hiring a property manager is expensive. With the Portugal fund, however, your investment is managed by professional fund managers, and you don’t have to incur additional management costs.
Schengen Free Travel
A Portuguese residence permit allows you to travel visa-free across the twenty-six-country Schengen zone.
Relocation
With this fund, you don’t have to relocate. You can decide to live in Portugal or visit once for two weeks every year.
Disadvantages of the Golden Visa Fund
The following are the disadvantages of the fund:
Risk Funds
The Portuguese funds are categorized as risk funds. This means there is a certain degree of risk involved.
No Guarantees
There is no guarantee for investors over the invested capital.
Maturity Regulation
Until the fund reaches a maturity period of six years, investors can’t sell their units.
No Control
With real estate, investors can do whatever they want with their property. However, with the Golden Visa funds, an investor is at the mercy of the fund manager.
Know-Your-Client (KYC) Burden
Before an investor invests in the fund, they are required to submit and share valuable information with the fund managers. This exchange of information is used to verify an investor’s source of income. This burden of know-your-client (KYC) isn’t in the real estate route.
Considerations for the Portugal Golden Visa Fund
Before making that decision as an investor to go the Golden Fund path in your EU residency journey, consider the following:
Risk
Golden Visa Funds are classified as risk funds. As an investor, you must know the degree of risk you are willing to take.
Dig Deeper
Funds have various strategies and management styles. Dig deeper by asking fund managers questions and doing the research before making that final decision. Make sure that the fund meets the statutory regulations. Find out how much experience the fund managers have and their reputation.
FAQs
What are the Various Forms of Investment Funds in Portugal?
Various forms of investment funds qualify for the Golden Visa Fund in Portugal. They are:
● Securities funds whose only focus is on stocks
● Capital venture funds that focus on start-ups
● Real estate funds that focus on real estate
How Much Do I Need to Be Eligible for the Golden Visa?
The minimum amount is €500,000.
Can I Add My Family to My Application?
Absolutely. You can add your spouse (if you have lived together for two years and can prove it), children under 18 years, and parents (if they are over 66 years or financially dependent on you).
Can I Exit my Investment Before Time?
Yes. However, if you exit early, you’ll lose your golden visa and your residency position. That means you’ll be putting a halt to your citizenship journey.
Who Can Invest in the Golden Visa Fund?
The eligibility criteria are:
● Be a non-EU-EEA or Swiss citizen
● Have no criminal history
● Be over 18 years old
● Have enough legal funds to invest
● Show proof of having the funds and the source
Fund Investment Vs. Real Estate: Which is Better?
There’s no right or wrong answer. It all depends on the investor’s personal preferences. If you want to see monthly returns for your investment, then real estate is the perfect fit for you. If you want your investment to bring returns over time, then funds could work for you. However, with funds, you must keep in mind that they are considered risky.
The major difference between these two is the capital base. With funds, the cost involved is much lower compared to real estate. However, the value of property in Portugal is increasingly growing. This also makes it a one-time investment with a guarantee of huge returns over time.
When all is said and done, the final decision rests on the personal choices and preferences of the investor.
Can a U.S. Citizen Invest in the Portugal Golden Visa Funds?
Yes. However, the IRS mandates foreign institutions and other specific non-financial institutions to report to it regarding foreign assets being held by their U.S. account holders.
Because of this regulation, some funds and banks steer clear of working with American investors. However, some banks and funds happily work with and accept American investors.
Conclusion
Portugal Golden Visa Funds are a popular option for starting the journey to EU residency. Considering that these funds are categorized as risky funds, however, you should consult a licensed professional. With the expert’s experience and guidance, you can look at the advantages and other considerations and make an informed decision.
