Now is an exciting and appropriate time for investing into Portugal.
The increased appetite for Portuguese venture capital funds has continued on into 2021. There has been an influx of new start-ups and companies founded on ethical principles; an exciting and dynamic time in Portugal.
There are many facts and figures that demonstrate the positive status of the Portuguese economy in terms of interest and investment, in spite of covid:
- 2019 was a record year for investment in hotel developments in Portugal, with over €800million being invested in this sector.
- Another dynamic sector is that of student housing and co-living, with over €400million being invested in 2020.
- In the first half of 2020 more than €1,570million was invested in Portuguese real estate.
Future Changes: Why Act Now?
Changes are to be introduced as from 1 January 2022 that are designed to correct real estate price distortions in the areas of; Lisbon, Oporto and the whole Algarve region. Investors choosing to invest in real estate and to apply for a Portuguese Golden Visa will be blocked from buying residential properties in the areas mentioned above, as well as in coastal areas such as Setubal and the Silver Coast.
Other areas of Portugal, however, also offer attractive investment potential, for example; the Douro Valley, Aljezur, Peneda-Gerês, and Madeira, also offer attractive investment potential.
The forthcoming restrictions will not apply to commercial property.
The advanced warning that has been provided, gives sufficient time for investors to adapt, plan and take any necessary action, before these measures come into place.
Changes to Golden Visa Investment Routes
For investors wishing to invest into Portugal and to apply for a Golden Visa at the same time, the investment level is increasing, as of the start of 2022. This increase provides motivation to act in the near future, for individuals in this scenario.
As of 1st January 2022, investment in any of the non-real estate routes, will be required as detailed below:
- Investment by capital transfer will increase from €1,000,000 to €1,500,000; or
- Investment by capital transfer in research activities, will increase from €350,000 to €500,000; or
- Investment by capital transfer for the acquisition of units of investment funds or venture capital funds, designated for the capitalisation of companies, will increase from €350,000 to €500,000; or
- Investment by capital transfer through the establishment of a commercial company with a head office in Portugal, and the creation of a minimum of five permanent jobs, will increase from €350,000, to €500,000.
Investment into Portuguese Venture Capital Funds – Why is This So Attractive?
Investing into Portuguese venture capital funds is an attractive option, with or without a Golden Visa application.
Investment into Portuguese Venture Capital Funds has some unique advantages – depending on the client’s investment appetite:
• The investment does not trigger taxes similar to the ones that the client needs to take into account, for example, when buying a property. Such taxes on real estate purchases include; a transfer tax (on average 6%), stamp duty (0.8%), annual municipal tax (between 0.3% and 0.5%);
• The investment is made into a Portuguese fund that is heavily regulated by the Portuguese authorities; the Portuguese Securities Market Commission (CMVM), the Portuguese Stock Market Regulator (“CMVM – Comissão do Mercado de Valores Mobiliários), the Bank of Portugal, the external Fund Manager (such as STAG), and the Tax Authorities – and, in addition the fund will be audited;
• It is a tax-efficient investment, whereby several benefits are granted (for instance, the exemption of withholding tax on the payment of the income generated by the fund to the unit holders, as long as they are not tax resident in Portugal);
• It requires a very light “footprint” in Portugal, allowing a quick exit from the investment if needed. Each fund has a dedicated 3rd party fund manager which, in addition to controlling the fund and reporting to the Portuguese authorities, takes care of the payments to the fund units, and assists should there be the need to sell the owned units.
Summary and Indicated Action
STAG, as a Portuguese venture capital fund manager, is delighted to be heavily involved in this exciting time of commercial innovation and entrepreneurship in Portugal.
There are several reasons why investing into a Portuguese venture capital fund is an attractive option. With certain measures being put in place at the start of January 2022, now might be the time to act.