The changes and implications for South Africans moving to Portugal

Changes to Portugal’s Golden Visa programme are now law. From 2022, foreign property investments will be channelled away from prime locations in the more populated coastal cities towards inland and island areas. 

From next year, the greater Lisbon, Porto and most coastal areas will no longer be available for investment under Portugal’s revised Golden Visa scheme. Instead, residential property investment will be directed to less-densely populated interior regions, the Azores and Madeira.

The changes are scheduled to come into effect on January 1 2022. After the deadline, the amendment will affect both the €350,000 and €500,000 property investment routes within these areas. Notably, the €350,000 Private Equity Fund investment threshold will be raised to €500,000.

As the new policy will come into effect in less than 10 months', experts anticipate a surge in the number of investors hoping to seize the last opportunity to invest in prime locales of the country or in the PEF at the lower minimum investment threshold. Prospective investors will need to move quickly to get the best available deals and get into the programme before the deadline.

The new rules will help Portugal address two issues: the redistribution of investment received and the development of the property market in its sparsely populated regions.

The new rules being put in place are an attempt to encourage investment outside of current hotspots, such as Lisbon, Porto, the Algarve region, and the Silver Coast. Investor capital will instead be directed towards Portugal’s less densely populated interior and the island municipalities of Azores and Madeira. This will help the country gain a more balanced environmental and social dynamic. Investors will still have the opportunity to enjoy the Golden Visa’s long-term benefits.

The Portuguese government has provided cash incentives to companies and individuals who relocate to the interior of Portugal.

How the transitional period will affect investment

Due to the pandemic and the importance that Golden Visas have had for real estate, the government opted to create a transitional period for the sector to try to adapt, instead of implementing the change at the beginning of 2021.

All applications up to December 31 2021 will still be accepted, and the changes will not affect residency cardholders/applicants on the programme, who renew their residence permit cards or join family members in the programme. Though the deadline is looming, there’s a small window of opportunity for those who still want to secure property investment. 

Those considering applying for the visa could also invest through the private equity fund category, in a fund that has to be recognised by the Immigration Office. Sable works with credible partners with a proven track record who offer a solid investment solution.

Why is the Golden Visa so popular?

The Portuguese Golden Visa programme is a residency-by-investment scheme designed to encourage investment into the country from non-EU citizens.

Traditionally, the programme’s real estate option is a popular way to get residency in Portugal, especially for South Africans. This is because the country is regarded as a prime destination among property investors, with a flourishing real estate market. The route also allows investors to sell a property after a period of time and recover their investment.

Among the programme’s investment options, the purchase of a Private Equity Fund share at €350,000 has also become an increasingly popular option over the past two years. Sable International has already assisted more than 30 families in this regard.

Since launching in 2012, Portugal’s Golden Visa programme has been one of the world’s most successful residency-by-investment initiatives, largely due to the minimal residence requirements and flexible path to citizenship. The main benefits of the Golden Visa programme include:

• The right to enter and stay in Portugal with no additional travel visa.
• The right to live and work in Portugal.
• The freedom to travel across the Schengen Area without an additional travel visa.
• The right to benefit from family reunification and add family members to the Golden Visa programme.
• The right to apply for permanent residence or for citizenship after five years.

As of June 2021, 9,834 Golden Visas had been approved through the property route. However, the majority of these were for the urban and coastal areas. Only 761 were in “urban regeneration” classified areas.

Why choose Portugal

Many people from across the world are settling in Portugal. The most sought-after lifestyle and business locations include Cascais, Lisbon, Oporto, and Algarve. 

Portugal was recently ranked as the third safest country to live in in the world according to the Global Peace Index. This will no doubt speak to many South Africans concerned about the high level of crime in their home country.

Visa-free travel in and around Europe is a prime reason for obtaining Golden Visa. If you have ambitions of working within the EU, this is really beneficial. If you are a Portuguese citizen, you also gain the right to live and work throughout the EU area.

Portugal is a prime destination for foreign retirees and, according to the Global retirement Index 2020, Portugal is on the top 10 list of best countries to retire to. This is largely due to the fiscal regime that’s integrated into the Non-Habitual Residency status with the level of taxation on pension income remaining relatively low at 10%. 

Portugal has one of the most favourable tax regimes in the EU whether you’re a resident or citizen. If you are a tax resident in Portugal, you are exempt from close to all foreign-sourced income tax. There’s also no tax on inheritance or gifts as well as no wealth tax.

The changes will not work retroactively

The Portuguese constitution prevents any judicial updates from working retroactively. Therefore, applicants who have started their application will not be affected.

Understandably, the change to the programme has triggered a rush of property buyers and Private Equity Fund (PEF) investors wanting to qualify for the residency scheme, with inquiries for residency via property investment and demand for Private Equity Funds up by at least 20%. Through our experienced on-the-ground support staff and property specialist, we are still able to present great investment opportunities and assist you with your property or PEF investment remotely.

Not all properties or PEFs will qualify an investor, so prospective investors need to beware of unscrupulous agents and developers who themselves don’t always understand the qualifying requirements.

For more information, visit www.sableinternational.com.

About the author: Andrew Rissik is director at Sable International.

This article was paid for by Sable International.