This proposal was discussed and voted on in the Assembly of the Republic, along with other measures related to the housing crisis in Portugal. The Mais Habitação housing program, Law No. 56/2023, was published on October 6, 2023 and came into force on the immediately following day.

This program contains concrete measures that change the rules regarding residence permits for investment activities (Golden Visa). This law results in the termination of certain modalities of the ARI regime (Golden Visa), through the thirteenth amendment to Law no. 23/2007, of July 4, in its current wording. It also results in the maintenance of investment activities that continue to be eligible for Golden Visa purposes, thus maintaining the program in force.

Among the various investment modalities maintained, we will focus our analysis on the Investment Funds option.

From the law:

EUR 500,000 for the acquisition of investment fund or venture capital fund units committed to the capitalization of companies incorporated under the Portuguese law, with a maturity of at least five years and with at least 60% of the investment portfolio in companies with a registered office in the national territory.

The new law also limited the type of investments of the eligible funds themselves, that is, they cannot be directly or indirectly related to the real estate market. Therefore, the transfer of capital intended for the acquisition of participation units or shares in investment funds, with the exception that these must be non-real estate.

We consider that if the investment is made in a company which corporate purpose is exclusively purchase and sale (or rental) of real estate assets, this will not be eligible for the purposes of obtaining a Golden Visa, however, if its corporate purpose and respective activity are not exclusively real estate, we understand that it may be considered eligible. Investment in a fund or company that holds real estate assets necessary for the pursuit of its corporate purpose and activity, namely hospitality or touristic businesses, may eventually be considered eligible for Golden Visa, to the extent that the investment it is not done in the real estate asset itself, but in the fund/company that needs to own these real estate assets to continue its activity. There are many companies that own real estate, so this on its own should never be a factor of exclusion for investment purposes. Although, to date, these issues remain pending further legal clarification.

If you choose this type of investment, you must take into account whether it meets the requirements of the new program, among other legal requirements, namely:

  • Be constituted in accordance with Portuguese legislation;
  • Have a maturity, at the time of investment, of at least five years;
  • At least 60% of the investment amount must be made in commercial companies with headquarters in the national territory; and
  • It is not qualified as a real estate investment fund.

In addition to the requirements relating to Investment, the potential investor must also:

  • Be a non-EU/EEA citizen or non-Swiss citizen;
  • Be over 18 years old;
  • Present no criminal record;
  • Have sufficient legal funds to invest;
  • Have experience with financial instruments such as company shares, government bonds, corporate bonds, funds, etc.;
  • Submit proof of having sufficient funds;
  • Show the origin of funds.

Credits: Supplied Image; Author: Client;

Investing in Funds offers several advantages from a tax point of view, namely:

Income tax exemption for non-residents on fund dividends and capital gains. Although a flat tax rate of 28% applies to all real estate rental income, venture capital funds offer tax efficiency. Dividends and capital gains distributed to investors may benefit from tax

exemptions. In certain cases, there are provisions for exemptions from withholding tax on income generated by funds, especially for non-tax resident investors. Annual returns and potential capital gains may vary considerably depending on the focus of the investment fund, namely 10% for tax residents in Portugal instead of the 28% mentioned above.

It also offers advantages in terms of security and transparency, namely:

These funds are regulated by the Portuguese authorities, providing additional security and transparency to investors. They allow for great investment diversification, making it possible to allocate EUR 500,000 across several funds, depending on your minimum investment requirements. Portuguese regulations require a specific level of diversification for these funds. There are restrictions to limit the proportion that any specific asset or investment can represent in the fund's overall portfolio. This ensures the diversification of investments within the fund, mitigating risks for investors. In terms of possible exit from the fund, regulations guarantee investors the ability to resell their fund units to other investors, convert the units into real estate assets guaranteed by the fund or exit the fund at their discretion. It should also be noted that the investment fund is professionally supervised by experts from each specific sector. Fund managers assume management responsibility and are incentivized to generate returns for investors to qualify for performance fees.

Investing in regulated funds is a simple, safe and profitable solution, in addition to allowing you to obtain a residence permit in Portugal. According to the selected Fund, investors can choose to finance projects in areas of interest and expertise, such as innovative companies or startups focused on science and technology, renewable energy and sustainability sectors, computer applications and e-commerce, among others.

by Dr Ricardo Filipe Ferreira - Lawyer and Managing Partner of Martinez Echevarría Ferreira Portugal