Investing in Funds for Portugal’s Golden Visa

Portugal’s has one of the most popular golden visa programs in the world, and one of the ways that you can obtain this visa and obtain residency in Portugal is by investing in a qualifying fund (or funds), such as a private equity or venture capital fund. There are a number of qualifying funds, in sectors ranging from startups and technology to renewably technologies, wine, and football teams.

After five years of residency, it’s possible to apply for Portuguese citizenship, which allows you to obtain an EU passport. During those initial five years, golden visa holders can enjoy the same benefits as other residents, which includes access to the Portuguese healthcare system, access to Portuguese universities and educational institutes, and visa-free travel within the Schengen Area.

Investors need to hold their investment until their citizenship (or permanent residency, if that’s your goal) has been approved. Due to citizenship applications currently taking around two years, this means you will likely need to hold your investment for at least seven years.

The golden visa is aimed at those from outside the EU/EEA/Switzerland (e.g. those in the UK, USA, India) that want residency in Portugal but without having to spend the typical six months or so per year in Portugal [source]. With the golden visa, you only need to spend an average of seven days per year in Portugal. If you want the benefits of residency in Portugal but want to continue living in another country or perhaps even travelling the world, this could be the perfect residency visa for you.

Finding information about golden visa funds can be challenging, particularly information that doesn’t come directly from one of the companies operating a fund, but in this article we’re going to take a deep dive into this investment option.

As with all the information on Portugalist, the information on here is for educational purposes and does not constitute advice of any kind.

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Quick Overview of the Funds Option

Here’s some quick snippets about the funds option.

• Minimum Investment: To qualify for the golden visa, you’ll need to have invested €500,000 in one or more funds. Some funds offer upfront returns that effectively reduce this, for example to €400,000.
• Fund Choices: There’s a wide range of funds to choose from, covering various sectors like technology, agriculture, healthcare, renewable energy, and more.
• Eligible Funds: The fund needs to be approved and regulated by the CMVM (Portuguese Securities Market Commission). A requirement for approval is that 60% of the fund’s capital must also be invested in companies that have their headquarters in Portugal.
• Diversification: As long as you meet the €500,000 requirement, you can invest in one fund or multiple (depending on the fund’s own rules: most have a minimum investment that’s less than €500,000 allowing you to invest in multiple funds). Some funds have fixed fees so investing in multiple funds can result in higher costs and more paperwork, however the upside is better diversification.
• ROI: The Expected Return on Investment (ROI) per annum (P.A.) varies, with some funds offering as high as 20% IRR (Internal Rate of Return) and others providing more modest returns around 6-7% IRR.
• Minimum Hold Period: Qualifying funds require a minimum holding period of five years, often around seven to 10 years (although some are longer than this). This is a crucial factor for long-term investment planning. The investment needs to be held during the entire golden visa process until the holder obtains permanent residency or citizenship, which takes at least 5 years (in practice this take around 7 years).
• Regulation: Golden visa investment funds are regulated by the Portuguese Securities Market Commission (CMVM), meaning that fund managers are audited by third parties on a regular basis. Both the Bank of Portugal and the external Fund Management company also regulate the fund. Finally, the Portuguese Tax Authorities also audit the fund.

Quick overview of the golden visa program

• It only requires you to spend an average of seven days per year in Portugal to maintain residency (however, you can spend more if you want).
• There is no requirement to become a tax resident due to the minimal physical presence requirement. 
• It allows you to invest cash, unlike other Portuguese residency routes which require a passive income (e.g. D7 visa) or an actively-earned income, such as a salary (e.g. the “digital nomad” visa). 
• There is no language requirement for residency (but if you later apply for either citizenship or permanent residency you will need to show at least an A2 level of Portuguese).
• Certain family members such as a spouse (or partner) and qualifying dependent children can be added to the application. 

Why Choose funds over other routes?

Investing in funds has always been one of the most popular routes to obtaining the golden visa. However, it has grown in popularity ever since the Portuguese government announced that it’s no longer possible to invest in real estate (commercial or residential) and obtain the Portuguese golden visa.

However, funds isn’t the only investment route. You could also:

• Invest €500,000 or more into a company, which creates five jobs or maintains 10 jobs. 

There are also more donation-focused options:

• Transfer €500,000 into public or private scientific research institutions. 
• Transfer €250,000 into projects which  support artistic production, recovery or maintenance of the national cultural heritage. 

Naturally, the donation-based routes are less popular than the investment routes. The appeal of the funds option over the option that maintains or creates jobs is that the funds option is much less hands-off.

Disadvantages of investing in funds

As with any form of investment, there are both advantages and disadvantages.

The following are some of the main disadvantages:

• Investment Period: It’s not unusual for golden visa investment funds to require you to hold your investments for seven years or more, which is greater than the normal five-year period in which you have to maintain any golden visa investment. 
• Lack of Control: Investment funds are managed by fund managers rather than the investor. Some investors may not like this lack of control. 
• Fees: While investing in funds means you don’t have the taxes, stamp duty, notary costs, and selling costs that comes with investing in real estate, there are other fees such as performance fees and management fees to consider.

