Living in Portugal is the dream for many South Africans, and those wishing to make this dream a reality often opted to apply for a golden visa. According to Henley & Partners, a leading global investment migration firm, a golden visa grants approved applicants’ full residence rights in exchange for a defined economic contribution to the country. To many high-net-worth individuals (HNWIs) in South Africa, this permit offers a golden ticket into Europe.
On 16 February 2023, this dream was shattered when the Portuguese government released a draft of a law proposal aiming to end its Golden Visa Program. While this is disheartening, those seeking a pathway to European residence and citizenship through Portugal have one last opportunity to do so.
The Portugal Golden visa
In 2012, the Portuguese government announced its own residency by investment program: the Portugal Golden Residence Permit Program, better known as Portugal Golden Visa Program. Like other golden visa offerings, this process aimed to boost the Portuguese economy through foreign investment.
The Portugal golden visa became one of the most popular Plan B options for South Africans and non-EU citizens. Henley & Partners explain that “Portugal boasts an excellent reputation and is considered one of the world’s most globalized and peaceful nations,” offering a high standard of living. And, with its rich history, lively culture, idyllic nature, and exceptional cuisine, it is no surprise South Africans are among the highest numbers of applicants for this golden visa.
Further, this permit offers many benefits, including the ability to live, work, and study in Portugal and travel to other Schengen states without an additional visa, as well as the possibility to acquire Portuguese citizenship after five years of legal residence. One more added allure, especially for South Africans, is the attractive Non-Habitual Resident (NHR) tax regime, which provided reduced tax rates and occasionally, full tax exemptions for the first ten years of residence.
Despite the many investment options HNWIs could have considered, most opted to invest in property worth at least €280 000 up to €500 000, and overall, the Portuguese golden visa succeeded in boosting the economy by bringing in €7-billion. Considering that about 90% of this large sum came from the sale of property to golden visa holders, one would think that the government would wish to continue the program.
However, this staggering statistic is behind the Portuguese government’s decision.
The problem with property and negative press
Whilst wealthy foreign investors have brought a large sum of money into the Portuguese economy by buying luxury real estate, it has resulted in a housing crisis. In recent years, the cost of real estate has increased substantially, particularly in Lisbon and Proto, mostly due to non-EU citizens buying homes at prices that members of the Portuguese public cannot afford.
However, while a major spotlight has been shone on the housing crisis, it is not the only reason why the Portuguese government has decided to end the popular golden visa program.
The European Commission, a subsidiary of the European Union, has been increasingly negative towards golden visas, stating that it undermines the values of the EU project and is a major security risk – supposedly opening the door to illicit affairs. For several years, the European Commission has urged countries within the union to reconsider their golden visa programs, or at least modify them to comply better with the EU’s transparency and security standards.
While the Portuguese government has maintained its stance on the housing crisis being the cause for its decision, one cannot ignore the mounting pressure from the EU. Portugal is not the only country to consider ending their golden visa program, as Ireland announced the end of theirs just days before Portugal’s announcement, and there are growing concerns that Spain will follow suit.
The threat of the end of a golden ticket into the EU is worrying for many South Africans wanting to incorporate residence and citizenship planning into their life roadmap, however, it is not over yet.
The door is not closed – yet
The announcement on the 16th of February 2023 was a mere proposal to end the Portuguese Golden Visa Program. Since then, the draft proposal has changed several times, but as it stands, existing and new applications will still be considered, if they are submitted before the law comes into force, which, at this point, is unclear.
The lack of clarity may be concerning; however, it does offer one last opportunity for South Africans to apply for a golden visa.
As mentioned, there are several economic contributions to consider when applying for the Portuguese golden visa, including:
- A capital transfer of at least €1-million into the country;
- The creation of at least eight job positions in Portugal;
- The purchase of a property in Portugal worth at least €280 000;
- Investing at least €400 000 in scientific research in Portugal; and
- Invest €200 000 or more in Portuguese arts, culture, and heritage.
With so many options to choose from, and the scrutiny of the property investment route, it might be best to consult with emigration experts who can help you plan an effective financial emigration roadmap. A good roadmap takes into consideration all your plans for your and your family’s future and Portugal’s current standing on golden visa applications.
Thomas Lobban, Head of Cross-Border Individual Tax at Tax Consulting SA, agrees that Portugal remains a destination of choice for South African HNWIs, especially from a tax perspective, due to the “robust double taxation agreement” between the two countries. He also goes on to say that “We have seen South Africans make this transition with relative ease, where it is well planned, and we do not typically see these individuals permanently returning to South Africa thereafter.”
The time is now
While the ending of the Portuguese Golden Visa Program might be disappointing, the opportunity to invest and live in Portugal is still there, until the Portuguese parliament votes the proposal into law.
Ultimately, the time to invest in and move to Portugal is now.
For greater success in securing your spot, it is best to consult with emigration experts who can assist you in planning an effective roadmap.
Henley & Partners, in collaboration with Tax Consulting SA, will discuss the Portugal Golden Residence Permit Program, other European Residence Programs, tax planning, and more, at this year’s South African Roadshow, Investment Migration Is More Than Just a Plan B — Secure Financial Freedom and Global Education for Your Children. Visit henleyglobal.com to register for this free event.
Submitted by Tax Consulting SA