The following is an interview with Michael Maxwell (eqtycapital.com),
Luiz Maia (maiaip.com), and Lionel de Freitas (dixcart.com).
Portugal has become a magnet for high-net-worth families in recent years attracted by a mix of residency programmes, tax benefits and investment opportunities.
Lionel de Freitas (Dixcart Management): Besides a Digital Nomad’s visa, it offers the popular Golden visa and the Non-Habitual Residents (NHR) programme, which when combined together, offers an interesting route for individuals to move to Portugal and enjoy very agreeable tax advantages.
The Golden Visa programme is a quick way for foreign investors from non-EU countries to obtain a valid residence permit in Portugal, and also allows them to travel freely in most European countries (Schengen Area). Importantly it can be converted to permanent residency or indeed citizenship at a later stage should acceptable conditions be met.
Over 17,000 family members have benefited from the Portuguese Golden Visa. The programme has specific investment criteria – the most popular in recent times has been an investment in a fund to the value of €500,000. British passport holders are, along with Americans, the fastest growing demographic pursuing this route.
The stay requirements in Portugal are minimal, with an average of only seven days per annum, over a five-year period.
What is currently attracting the affluent is the favourable tax regime in the NHR regime, including EU and non-EU citizens.
NHR status lasts for 10 years and is available to those who become tax residents in Portugal, provided they have not been so for the previous five years.
As such, income derived from employment or independent personal services (from a domestic source) is taxed at a special flat rate of 20 percent.
A tax exemption applies to passive income derived from a foreign source. Portugal offers favourable or no inheritance, wealth or donations tax.
What fundamentals should those interested look out for in eligible Golden Visa Investments?
Michael Maxwell (EQTY Capital): Reflecting on the past year and the significant increase in interest shown in companies such as EQTY Capital in Portugal, it is safe to say that a suitable residency by investment is no longer only a requirement for HNW families from jurisdictions with social or political unrest or economic instability.
In the recent past, there have been important events that have changed the very nature of how such an investment is viewed, and it is safe to say that it is indeed now an asset class in its own right.
As a result, it is imperative that such an investment be viewed exactly as that: An investment. This was the starting point for the establishment of EQTY Capital and should be the starting point for any prospect considering a Golden Visa eligible investment.
The question should be asked: “If a visa was not attached, would I be interested?” When answering this question, one should consider the team involved, conflicts of interest, risk profile, fee structure, and exit strategy, among others.
EQTY Capital resonates strongly with these internationally minded individuals who expect to engage with teams or companies with commercial expertise and corporate ethics of the highest standards.
Although these investors are looking at investments linked to residency, it is just as important that the investment can stand essentially on its own and not need the attachment to potential residency to justify its existence.
Track record, team, governance, conflicts of interest are pertinent considerations, and should these fundamentals stack up, then the right of residency is merely a bonus, and the decision to invest an easy one.
However, it is becoming much more common that HNW families are now seeing not only the financial and succession planning opportunities in holding a second residency but also the opportunity to stretch retirement plans or budgets or improve lifestyles.
It’s as much a plan B or C as a plan A, particularly for baby boomers or highly mobile digital nomads.
How does international interest impact Portugal’s real estate market?
Luiz Maia (Maia International): Not all countries are created equal when you look at their business and social environments.
Gaining access to countries governed by unbiased legal systems and protected by fair police and security forces is a huge draw for HNW families.
Portugal scores highly across the board, but most importantly, it is a place where one can enjoy the simple things in life in a cultured, dynamic and affordable environment. It is not surprising that the Portuguese Golden Visa programme is considered the benchmark.
Portugal has benefited from this increase in investment. The country is going through somewhat of a controlled property boom, partially helped by the original demand for property at the start of the Portuguese Golden Visa programme. Importantly, Golden Visa investors only account for 1.5 percent of all property sales, according to last year’s statistics, which shows a robust market with solid fundamentals.
That said, the rules on where Golden Visa investors can buy property have changed, and investors cannot access the best areas of Portugal anymore. Funds, however, are Golden Visa eligible and not similarly restricted.
In addition to qualifying as an investment for a family’s residency application, a fund represents a real opportunity to make an investment in a rising economy and one that is well regulated by the Portuguese Financial Services Regulator, CMVM.
500 years ago, Portugal ‘discovered’ half the world. In the last five years it feels like the other half has discovered Portugal.
The shortage of prime real estate in and around Lisbon has been well documented and is being accentuated by a significant increase in demand.
Baby boomers, digital nomads, crypto investors, online gamers and others seek the exceptional work-life balance, fiscal incentives and wonderful climate of Portugal.
Most properties acquired by this segment are with equity and it is largely detached from the domestic property landscape. Today, it is a truly international market.
Prices are high by Portuguese standards, they remain accessible for international buyers, especially when coupled with the high quality of life Portugal offers at a relatively affordable cost. A “modest” home in central London, for example, when sold, can cover a quality property in Portugal and leave a surplus for lifestyle, savings or earlier retirement.
In the last three months, we have received a record number of enquiries for properties in areas between Lisbon and Cascais due to their proximity to beaches and international schools. These are not Golden Visa buyers, but rather families moving here, establishing roots, businesses, employing locals and truly calling Portugal home. This is positive as the multiple revenue streams these families create for the state are significant.
American buyers are common, but it is the general English-speaking world where demand is growing. With the high number of French, British, South African, Australian, and New Zealand families moving here, perhaps Portugal could field a solid rugby team in a few years’ time?
The same chronic undersupply is evident in the prime rental market. It is not uncommon to see these properties fetching up to 30 percent more than their initial asking price as potential tenants outbid one another.
Therefore, any investor or fund targeting prime real estate assets would be well placed as market conditions are unlikely to change any time soon.
Portugal is often seen as a safe harbour in a storm, and should turbulent times arrive, the attractiveness of Portugal stands out.
Lisbon is unique. There is limited opportunity for new development, making the supply of new luxury property inadequate. Then there is the cachet of owning a period property that can’t be built today and concentrated in small areas in one of the world’s most dynamic, liveable, peaceful and increasingly international cities.
The combination of Lisbon’s global city status, low value of the Euro relative to the USD, stability and restricted supply of top-end properties means that prime markets will remain highly desirable for high-net-worth property buyers
The apprehension of investing in a foreign country is mitigated with the right partner. We’re glad to share our expertise with those looking to invest in this beautiful country, so they too can receive the same privileged welcome we’ve enjoyed. We are passionate about Portugal and are here to help.
For more information visit eqtycapital.com, maiaip.com & dixcart.com
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