Medicinal Cannabis – Portugal’s next big investment sector?

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Since February 2019, the cultivation, processing, wholesale, import and export, and transport of Medicinal Cannabis is now a legal endeavor and thoroughly regulated in Portugal.

The new law invigorated a stagnant economic sector. A long agricultural tradition with a skilled and relatively inexpensive workforce, coupled with the ideal climate for the plant cultivation and access to renewable energy, makes the country a privileged destination for investment.

New regulations will allow an entirely new sector to flourish at the junction of pharmaceuticals and agroindustry.

CBD is proven to have a positive effect in the relief of pain associated with muscle and bone trauma, headaches, symptoms related to cancer treatment and anxiety. It is gaining popularity as it detaches from the social stigma still somewhat associated with other Cannabis products.

The country is now open for international companies operating in this sector to establish a strategic foothold in Europe. Establishing an operational base in Portugal allows for production and easy export to other Member States of the E.U.. Brands will be able to launch operations in the E.U. in a tax and cost-effective manner.

Portuguese weather is perfect for these types of crops (Cannabis and Hemp), due to the possibility of prolonged sun exposure combined with the right amount of humidity which make it possible to grow hemp virtually anywhere.

Portugal has a clear advantage in comparison to other European countries, as costs with infrastructure are lower, and skilled workforce is cost effective. In the real estate market, large portions of undervalued farmland are still available.It is estimated that 2019 investments will amount to EURO 160M, leading to the creation of over 750 jobs. The tendency is investment to increase over the next years, even though red tape is the biggest obstacle.


Taking advantage of an investment in Portugal

Individual investors can also benefit from advantageous immigration regimes such as the Golden Visa.

In addition to the right to reside in Portugal for the applicant and freedom of movement within the Schengen Area, the Golden Visa grants the right to family regrouping, the possibility to apply for a permanent residence permit or Portuguese citizenship (further requirements must be met) after 5 years.In addition to real estate investments, other eligible investments include the creation of 10 jobs or the incorporation a Portuguese company with a share capital of Euro 350.000 and five jobs.

Another type of eligible investment is to incorporate a company with a share capital of Euro 1.000.000 without the need to create jobs.

Corporate investors can benefit from tax exemptions based on the Portuguese Participation Exemption regime.This regime allows international enterprises to avoid double taxation of dividends and capital gains arising from the disposal of both foreign and Portuguese shareholdings. Portuguese companies are exempt from corporate income tax on inbound dividends and capital gains. Foreign corporate shareholders are exempt from withholding tax on dividends provided certain conditions are met.

This regime puts Portugal on the map as a privileged jurisdiction for companies to do business and invest worldwide in a tax efficient manner.


Background and future perspectives

At the turn of century, Portugal decriminalized the consumption of certain types of drugs, including Cannabis. The consequences of this trailblazing measure were the reduction in transmissible diseases, the decrease of overdoses and the decline of drug use.

Portugal was considered as a case study in the fight against drugs and its model copied worldwide. The new regulations now place Portugal in the forefront of the exploration of Cannabinoid products.

Increasing integration of E.U. standards on production and quality control will lead to eased product placement in other European markets where plant-based solutions can be used for medicinal purposes.

Finally, demand for Cannabis based products will increase in jurisdictions where controlled recreational use of Cannabis is allowed.

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