Disadvantages of the golden visa Overall

It’s also worth considering the disadvantages of the golden visa program when compared to other residency visas:

• Timeframe: Currently, there is a backlog of golden visa applications and it’s not unusual for applicants to wait for 12-18 months for their application to be approved. However, the good news is that there is a proposal that the time spent waiting for an application to be approved will count towards the five years of residency needed before applying for citizenship.
• Fees: The fees, particularly government and legal fees, for the golden visa are much higher than for other visas (e.g. the D7, Digital Nomad Visa, or D2).

Example Funds

There are an ever-increasing number of qualifying funds available. Example funds include:

The Holborn Fund

Essential Details:

• Nature of Investment: Private Equity
• Industry Focus: Hospitality
• Minimum Required Investment: €500,000
• Fund Size: €80 Million
• Investment Period: 6 Years
• Final Date to Subscribe: March 2024

The Solar Future Fund

Investment Summary: The Solar Future Fund invests in renewable energy projects within Portugal, the EU, and US. 60% of all funds will be invested in Portugal and the remainder in the EU and US, with 30% invested in the US and 10% in the remainder of the EU. Example investment projects include utility scale solar farms, solar mechanical plants, and distributed battery storage.

Essential Details:

• Nature of Investment: Private Equity
• Industry Focus: Renewable Energy
• Minimum Required Investment: €250,000
• Fund Goal: €50 Million
• Investment Period: 9 years
• Final Date to Subscribe: –

Alternative Funds

As well as the more typical funds that invest in industries like startups and tourism, there are plenty of funds that focus on a variety of other sectors as well.

Football Strategies Fund

Investment Summary: The Football Strategies Fund is focused on investing in European football clubs within the second and third leagues. Its strategy centres on enhancing club management and cultivating player academies, with the goal of elevating these clubs to the first league.

Essential Details:

• Nature of Investment: Private Equity
• Industry Focus: Sports
• Minimum Required Investment: €100,000
• Fund Goal: €100 Million
• Investment Period: 8 Years
• Final Date to Subscribe: December 2025

Pela Terra II: Regenerate

Investment Synopsis: Pela Terra focuses on acquiring and improving large-scale farms, ensuring stability through the steady expansion of orchards. This investment offers a path to EU citizenship with reduced risk, while also contributing positively to Portugal’s social landscape.

Principal Information:

• Investment Type: Private Equity
• Industry Area: Farmland
• Minimum Investment Required: €200,000
• Fund Objective: €100 Million
• Timeframe of Investment: 8 Years
• Closing Date for Subscription: December 2024

Impact Innovation Fund

Investment Outline: This women-led fund is dedicated to investing in companies within Portugal and Spain that have a significant impact. It focuses on enterprises that contribute positively to the environment and society while also generating profit.

Key Details:

• Nature of Investment: Private Equity
• Industry Sector: Diverse
• Minimum Capital Required: €250,000
• Fund Goal: €25 Million
• Investment Term: 8 Years
• Final Date for Subscription: October 2025

InVino Fund

Investment Summary: As Portugal’s inaugural eco and wine tourism fund, InVino channels investments into sustainable ventures within the local hospitality industry. It targets companies poised for substantial growth and focuses on enhancing assets and value. InVino is committed to elevating the hospitality sector through innovative wine and agroforestry initiatives.

Essential Information:

• Investment Type: Private Equity
• Industry Focus: Hospitality/Ecotourism
• Minimum Investment Amount: €100,000
• Fund Target: €35 Million
• Investment Duration: 8 Years
• Deadline for Subscription: July 2025

Choosing a Fund

Choosing the right fund is complex, and best done in line with a qualified professional such as a lawyer or financial advisor. The following are some questions that you should consider asking.

1. Is this particular fund overseen by the Portuguese authorities?
2. Is the fund acknowledged by AIMA (previously known as SEF) as fully qualified for the Portuguese Golden Visa?
3. Does the fund possess the necessary attributes to ensure the investor’s Golden Visa status remains intact?
4. How does the fund guarantee diversification? If it does, what criteria and frequency are applied?
5. In which areas does the fund specialise?
6. What is the anticipated target return?
7. Are dividends distributed by the fund? If so, how frequently and what’s the expected amount?
8. What kind of fees (e.g., subscription fee, management fee, performance fee) are associated with the fund investment?
9. What is the fund’s investment strategy?
10. What’s the fund’s duration, and how does it intend to reimburse investors?
11. Do the managers of the fund have the necessary experience and qualifications?
12. Are the fund’s legal documents crafted in a manner that protects the investor’s interests?

Fees and Costs

Naturally, there are a number of fees and costs to consider when considering investing in the golden visa. 

Costs specific to the funds route

• Performance Fees: While these can differ depending on the fund, it’s common for performance fees to range from 20% to 50% on profits that exceed a specified hurdle rate.
• Management Fees: These fees can also fluctuate based on the fund. Typically, the annual management fee lies between 1% and 2% of the total investment.
• Legal Fees: The costs for legal services can vary significantly based on factors such as the law firm selected, the number of family members involved, and other considerations. However, the variation in legal fees is generally consistent across different investment avenues.

