The Golden Visa Portugal program (ARI) is a hugely popular way for foreign investors to obtain Portuguese residency or citizenship. In return for investing fixed sums into the Portuguese economy, investors are put on a clear 5 year path towards obtaining Portuguese permanent residency or a Portuguese passport, which in turn means investors become citizens of the European Union.
What is the Investment Fund option?
Traditionally, most people think of real estate investments when it comes to the Golden Visa Portugal. But the cheapest and smartest route is through Investment Funds. Locally known as “fundos de capital de risco”, these are investment funds you can subscribe to that support Portuguese businesses. Provided you are over 18, a non-EU citizen and can invest €350,000 of your own money in a “fundo de risco”, then you can have the necessary paperwork ready for SEF in just 7 days.
Why invest in a fund option?
The investment fund option is becoming increasingly popular primarily because there is significantly reduced initial investment than when compared to the other options for a Golden Visa Portugal. A real estate investment in Lisbon or Porto for example requires a €500,000 investment, whereas a capital transfer requires €1,000,000. To qualify through the investment fund route though only needs an initial €350,000. There are some other advantages that are very specific to the Investment Fund option too.
Reduced Tax Burden
Golden Visa Portugal holders and non-habitual residency will most likely be exempt from paying capital gains tax, as well as taxes on dividends. This makes the Golden Visa Portugal Fund option highly tax efficient.
There is a risk for any savvy investor that comes from investing all your capital in one source. As opposed to needing to see returns from a single piece of property or company, a well managed fund will instead make sure your investment is spread out over different units and perhaps industries, which in turn increases the likelihood of a positive capitalisation.
Familiar Method of Investing
For many international investors, the mechanisms and principles of an investment fund will be well known. The rules to govern them are pretty universal and a reputable fund manager can steer you through the process. On the other hand, investing in property, the arts or science can be an unfamiliar and time-consuming process.
There are also the general advantages of the golden visa portugal program as a whole that you can enjoy through the investment fund option. These include citizenship in 5 years, visa-free travel throughout the European Union and the necessity to only spend 14 days every two years in the country.
What about the Real Estate option?
Out of all the Golden Visa Portugal applications to date, the majority have pursued the real estate investment option. However, due to the saturation of the local housing markets in Lisbon, Porto and the Algarve, the government is starting to put in restrictions on this method which makes it less appealing in comparison. The investment fund option might present a better option for a number of reasons.
More Predictable Investments
It is possible to invest just €350,000 in a real estate project if you do it in a designated area of regeneration. However, when taking into account the costs of finding property, registering the sale, paying the taxes and managing the property, the eventual costs could rise by as much as 30%. Since the property is in a low density area too, the eventual exit price can be hugely volatile. Investment funds on the other hand usually only require a fixed management fee on top of the initial investment, while offering a more predictable rate of return over the term of the fund.
Quicker Time to Completion
The process of buying property in any country takes time. Portugal in particular has quite a heavy layer of bureaucracy surrounding property purchases, which means when doing it from abroad you can expect the whole process to take up to 2 months. A properly managed investment fund however can give you the paperwork needed to start your golden visa portugal application in just 7 days.
Although many investors might see regulation as a problem, in this case it can very much be a good thing. Unless you have local knowledge of the property markets in Portugal, you will have to deal with many third parties within a very lightly regulated industry, which in itself represents a possible risk. The CMVM though takes an active role in monitoring the investment fund landscape which means you can have more confidence in where you place your investments.
How to pick an investment fund
It is not possible to select just any fund based in Portugal and then apply for an Investment Fund Golden Visa Portugal. The funds need to meet 3 key criteria:
- The Portuguese Securities Market Commission (CMVM) need to approve and regulate the fund;
- At least 60% of the investment units need to have their HQ based in Portugal;
- The minimum term of maturity has to be at least 5 years.
There are many funds within Portugal that meet these criteria, so although for many investors the primary motivation for investing will be to secure a Golden Visa for Portugal, there is still plenty of scope to make an investment which delivers a positive return. As with a normal investment, it is wise to consider whether the investment strategy, track record, leverage and liquidity of the fund matches your investor profile. Typically speaking though, most funds in Portugal take 3 forms:
Traditional Venture Capital Funds
These will be typical VC funds with long term limits who invest in start-ups. With no early exits or dividends, they offer a high amount of risk in exchange for a high amount of reward.
Traditional Private Equity Funds
These invest in traditional markets like industry, health and agriculture to reduce the risk somewhat, but also the reward. Like VC funds, they tend to have slightly longer term limits.
Golden Visa Friendly Funds
These are funds specifically designed for foreign investors as they have a reduced withdrawal limit to mirror the 5 year requirements of the Golden Visa program. They will also accept subscriptions that match the €350,000 of the golden visa program, and tend to be risk averse to make sure you exit the program with no risk.
How does the process work?
The process for applying for a Golden Visa Portugal is relatively straightforward, and the investment fund option is the most streamlined of all the possible avenues available.
- Fill out the Know Your Customer form and Subscription forms required by the fund manager, plus any relevant documents;
- Register for a Portuguese Tax Number (NIF) as a non-habitual resident and open a bank account with a Portuguese Bank;
- Transfer the investment amount to the Portuguese bank account, and then transfer it to the selected fund;
- Receive your declaration of subscription from the fund manager and any other necessary documents for the Golden Visa process;
- Go to the Portguese Border and Immigration Authority (SEF) with your documents and start the process.
Golden Visa changes for 2022
As of January 2022, there will be some wide ranging changes to the Golden Visa Portugal program. As far as the investment fund option is concerned, the only change is that the investment amount will rise from €350,000 to €500,000. However, anyone making the investment before January will be locked into the old rate.
Lince Capital is an ideal partner for anyone wishing to pursue an Investment Fund Golden Visa. Drawing on over 40 years of experience, Lince’s funds are diversified, have consistent potential yields and are fully managed, meaning that investors can take a hands-off approach with almost no risk. They create funds which are designed to make the process of applying for a Golden Visa as smooth as possible, while still offering funds that act more like traditional VC and PE funds. Lince has two standout funds to consider which are still open to subscription.
Lince Innovation Fund
The Lince Innovation Fund is focused on research and development projects across a wide range of sectors such as health, IT and industrial. The minimum investment in this fund is €100,000 and the term lasts for 8 years.
Lince Navigator II
Lince Navigator II is exclusively focused on real estate development projects in the high-value central Lisbon area. The minimum investment for this fund is €100,000 and the term lasts for 7 years.
If you would like more information about Golden Visas or would like to explore how to invest in Portugal, please feel free to contact us.