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December 15, 2016

There are some very good reasons to consider Portuguese second citizenship

There are some very good reasons to consider Portuguese second citizenship
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Neil Petch

Chairman of Virtugroup

Few ventures are as life-changing as the Portuguese residence-by-investment programme. And now is the time to apply – with Portugal lowering investment requirements and adding new options.

Otherwise known as a ‘golden visa’, the programme has been popular globally since its inception in 2012 for the myriad benefits it offers.

First, let’s start with the country of Portugal just by itself.  It offers a very attractive investment environment given its booming real estate market and generous tax advantages. So the golden visa programme is really the icing on the cake in this sense – not only does investment here entitle you to instant residency status which allows you to live and work in Portugal, but it also unlocks access to the wider Schengen area.

Now, if the golden visa programme is the icing, then the ability to convert residency into full citizenship is the cherry on top. After only six years of maintaining residency – which requires only seven days in Portugal per year – you’re eligible to apply for full citizenshep status.

Let’s look in more detail at the key advantages on offer – from EU residency to the exceptional investment environment, as well as political and economic stability.

1. Unlock the Schengen area: Your Portuguese residency entitles you to travel visa-free throughout the Schengen area. Signed in 1985, the Schengen agreement dissolves border controls among its 26 member states. This gives residents notable benefits in terms of travel and trade. For investors with business commitments across the Schengen area, Portuguese residency allows inter-Schengen trade to progress rapidly and without unnecessary roadblocks.

Signed in 1985, the Schengen agreement dissolves border controls among its 26 member states.

2. Minimal residency requirements: One of the reasons the Portuguese programme is so popular is the flexibility it affords investors. You need only spend seven days in Portugal annually to maintain resident status – less than 2% of the year. Many choose to spend much longer in-country than this though, given the lifestyle Portugal offers.

3. From EU resident to EU citizenship: In exchange for a reasonably modest investment, the Portuguese residency programme grants you instant resident status – with the chance to live and work in Portugal should you choose. Of course, Portuguese residency is beneficial in and of itself, but it’s also a gateway to full citizenship. If you meet the criteria, you’re eligible to apply for Portuguese citizenship after six years of residency. Once you’re a fully-fledged Portuguese (and therefore EU) citizen, you can work and live freely across the entire EU and travel on visa-free or visa-on-arrival terms to around 172 countries.

4. Mutually beneficial investment: The Portugal Residence Programme was amended in 2012 to allow additional nationalities to benefit from residency, while encouraging investment in the then struggling real estate market (the Portuguese economy has since improved, with the GDP growth rate increasing to +1% in 2016). Meanwhile, since its inception the programme has generated nearly EUR 2bn of investment and issued over 3,000 permits according to World Finance magazine. These figures make Portugal alone a prime candidate for investment (before we even get to the additional advantages that residency offers) thanks to a secure and rapidly developing economy, and real estate prices that have – according to the data bank Trading Resources – increased by around 10 index points over the last year or so.

Since its inception the programme has generated nearly EUR 2bn of investment and issued over 3,000 permits.

5. Low tax burden for residents: In addition to the golden visa programme, Portugal offers very attractive tax advantages through their Non-Habitual Residence programme (NHR) – something which foreign investors are likely to be eligible to obtain. This makes Portugal one of the most tax-beneficial environments for foreign investors – and you can apply as long as you haven’t lived in Portugal for five years before taking up tax resident status.

NHR status earns you potential tax exemption from numerous tax categories of foreign-source income including pension, capital gains and employment tax. Any Portuguese-derived income is taxed at a preferential fixed rate of only 20%, compared to rates of up to 48% for non-NHRs.

6. Excellent quality of life: Portugal is known for its high quality of life. The KOF Globalisation Index scored Portugal at 85.08 in 2016, making it the 12th most globalised country in the world. It offers exceptional infrastructure and a stable political environment. One of Europe’s oldest countries, Portugal is steeped in history and cities such as Lisbon and Porto are globally popular amongst travellers. Paired with world-class beaches in the Algarve, it’s little wonder that Portugal has such a thriving expat culture.

How to obtain Portuguese residency: The real estate option

Now is a particularly good time to invest, as Portugal has lowered their minimum real estate investment requirements considerably.

To qualify for Portuguese residency via real estate you must invest a minimum of EUR 350,000. To be eligible for this lower investment level, your property must be at least 30 years-old and sit within an area of urban regeneration. Furthermore, this EUR 350,000 includes any renovation, so your total investment isn’t likely to spiral. For instance, you could purchase a property for EUR 200,000 and spend EUR 150,000 renovating it in order to qualify. Alternatively, you can purchase property outside these parameters for EUR 500,000 – so there’s great flexibility in where you choose to invest.

Now is a particularly good time to invest, as Portugal has lowered their minimum real estate investment requirements considerably.

The residence-by-investment process can take as little as two months. As long as you hold a clean criminal record and aren’t listed in the Portuguese Immigration and Schengen Services registry, you’re ready.

Portuguese residency: Alternative investment options

Since September 2015, the programme has included alternative investment options, giving potential investors more routes into Portugal than ever before.

So if real estate doesn’t take your fancy, there are several other investment routes that can seal your position as a Portuguese resident. The original capital funds option of course still exists, and would see you qualify for residency if you transferred over EUR 1m into a Portuguese bank account. There’s total freedom over how you spend these funds, including investing in shares.

In addition, you can now choose to invest at least EUR 250,000 into artistic or cultural activities; at least EUR 350,000 into scientific or technological research; or at least EUR 500,000 into funds for the capitalisation of small and medium companies in Portugal. For instance, an investment of EUR 250,000 into activities related to maintaining Portuguese cultural heritage would qualify you for residency.

From residency to citizenship: What happens next

You will receive your EU residency card as soon as your application has been accepted, after which you’re considered an official resident of the EU. To maintain this status you must spend one week in Portugal annually – which is little hardship, given the holiday and business potential Portugal offers. You must also renew your residency card after one year, three years, and five years – and you must hold your investment for a minimum of five years or forfeit your resident status.

Once you’ve been accepted as an official Portuguese/EU resident, the countdown to your application for citizenship can begin. You must maintain your residency for six years by following the guidelines mentioned above, after which time you’re eligible to apply for full Portuguese/EU citizenship. Once granted, this entitles you to the same rights as natural-born EU citizens, including the ability to travel, live and work freely across Europe.

So long as you’ve met the criteria, qualifying for Portuguese citizenship should be straightforward. As well as your six years as a resident, you must speak basic Portuguese and you must not have been convicted of any crime that earned you three years’ or more penalty under Portuguese law. Provided you tick those boxes, you could be enjoying Portuguese citizenship in only a handful of years.

In the end, investment in Portugal offers multi-layered benefits, of which the possibility of gaining full EU citizenship is only one. For high-net-worth individuals who prefer to plan several moves ahead, investing in Portugal can be a sound choice, and one that stands to yield returns for many years to come.

Next Generation Equity is a government-approved provider of second citizenship and residency programmes tailored to the individual needs of discerning clients across the globe. To learn more about our programmes, please sign up for a free consultation via the form below.

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