General golden visa costs

Beyond your core €500,000 investment, you’ll also need to account for legal expenses and official application charges. The table below breaks down these costs for clarity:

Government Fees

Legal Fees

Your legal expenses will hinge on your choice of law firm. Given the substantial nature of the Portugal Golden Visa investment, it’s prudent to engage a seasoned legal firm to oversee due diligence, application, and renewals. 

For a family of four, the legal costs can range from €10,000 to €30,000 over the five-year duration. Fortunately, these charges are typically spread out in installments, aligning with milestones achieved over the five years.

Exiting Your Investment

Delving into the exit strategy of a Portugal Golden Visa investment fund is crucial, given the advantages and challenges previously highlighted.

• Minimum Commitment Duration: A significant number of funds tailored for the Golden Visa program ensure, through contractual agreements, a lifespan of at least 6 years. This commitment ensures that investors can maintain their eligibility for Portuguese citizenship.
• Participation Unit Resales or Transfers: While many Portuguese investment funds permit the transfer or sale of participation units between stakeholders, finding a buyer can be challenging, especially if the fund’s timeline aligns closely with Golden Visa requirements. Some funds mitigate this by offering a buy-back option for their units, albeit at a reduced rate.
• Potential Extensions: Many Golden Visa funds in Portugal set specific exit timelines, often spanning six, eight, or ten years. It’s noteworthy, however, that many also come with optional extension clauses that can be activated upon reaching maturity. This decision rests with the fund managers, not investors. This could mean your investment might be tied up longer than the citizenship application timeline, necessitating due diligence on your part.
• Exit Market Dynamics The overarching goal for most Golden Visa funds is to eventually divest their portfolio at a profit. Given that many fund managers receive performance fees tied to the fund’s value appreciation, their objectives align with investors’. Yet, it’s essential to understand that while fund managers share in the profits, potential losses fall squarely on the investor.

Restrictions

Portugal’s golden visa program is open to those that don’t already hold a citizenship with an EU/EEA country (e.g. France or Iceland) or Switzerland. That means it’s open to everyone else in the world, including those from the UK, USA, Canada, India, and Turkey and everywhere else outside the EU/EEA/Switzerland.

However, there can be country-specific restrictions (e.g. those from Iran or Russia may struggle to qualify for the golden visa). Some funds do not accept people from certain countries (typically the US or capital from certain countries).

Other requirements include a clean criminal record, to be over 18 years of age, and to be able to show the source of the funds. 

Obtaining Citizenship

You can pursue Portuguese citizenship (or permanent residency) after five years of residency. To be eligible for citizenship, you must:

• Maintain your investment in the fund units for the entire five-year duration.
• Fulfil the minimum residency requirement in Portugal, which averages seven days per year.
• Successfully complete a Portuguese language test at the A2 level (or show an A2 level of Portuguese through other means, for example completing a qualifying course).

FAQs

The following are some of the most frequently asked questions about investing in funds.

Can a US Citizen invest in golden visa funds?

Yes, a US citizen can invest in an investment fund in order to obtain a Golden Visa in Portugal. However, the IRS requires foreign financial institutions and certain non-financial foreign entities to report on the foreign assets held by their U.S. account holders.

This means any bank, fund, and fund manager in Portugal, who has an American client or investor, is required to abide by heavy compliance implemented by the U.S. government. This leads some banks and Portugal investment funds to shy away from working with investors, who are US citizens. Regardless, there are banks and Portugal funds, that accept Americans.

Can I diversify my investments across different Portuguese funds for the Golden Visa?

Yes, diversification is possible with the Golden Visa Portugal investment fund. For instance, you might invest €200,000 in two separate funds and €100,000 in another, and still qualify for the golden visa.

What’s the minimum investment threshold for the Golden Visa investment fund in Portugal?

As of January 1st, 2022, the minimum required investment stands at €500,000.

How do Venture Capital and Private Equity in Portugal differ?

At their core, private equity funds invest in well-established businesses, while venture capital funds typically channel resources into startups.

Do all funds under the ‘Fundo do Capital do Risco’ category qualify for the Golden Visa?

No, you should check that the fund qualifies for the golden visa program and not assume. Following the “Mais Habitaçao” legislation enacted in late 2023, any fund with direct or indirect real estate investments will be ineligible for a Golden Visa application.

Is citizenship through investment an option in this program?

While Portugal doesn’t directly offer citizenship through investment, it does provide residency by investment. After a five-year residency duration, you become eligible to apply for Portuguese citizenship.

Is the golden visa program being phased out?

Despite initial indications that the golden visa program might be terminated, the Portuguese government, after extensive parliamentary discussions, decided to discontinue only the property and capital transfer segments of the program. Fund investments remain unaffected and continue to be a valid avenue for the golden visa.

What if my fund investment value diminishes during my holding period?

Fluctuations in fund values are a typical part of the investment landscape. If the value of your investment dips below €500,000, your residency status via the golden visa remains intact.