Investors in Portugal’s golden visa program are set to escape a new property tax to be imposed in 2017.
Portugal’s government will impose a 0.3 per cent levy on all taxpayers owning real estate valued at more than €600,000. The real estate threshold for the permanent residency-by-investment program is €500,000.
It is unclear whether the government specifically has the golden visa program in mind when setting the €600,000 tax threshold.
The program has been lucrative for the Portuguese economy, particularly the real estate market, which has recovered from the dark days of the global financial crisis thanks in part to the €2.37 billion of investment attracted from awarding nearly 4,000 golden visas since 2012.
Investment Requirements: Portugal Golden Residence Investor Program
Transfer of capital of minimum value of €1 million into Portugal including through purchase of shares in companies
Creation of at least 10 new positions in Portugal
Purchase of unencumbered real estate in Portugal of a minimum value of €350,000. Co-ownership or purchase of property through finance is permissible provided each individual makes a mandatory minimum investment of €350,000.
Investment of at least €350,000 in constructed 30 years ago or investment for rehabilitation of properties located in Urban Rehabilitation Areas
Scientific Research and Development
Investment of at least €350,000 in R&D activities of institutions that are part of the national technological system.
Promotion of Culture
Investment of at least €250,000 towards financing of bodies pursuing cultural or artistic activities or towards renovation or maintenance of cultural heritage.
Small-Cap and Mid-Cap Finance
Investment of at least €500,000 towards purchase of units of small-cap or mid-cap venture capital funds.
Investment in Low Population Areas
20 per cent reduction in minimum investments in the above-mentioned categories when investment is made in a low population-density area.
Although property investment is not the only investment stream, it is by far the most popular, as investors look to use Portuguese residency as an access window to the European Union. The program is overwhelmingly dominated by Chinese investors, although Russians and Brazilians are also key candidates.
The new tax, included in the government’s draft budget for 2017, is aimed at boosting the coffers of the country’s pension pot, but has come in for criticism from the real estate sector. Previously, Portugal had attracted European retirees with property tax breaks, homeowners who will now be subject to the new levy.
Short-term rentals will also be subject to a new tax, given the success of Airbnb in the country, which is a popular tourist destination.
Of the 3,888 candidates given permanent residency under the golden visa program, 1,100 of them were granted in 2016. Some 766 were granted in 2015, 1,526 in 2014 and 494 in 2013. When the program was gaining traction in 2012, just two visa were awarded.
Candidates overwhelmingly prefer the real estate investment stream of the program, which accounts for 3,669 out of the 3,888 visas awarded. There have been 213 visa offered in return for capital transfers and six for creating at least 10 jobs.
Changes implemented in September 2015 rejuvenated the program.
They included new investment options for buying older property, or buying a building in a designated regeneration area. Aa scientific research investment option was also introduced.
Existing investment classes include general real estate, capital transfer and job creation.
These latest figures go against fears candidates for investment immigration programs could start turning their attention away from European countries like Portugal and towards the Caribbean, because of the UK’s impending exit from the European Union.
‘Brexit’ could mean the investment immigration programs run by the likes of Cyprus, Malta and Portugal may no longer be able to offer visa-free travel to the UK, one of their key benefits.
Portugal’s golden visa has been highlighted as one of the chief drivers behind Lisbon’s emergence from economic difficulties.
Global real estate agency Savills says the property market in the capital is thriving thanks to the success of the investor program.
The Savills report uses data up until 2015, pointing out that €1.56 billion of investment could be traced back to the 2,697 golden visas awarded under the program. Chinese investors account for 83 per cent of real estate acquisitions.
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