Portugal Golden Visa Investment Fund: Comprehensive Guide

Want to secure residency in Portugal? With a Portugal Golden Visa Investment Fund, investing €500,000 in a Portuguese investment fund can help you qualify for the Golden Visa program.
Ana Fankhauser
June 3, 2024
TABLE OF CONTENTS

Want to secure residency in Portugal? With a Portugal Golden Visa Investment Fund, investing €500,000 in a Portuguese investment fund can help you qualify for the Golden Visa program. This article explains how these investment funds work, their benefits, and the steps to get started.

Key Takeaways

  • The Portugal Golden Visa program allows individuals to obtain residency in Portugal through a minimum investment of €500,000 in qualifying investment funds, gaining popularity for its potential returns and visa-free travel within Europe.
  • Eligibility for the Golden Visa investment funds is open to non-EU/EEA individuals, with several types of funds available, such as venture capital, private equity, and mutually managed funds, each offering different risk and return profiles.
  • Investors should consider various factors, such as management fees, liquidity, and tax implications, when choosing a fund, while also acknowledging the illiquidity and lock-up periods associated with such investments.
  • Eligibility criteria and benefits of the Portuguese investment fund for the Golden Visa program:
    • Non-EU/EEA individuals can qualify by investing a minimum of €500,000.
    • Benefits include potential returns, visa-free travel within Europe, and a pathway to Portuguese residency.
    • Recent changes have made the program more attractive, with growing interest from American investors.

Overview of the Portugal Golden Visa Program

Portugal's Golden Visa Program

In October 2012, Portugal introduced a pathway to residency that captured the attention of investors worldwide: the Portugal Golden Visa program. This program allows individuals to acquire residency in Portugal via a qualifying investment in the country’s economy. The Portugal Golden Visa offers a five-year residency-by-investment scheme, allowing individuals to obtain residence in Portugal by making a qualifying investment. This program has gained popularity among foreign investors seeking to secure residency in the European Union. To obtain residency through the Golden Visa investment funds, a minimum investment of €500,000 is required. This investment allows individuals to become eligible for residency in the country.

In 2021, around 10% of Golden Visa residency cards were issued under the funds’ category, which suggests that this category is becoming increasingly popular. Portuguese Golden Visa funds have indeed become the most popular way of qualifying for the Portugal Golden Visa scheme. The appeal of the program lies not only in the potential for significant returns on investment but also in the opportunity it provides for visa-free travel to European countries and the potential to acquire EU citizenship after five years. Recent changes in the program and the growing interest in the Portuguese investment fund option, particularly among American citizens, have further boosted its popularity.

Investing in fund units for a Portugal Golden Visa typically takes 8–10 months to complete the process. The timeframe may vary depending on individual circumstances. However, as of 2022, the investment amount for the Golden Visa program increased to €500,000 for investment funds. Evidently, the Portugal Golden Visa program is an attractive proposition for investors seeking to broaden their opportunities and secure EU residency.

What is the Portugal Golden Visa Investment Fund?

Portugal Golden Visa Investment Fund

The Portugal Golden Visa Investment Fund is a distinctive financial product. Investors can use it to qualify for the Portugal Golden Visa. With a minimum investment of €500,000, investors can contribute to a fund that utilizes money from different investors for pre-established assets and strategies. The mission of such a golden visa fund investment is to attract investors and increase capital, ultimately driving economic growth in Portugal.

Eligibility for the Golden Visa investment funds option is open to anyone who is at least 18 years old and not an EU/EEA citizen. For instance, US citizens can invest in the Portugal investment funds to obtain a Golden Visa. The minimum investment required for a Golden Visa in Portugal is €500,000, ensuring qualification for the Portuguese Golden Visa through golden visa-eligible funds. The Portuguese investment fund offers benefits such as potential high returns and diversification, but it also has disadvantages like market risk and management fees.

