Portugal has created the Golden Visa, a mechanism that grants a temporary residence permit without the need of a prior residence visa. When citizens of any country outside the European Union, personally or through a company, make a substantial investment in real estate, artistic or scientific activity, urban rehabilitation, or create jobs in Portuguese territory for a minimum period of 5 years, they will qualify for residency.
When obtaining the Golden Visa, the investor and his family can live in Portugal and circulate freely in the 26 countries of the Schengen area with their Portuguese residence card. After 6 years, the investor may apply for Portuguese citizenship and a second passport.
In most cases, it’s this EU passport that the investor is after. As of 1 January 2018, Portuguese citizens had visa-free or visa on arrival access to 173 countries and territories, ranking the Portuguese passport 5th in terms of travel freedom (tied with the American, Irish and South Korean passports).
Portugal is a top tier second passport because it gives you visa free access to the United States and Canada. Also, it allows you to live and work anywhere in the European Union.
Note that tax residents of Portugal must pay tax to Portugal on their income. A tax resident is usually someone who spends 183 days or more in the country. If you spend less than 183 days a year in Portugal on your Golden Visa, you need not pay tax to this country. Remember that your visa allows you to live anywhere in the EU, so few second passport investors spend 183 days a year in country.
When buying property in Portugal, the buyer must pay the Municipal Tax on Transmission (IMT). The calculation of the IMT is based on the purchase price of the real estate or its taxable value (the highest amount of these) and varies depending on whether the residence is the main or secondary one.
The law provides various examples that prevents the IMT exemption from taking place, such as the purchase of urban properties in the field of urban rehabilitation, if the buyer starts construction the first 2 years from the date of acquisition, etc.
On the other hand, the purchase of real estate in Portugal is subject to real estate tax. The property owners pay this tax on December 31 of each year and it is calculated based on the Tax Patrimonial Value determined by the Portuguese Treasury Service.
The real estate tax rates are set by the municipalities through the deliberation of the municipal assemblies and vary according to the type of property: Rural property: 0.8%. Urban property: from 0.3% to 0.5%.
These rates may increase in the case of empty buildings, buildings with a damaged infrastructure, ruined, abandoned, buildings located in areas of urban rehabilitation that are owned by entities located in tax havens.
These rates can also be reduced when the real estate property is located in areas of urban rehabilitation and in areas designated as Priority by the Portuguese Government. The rates can also be reduced if the real estate property is classified as being of public interest, has municipal value or cultural heritage and, has buildings rented in urban areas.
The real estate market in Portugal currently has many opportunities. There is a very varied offer to respond to any type of need, such as retiring in Portugal, owning a vacation destination or simply to have a place to stay while you visit Europe. The risk of depreciation of assets is not high, since Portugal has not suffered a real estate bubble.
Since the economic crisis of 2008, a large number of American investors have arrived in Portugal, most of them using the Golden Visa to acquire residency and to invest more securely; This has generated the rise in real estate prices, but still very affordable compared to other parts of the world.
At the fiscal level, the Portuguese government has implemented incentives to make the real estate market more attractive. We recommend our clients who are interested in buying real estate in Portugal or plan to obtain the Golden Visa to hire qualified professionals to verify that the real estate transaction and the legal process is carried out correctly.
The Golden Visa is Portugal’s most attractive legislation for American Investors. There are other countries that ask for investments of a much higher value. More and more people are interested in the Golden Visa and Portugal welcomes you with open hands. It takes money and it is a business that benefits many different sectors.
I hope you’ve found this article on Portugal’s Golden Visa to be helpful. For assistance in buying real estate in Portugal or making an investment, please contact us HERE. We’ll be happy to assist you with your international tax plan and support you.
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