Now close your eyes and take a deep breath: you and your family are lounging by the pool of this contemporary villa located in Estoril which oversees the sparkling Atlantic Ocean in ever-changing shades of blue. The sea song of the waves serenades in the air, and you are embraced by the warm sunshine and the refreshing sea breezes. This is, without doubt, paradise on earth. The good news is: you can now own a piece of this paradise under the Golden Residence Permit Programme, or the Golden Visa Scheme, introduced by the Portuguese government in 2012 at an affordable price.
Since Portugal is a member state to the European Union, the immigration process for European citizens is straightforward. Upon arrival in the country, one is required to register with the local authorities while providing evidence of, amongst other things, sufficient recurring income and health insurance.
For non EU-nationals, the Portuguese government has introduced a residence by investment program. The Golden Visa Scheme targets at non-EU nationals who wish to obtain residence through the pursuit of an investment activity in Portugal. All third country nationals who conduct an investment activity, either as an individual or through a company set up in one of the EU countries, and who are stably settled in Portugal can apply for a golden visa.
The investment criteria are as follows:
- acquisition of real estate with a value of EUR 500,000 or more;
- transfer of capital that is worth EUR 1,000,000 or more (including investments in company stocks or shares);
- creation of at least 10 jobs;
- transfer of capital in value not less than EUR 250,000, applied to supporting artistic production, recovery or maintenance of cultural heritage;
- transfer of capital in value not less than EUR 350,000, applied to scientific and technological research activities;
- purchase of real estate which is either under urban rehabilitation or over 30 years old, and the implementation of recovery works to the property purchased having a global value not less than EUR 350,000; or
- transfer of capital with a global value of not less than EUR 500,000, applied to investment funds or capital ventures aimed at the capitalisation of small and medium-sized enterprises with a viable capitalisation plan.
The minimum time required for maintaining the investment is 5 years, from the date of issuance of the golden visa.
Subject to satisfying other documentary and procedural requirements, a golden visa will be granted for an initial period of one year, renewable for two consecutive two-year periods (1 + 2 + 2). One can thereafter apply for permanent residency and even citizenship (given that one acquired sufficient knowledge of the Portuguese language).
In 2009, the Portuguese government introduced an exceptionally favourable tax regime for non-habitual residents ("NHR"). Under the NHR regime, a tax exemption applies to non-Portuguese source income such as interests, dividends or pensions. Moreover, qualifying Portuguese source income, being ‘high added value activities of a scientific, artistic or technical nature’ benefits from a fixed rate of 20%. Other Portuguese source income is subject to progressive rates up to 48%.
One notable exception to the exemption of non-Portuguese source income under the regime concerns capital gains, which are fully taxable in Portugal. The rate depends on the underlying asset, with for example a fixed rate of 28% for shares. Due to this exception, a planning prior to the migration to Portugal is recommend.
The Golden Visa Scheme and the NHR tax regime are often confused as interrelated. In fact, the grant of golden visa does not necessarily create a tax impact unless the golden visa holder qualifies as a tax resident who nonetheless may enjoy the NHR status if the requisite criteria are satisfied.
There is no wealth tax in Portugal save for local taxes on the Portuguese real estate.
Portugal applies the European Succession Regulations, which stipulate that the courts of the state where the deceased had his/her habitual residence at the time of death will be competent to rule on the succession. The applicable law determines how the estate shall be divided upon death, taking into account general rules on forced heirship etc. The Portuguese inheritance law acknowledges reserved shares for certain heirs. Depending on your preference, you may wish to apply the inheritance law of your state of nationality to govern the succession of your estate.
Portugal does not apply inheritance tax on your succession but stamp duty is levied at a 10% rate on the Portuguese assets with an exception for spouses, descendants and ascendants.
Stamp duty is also levied on gifts located in Portugal at a 10% rate with the same exception for spouses, descendants and ascendants. An additional rate of 0.8% is due on gifts of real estate.