The Portugal Golden Visa fund has gained popularity, particularly among American investors. This is because real estate investments are no longer eligible for the Golden Visa application. The potential return on investment in the Portugal Golden Visa fund is an attractive proposition for investors. The primary objective of Portuguese investment funds is to eventually exit the portfolio by selling it at a profit. This is their main goal in their investment strategy.

Types of Eligible Investment Funds

Eligible Investment Funds

There are several types of funds eligible for the Portugal Golden Visa program, each offering different investment opportunities. One of these is the Portuguese investment fund, which has seen growing interest, particularly among American citizens. Let’s break down these types into three main categories: venture capital funds, private equity funds, and mutually managed funds.

Venture Capital Funds

A venture capital fund, a popular choice for investors seeking high growth potential, can be considered an investment fund route. These venture capital funds, also known as ‘fundo de capital de risco (FCR)’, focus on early-stage startups with global growth potential, often before these companies achieve profitability. These investments are inherently risky but offer high growth potential, making them attractive to investors willing to embrace risk for substantial returns.

Portuguese venture capital funds tend to focus on technology, life sciences, and clean energy sectors. This reflects their interest in supporting innovative and sustainable business ventures. These funds may also focus on a wide range of sectors, including energy, industry, technology, and healthcare, or take an agnostic approach to sector focus. By investing in these funds, investors significantly contribute to the growth of these sectors and potentially yield significant returns.

Private Equity Funds

On the other hand, private equity funds target established companies with medium- to high-risk profiles. These funds, also known as private equity fund, aim to increase company value through active involvement in company management. The sectors targeted by private equity funds are diverse, including healthcare, industry, and IT.

Private equity funds focus on:

  • Acquiring companies
  • Restructuring
  • Improving systems
  • Expanding to other markets
  • Consolidating
  • Eventually selling these companies

This approach allows these funds to generate returns through both income and capital appreciation. The expected yield of private equity funds falls between 7 and 15% per year, offering an attractive return potential for investors.

Mutually Managed Funds

Last but not least, professional portfolio managers who choose the underlying investments for the fund's portfolio are typically in charge of managing mutually managed funds. These funds can have varying risk and return goals, ranging from modest returns of 2 to 5% to higher returns with higher risk at 7 to 10% or more.

One of the main goals of mutual funds in the context of Golden Visa investment is to beat the PSI-20 index, a benchmark stock market index of the 20 most significant and most liquid Portuguese companies, through strategic fund investments.

Examples of such funds include the ‘Portugal Liquid Opportunities’ fund and the ‘SHARING Education II’ fund, which invest in public equities and international education, respectively, through the investment funds route.

How to Choose the Right Investment Fund

Right Investment Fund

Choosing the right investment fund for your Golden Visa application is crucial. Several factors should guide your decision-making process. The investment mandate, for instance, can help you understand the fund’s strategy and what assets it can invest in. When selecting a Portuguese investment fund, consider the fund's performance history, management team, and alignment with your investment goals.

The credentials of the managers are also critical, as they are responsible for overseeing the fund’s investment strategy and ensuring compliance with regulations. Additionally, you should consider the fund’s leverage and liquidity, as these factors can influence the risk level of the investment.

It is also possible to diversify your portfolio by investing in several Golden Visa funds, which can help manage risk and potentially enhance returns. Finally, consult an expert or a financial advisor for guidance. However, be cautious of their incentives and limitations.

It’s also worth noting that you can move your investments from one fund to another within the Golden Visa category during the five-year period, provided the required amount of fund units is maintained.

Steps to Invest in a Portugal Golden Visa Fund

Embarking on an investment journey with the Portugal Golden Visa fund involves several steps. Here is a step-by-step guide to help you navigate the process:

  1. Choose an appropriate Portugal investment fund option.
  2. Appoint a law firm for assistance.
  3. Work with an experienced immigration lawyer throughout the process to ensure a smooth application process.
  4. Invest in a Portuguese investment fund that qualifies for the Portuguese Golden Visa program.

