Financial News

Time’s Up For Portugal’s Golden Visa

Expats have long realised Portugal offers a cheaper, more comfortable way of life than many other European nations.

Portugal has a lot of plus points – the weather is warm and sunny, the food is delicious and cheap, while the Portuguese are friendly and welcoming.

The country has a long Atlantic coastline with innumerable sandy beaches and rocky coves.

English is widely spoken, homes are inexpensive, and golf courses abound for the retired.

Until now, getting a long-term visa to live in Portugal has been simple for American and British expats but the window of opportunity is closing.

Property Crisis

The government has announced the end of the golden visa scheme that allowed wealthy expats to cut the queue for Portuguese citizenship and residence.

Since 2012, the scheme has enticed 12,000 or more expats to settle in Portugal, while attracting 6.8 billion euros of investment.

The announcement also came with a ban on new licences for short-term holiday lets, like properties rented through websites like AirBnB.

Scrapping golden visas and tighter regulation for licensed holiday lets is seen as a way to relieve a relentless housing crisis which has seen rents and house prices soar.

Prime Minister Antonio Costa said the crisis was now affecting all families, not just the most vulnerable and warned the government must act.

Visa Crackdown

But he failed to set a date on when the golden visa scheme closes, saying some aspects would change within a month while others would wait for a vote by lawmakers.

Besides a crackdown on visas, the measures also cover new ways to regulate rent rises and landlord taxes.

Golden visa is a generic term to stay in a country tied to investment that generally leads to citizenship or permanent residence. Applications are straightforward despite the paperwork involved.

For Portugal, this means gaining citizenship or residency within five years without living in the country full-time.

Last year saw some changes. Buying homes in popular cities, such as the capital Lisbon and Porto was banned for golden visa applicants. The favoured expat destination of The Algarve was included in the ban.

How The Golden Visa Works

The aim is to push expats to buy homes in less populated areas of the country, but these proved less attractive.

Now, the Portuguese government is holding a public consultation that is likely to close the golden visa pathway.

With a golden visa, foreign investors can buy homes in inland areas worth 350,000 euros or more if the property needs refurbishing or 500,000 euros for a home ready-to-go.

If the home is in a sparsely populated area, a 20 per cent discount may apply.

Investors may buy commercial property anywhere in the country from 350,000 euros if refurbishment is needed or 500,000 euros if not.

The residential property rules are the same for the autonomous islands of Madeira and the Azores, although speculation suggests Madeira will not abolish the golden visa even if the program closes on the mainland.

Need Help with your Finances?

Golden Visa Alternative

If the golden visa route to residence and citizenship closes, the most common visa issued is the D7 which is for anyone moving to Portugal that doesn’t need to work locally.

The D7 is for passive income, like money from pensions or investments.

The visa is a gateway to citizenship after five years of lower taxes and free access to the Schengen Zone. Other important benefits include access to healthcare, education and other rights reserved for residents.

D7 applicants must stay in Portugal for eight months during the first year and six months in each of the following visa terms.

Part of the application process for both visas is a language test.

Applying For A D7 Portugal visa

First, expats need a completed Portugal D7 visa application form. A pile of paperwork is needed to accompany the application:

  • Passport
  • Two passport-sized photographs
  • Confirmation of passive income, ie pension payments, that exceed the average cost of living in Portugal, which is around 10,000 euros a year, plus 50 per cent for a spouse and 30 per cent for each dependent child
  • Proof you have somewhere to live in Portugal for a year, such as a 12-month lease agreement
  • Criminal record background check
  • Valid travel and health insurance
  • Six months of bank statements
  • An application fee of 90 euros

Applications can take six to 12 months to process and should go to a Portuguese consulate.

Becoming A Non-Habitual Tax Resident

The Non-Habitual Resident tax program – otherwise known as NHR – offers expats a special tax status for up to 10 years.

Working or retired expats can apply, but have to meet one of two conditions:

  • Expats must stay in Portugal for 183 days in any 12 month period. The stay does not have to be for consecutive days
  • An expat stays in Portugal for less than 183 days in a 12-month period, but has had a home available that could be considered a habitual residence. Expats do not have to buy a home – a rental agreement is sufficient to qualify for NHR.

Applying For NHR Tax Status

The process is first to have a golden visa granted, which makes expats eligible for NHR tax status.

Next, register as a tax resident in Portugal and apply for a NIF – a tax identification number.

Then, expats can apply for the NHR status. At this stage, the government will want to see you have a permanent home in Portugal, proof you have not been a tax resident in the country for the previous five years and any tax returns filed in that time.

NHR gives several tax advantages to expats:

  • They are exempt from paying tax in Portugal on most foreign-sourced income
  • Tax rates are more than halved from the standard 48 per cent rate of income tax to 20 per cent for some earnings, such as from specific professions or self-employment.
  • No tax on funds remitted to Portugal
  • No wealth taxes
  • No minimum stay is required

Portugal Golden Visa FAQ

Why is the golden visa scheme closing?

The golden visa was set up to promote investment in Portugal for foreigners, but most of the 6.8 billion euros raised was spent on property. At the same time, Portugal has suffered a housing shortage, pushing up prices and rents. The government wants to shift the balance by cutting off the housing supply and beneficial terms to expats.

Is the Portugal D7 visa going as well?

No. Only the golden visa is halting – the Portugal D7 continues without change.

Is the NHR tax scheme still running in Portugal?

Yes. The Non-Habitual REsident tax status remains in force and offers applicants who qualify several financial and tax incentives, as well as unlimited access to the Schengen Zone, which provides visa-free travel around most European Union countries.

Must I move to Portugal to get a visa?

No, the golden visa and D7 visa only require temporary residence in Portugal. The NHR tax status is a little more demanding, but again only requires eight months in a year residence from expats.

Does the golden visa cover Madeira?

Moving to Madeira complicates the golden visa process in Portugal. The island is autonomous and has pledged to remain in the golden visa scheme even if the rest of the country scraps the process.

Below is a list of related articles you may find of interest.

Leave a Comment