news

Investing in venture capital and private equity funds as a route to get a Golden Visa in Portugal

  • March 14, 2021

    Portugal’s Golden Visa scheme became highly attractive for non-EU investors looking for a fast-track visa option while benefiting from seamless access to the Schengen area, permanent residency for the whole family and the potential for Portuguese citizenship after 6 years.

    Since the creation of the program in 2012 and until February 2021, 9544 Golden Visa were issued in Portugal, mainly for citizens of China (50.7%). Brazil (10%), Turkey (4.7%), South Africa (4.1%) and Russia (3.8%) complete the list of the main countries of origin of investors.

    Traditionally, the route for Golden Visa most widely used by investors was the direct investment in Portuguese real estate. With the most sought-out cities boasting valuations now rivalling with prime European capitals, direct investment in Portuguese real estate no longer presents such attractive yield and risk-return profiles.

    Additionally from january 2022, direct real estate investment in Lisbon, Porto and coastal cities will cease to be compliant for Golden Visa application purposes.

    As an alternative we see a bigger opportunity in the investment in Portuguese Venture Capital and Private Equity funds.

    This investment route is regulated by the Portuguese Law (decree 102/2017, dated 28th August 2017), that states that “capital transfer of the amount of 350,000 Euros, or higher, for the acquisition of units of investment funds or venture capital funds dedicated to the capitalization of companies; capital injected under the Portuguese legislation, whose maturity, at the moment of the investment, is, at least, five years and at least 60% of the investments are realized in commercial companies with main registered offices on national territory”.

    To start with, fund subscription requires lower investment than other alternatives, all funds are supervised by regulators (CMVM) and the subscription process is quite simpler combined with an attractive tax regime for non-resident investors.

    These are some of the comparative advantages this option represents:

    1. Lower investment amount (minimum): €350,000 while real estate requires €500.000;
    2. Lower fees and administrative costs: buying a property involves paying an additional amount in transaction tax (Property Transfer Tax), stamp duty and legal fees (minimum 8,4%);
    3. A quicker turn-around time: buying a property can be a lengthy and time-consuming process, while investing in funds can enable you to be ready to apply for the golden visa in 2-4 weeks.
    4. It has no recurring annual charges, unlike real estate that has taxes (Municipal Property Tax) and property maintenance costs.

    When scanning the list of approved venture capital/private equity funds on the regulator’s page we found niche, innovative and specialised funds, investing in sectors as varied as:

    • Life sciences;
    • Blue economy;
    • Agriculture;
    • Tech startups;
    • Distressed companies;
    • Tourism;
    • Hospitals & healthcare;
    • R&D;
    • Industrial and commercial properties.
    • And even “trendier” themes like Impact investing and ESG ((Environmental, Social and Governance) investing.

    In our view, the biggest benefit of having such diversification is how it allows to cater for investors with varying risk profiles, ranging from conservative investors who would prefer investing in real estate or a diversified portfolio of real estate/stocks/bonds, to investors who would value higher risk-return profiles of some of the sectors mentioned above.

    One important note is that prior to making any investment, potential investors should consult with their own legal, investment, accounting, regulatory, tax and other advisors to determine the consequences of the potential investment opportunity in order to make an independent evaluation of such potential investment opportunity.

    I would like to highlight that the minimum investment required will be raised to €500,000 in January 2022. Therefore, those investors who would still like to benefit from the lower minimum investment ticket have until the end of the year to kickstart the process.

     

    Paulo Pereira
    CEO Neomarca