Next, to start your business in Portugal, you will need to:

  1. Register a taxpayer number (NIF) in Portugal
  2. Open an account in a Portuguese bank
  3. Your appointed law firm can assist you in preparing the required documents and accompany you to the bank
  4. After opening a bank account, sign and complete all necessary fund subscription documents

After evaluating your credentials, the fund manager approves you as an investor. This decision is based on various factors, such as financial stability and investment experience. After approval, you can transfer the required funds from your bank account to the fund account. This process will enable you to complete the transaction in a timely manner. Lastly, provide all Golden Visa documentation to the law firm and attend the AIMA biometrics appointment in person. Following these steps will set you on the path to obtaining your Portugal Golden Visa.

Fees and Costs Associated with Golden Visa Investment Funds

Investing in Golden Visa funds involves various types of fees, including:

  • Setup fees: a one-time fee paid together with the investment made into funds, covering costs like fundraising and compliance
  • Management fees: ongoing fees paid to the fund manager for managing the investment
  • Investment exit fees: fees charged when you sell or redeem your investment

It’s important to consider these fees when evaluating the potential returns and costs associated with investing in Golden Visa funds. For instance, the Portuguese investment fund may have specific management fees and other costs that potential investors should be aware of.

Annual management fees for investment funds typically range from 1% to 2% of the invested amount. These fees cover overhead costs of daily operations, such as salaries, compliance, and monitoring investments. Some funds ensure an advertised management fee despite reaching a capital target by having a minimum fixed management cost per year.

In addition to setup and management fees, some funds also charge a performance fee. This fee is a share of investment returns not distributed to investors and is commonly used to incentivize fund managers. Performance fees can vary from fund to fund and can be around 20% in private equity and venture capital funds.

Tax Considerations for US Investors

US investors should be aware of specific tax considerations. If an investor holds a Golden Visa and is not a tax resident of Portugal, they can benefit from tax exemptions on dividends and capital gains. This can provide significant financial advantages for the investor. Portuguese non-residents investing in certain funds are exempt from taxes on dividends and capital gains unless they are fiscally resident in a tax-haven country. Additionally, the Portuguese investment fund offers tax exemptions and has specific compliance requirements that investors must follow.

However, American investors must adhere to the Foreign Account Tax Compliance Act (FATCA) regulations. Foreign financial institutions are required to report the assets and identities of US persons to the US Department of the Treasury under this federal law. It is designed to promote transparency and compliance with tax laws. US persons are required to report their foreign financial assets annually if they exceed a certain threshold, and this information is disclosed to the IRS using form 8938.

Another important tax consideration for US investors is passive foreign investment company (PFIC) taxation. Foreign financial institutions and certain non-financial foreign entities are required by the IRS to report the foreign assets held by their U.S. account holders. This is part of the IRS’s efforts to prevent tax evasion and ensure compliance with tax laws. U.S. persons who are direct or indirect shareholders of a PFIC must file Form 8621 annually, reporting all interests held in PFICs.

Advantages and Disadvantages of Golden Visa Investment Funds

While investing in Golden Visa funds offers numerous advantages, it’s also essential to consider the potential downsides. On the positive side, these funds offer:

  • The potential for significant returns
  • Security of investments
  • Supervision and regulation by the Portuguese Securities Market Commission, which increases investor protection

Additionally, the Portuguese investment fund can provide attractive returns, but it also carries certain risks that investors should be aware of.

Typical overall returns targeted by many funds eligible for the Portugal Golden Visa range from 7–10% per annum.

On the flip side, the risk of investing falls on the investors’ shoulders. Not all funds may be able to raise as much capital as they hope from Golden Visa investors, posing a risk of reduced profitability and increased management fees. Moreover, Portuguese investment funds are rather illiquid until they reach maturity or are dissolved. However, some funds offer a buy-back of their participation units at a certain discount to address the illiquidity.

