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Golden Visa through investment funds: main advantages and challenges

25 de July, 2019

Golden Visa through investment funds: main advantages and challenges

Discover the main advantages and challenges of the Golden Visa for Investment Funds. Find out how to obtain European citizenship.
Reading: 5 min

Did you know that Golden Visa can be acquired through the acquisition of investment fund units and venture capital? It is a less well known mode of Golden Visa, but it can confer a number of benefits to its cardholder. Check out how Golden Visa works by investment fund, as well as its advantages and disadvantages compared to other Golden Visa modalities.

Golden Visa: benefits in obtaining

Golden Visa (Residence Permit for Investors – ARI) is the best known visa program for Portugal. It is intended to attract foreign investors to the country, granting a number of benefits in return, among which:

  • Entry and free transit throughout the European area (Schengen);
  • Possibility of legal residence in Portugal, if the holder wishes;
  • Obligation to spend only one or two weeks a year in Portugal;
  • Possibility of obtaining the Portuguese citizenship after 5 years of investment;
  • Possibility of extending the benefits to the spouse and dependents.

It should also be noted that this Golden Visa Portugal program is not on the Organization for Economic Cooperation and Development (OECD) blacklist, and that its holder may also apply to be included in the Portuguese Non Habitual Resident Regime, benefiting from tax exemptions for a period of 10 years.

See how the tax regime of the Portuguese Non-habitual Resident Regime works.

Possible modalities of investment

Golden Visa is strongly linked to property investment in Portugal, however, there are a number of other investment modalities which enable its holder to apply for Golden Visa in particular:

  • Real Estate Investment;
  • Real Estate Investment for Rehabilitation;
  • Capital Transfer;
  • Creation of Jobs;
  • Participation in Investment Funds or Venture Capital Funds;
  • Investment in Scientific Research;
  • Investment in Artistic Production and Conservation of Cultural Heritage.

Participation in investment funds or venture capital: how does it work?

The lack of awareness of this type of investment for Golden Visa stems from its own legal definition, which is not very clear from a quick analysis of the law on Golden Visa, for example:

“(vii) Capital transfer in the amount of (euro) 350,000 or more, for the acquisition of investment units in investment funds or venture capital funds dedicated to the capitalisation of companies, established under Portuguese law, whose maturity at the time of the investment is at least five years and at least 60 /prct. of the value of the investments is made in commercial companies established in national territory;”.

Moreover, many people are also not used to the very concept and operation of an investment fund.

In short, an investment fund is a type of financial instrument that raises money from investors, through the provision of quotas, with the objective of investing this resource in a pre-defined strategy, with its management being the responsibility of an administrative entity, with regulation and supervision by the Comissão do Mercado de Valores Imobiliários (CMVM) in Portugal.

Types of investment funds

There are several types of investment funds, such as, for example, securities funds (which invest mainly in shares), real estate funds (which invest mainly in real estate) and venture capital funds (which focus on business investment, usually associated with levels of risk, but also with high potential for return on investment).

In other words, through this type of Golden Visa, Portugal aims to capitalise small and medium-sized national companies by attracting people interested in acquiring investment units in investment funds or venture capital for this purpose, provided that the other requirements set out are also met.

Golden Visa or D7 Visa? See also which modality is most suitable for your case.

Main advantages of obtaining Golden Visa by investment funds

For Portugal, this type of Golden Visa not only allows investment funds already established in the country to expand their capacity to attract foreign investors, but also encourages the formation of new funds, which results in greater economic dynamics in strategic sectors.

For investors, in addition to the advantages of obtaining Golden Visa listed above, this type of investment has a number of benefits in relation to other possible investments, mainly the minimum necessary amount, direct and indirect costs associated with the investment, time required to complete the business and ease in managing the operation.

1. Reduced minimum required investment amount

In order to apply for Golden Visa, the minimum value of the investment to be made through the purchase of units in these funds is EUR 350 000.

Therefore, in view of the minimum value of other types of investment, such as the transfer of capital (EUR 1 million) or traditional real estate investment (EUR 500 000), the minimum value required for investment or venture capital funds is one of the lowest provided for in the Golden Visa Programme.

Find out how the Portuguese real estate market is in 2019 before making your investment.

2. Ease of investment implementation and management

With regard to other types of investment eligible for Golden Visa which require an equal or lower financial contribution, such as real estate investment in real estate for urban regeneration, cultural investment or the creation of commercial companies and job creation, the acquisition of units in the funds is much simpler and quicker.

In practice, and in accordance with the law currently in force, the completion and proof of the investment is made through the presentation of a declaration issued by the fund manager, attesting to the viability of the capitalisation plan, the maturity of at least five years, and application of at least 60% of the investment in commercial companies headquartered in Portugal.

3. Absence of overhead costs associated with the investment

In addition to the minimum investment required being one of the lowest in the Golden Visa Program, we must point out that, as a rule, there are no indirect costs associated with investing in these types of funds.

That is, while in real estate investment you have costs associated with the acquisition and maintenance of the property (for example, taxes Municipal Tax on Transfer of Real Estate (IMT) and Municipal Tax on Real Estate (IMI) and expenses of administration and condominium), in the case of funds there are no taxes associated with this investment and neither costs with its management.

4. Return on investment and capital gains

Finally, if well invested, the fund may generate an annual return on your investment or even guarantee a pre-established minimum return. The figures, for example, are usually much higher than the return on investment through the transfer of capital.

In addition, the generation of this “added value” does not depend on a direct performance by the investor, since the entity that manages the fund will be responsible for the management of the investment.

Golden Visa’s key challenges for investment funds

As there are many fund options in the market today, the main challenge in taking advantage of all the benefits of this type of investment is the appropriate choice of investment managers, products and strategy.

In addition, it is very important to verify the legal feasibility and history of success stories of other fund members in obtaining Golden Visa.

Article published on the Euro Tips website: https://www.eurodicas.com.br/golden-visa-por-fundos-de-investimento/

Author: Roberta Fraser
Citizenship & Immigration

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