The Exit Strategy: Lock-up Periods and Withdrawal Options

The exit strategy is a crucial consideration for investors in the Golden Visa program, as it involves lock-up periods, resale or transfer options, and extension periods. The minimum lock-up period for an investment in the Portugal Golden Visa Investment Fund is five years. Some funds have a longer lifetime than the time required to obtain Portuguese citizenship or permanent residency. This may pose a challenge for individuals looking to invest in these funds while pursuing immigration status in Portugal. If someone needs to exit the fund as soon as possible, it’s better to choose a fund with a 6-7-year term rather than one with a 10-12-year term. This allows for quicker access to funds in the shorter-term fund. Additionally, the Portuguese investment fund offers various withdrawal options, which can be crucial for investors planning their exit strategy.

While it is possible to exit the investment prematurely for the Portuguese Golden Visa, specific factors should be considered. Investments in Golden Visa funds are typically illiquid due to the difficulty in finding demand for participation units timed for Golden Visa timelines. However, some funds offer a buy-back of their participation units at a certain discount to address the illiquidity.

Document Requirements for Golden Visa Application

To apply for the Golden Visa, several documents are required. These include:

  • Proof of age
  • Citizenship
  • A clean criminal record
  • Absence of diseases
  • Medical insurance
  • Income sources
  • Documentation for the Portuguese investment fund

Demonstrating that the applicant has made the required minimum investment is a crucial part of the application process.

Preparing all necessary paperwork beforehand is crucial to avoiding significant delays in the application process. The process of gathering the required documents can be complex, so it’s advisable to work with an experienced immigration lawyer who can guide you through the process and ensure that all paperwork is correctly completed.

Case Studies: Successful Investments

To provide a clearer picture of the potential opportunities in Golden Visa funds, let’s explore some real-world examples of successful investments. The Lince Growth Fund I, for instance, invests in Portuguese companies in the industrial sector and the circular economy, illustrating a focus on sustainability and innovation.

The C2 Legacy Buyout Fund is another example. It targets late-stage companies with proven business models and steady cash flows across multiple sectors that haven’t yet unlocked their full potential. This approach showcases a strategy aimed at supporting established entities to reach new heights.

A notable case study involves an American investor who successfully qualified for the Portuguese Golden Visa program through a Portuguese investment fund. By investing in the Blue Horizon Fund, which focuses on renewable energy projects, the investor not only secured residency but also contributed to Portugal's green energy initiatives. This example highlights the growing interest and influx of investors in the fund investment Golden Visa option.

Summary

In conclusion, the Portugal Golden Visa program offers an attractive pathway to EU residency for non-EU citizens through investment in Portuguese funds. The Portuguese investment fund option provides numerous benefits, including potential returns and a relatively straightforward investment process, but it also requires careful consideration of eligibility criteria, recent changes in the program, and the growing interest from investors, particularly American citizens. It’s important to carefully consider the type of fund, the investment strategy, associated fees, tax implications, and exit strategies. By making informed decisions and seeking expert advice, investors can maximize the opportunities offered by the Golden Visa program while contributing to the growth and development of Portugal’s economy.

Frequently Asked Questions

What is the minimum investment required for a golden visa in Portugal?

The minimum investment required for a Golden Visa in Portugal is €500,000. This is the amount needed to qualify for the program.

How long is the lock-up period for a Portugal Golden Visa Investment Fund?

The lock-up period for a Portugal Golden Visa Investment Fund is a minimum of five years. This means your investment will be locked in for that duration.

What are the tax implications for US investors?

US investors should consider the impact of FATCA regulations and PFIC taxation on their tax obligations. These regulations can have significant implications for their investments.

What are the advantages of investing in a Golden Visa fund?

Investing in a Golden Visa fund offers potential for significant returns, security of investments, and investor protection through regulation by the Portuguese Securities Market Commission. These advantages make it an attractive option for investors.

What are the fees associated with investing in a Golden Visa fund?

When investing in a Golden Visa fund, you can expect to encounter setup fees, management fees, and investment exit fees. These fees cover various aspects of the investment process.

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