Termination of the Portuguese Golden Visa?

 In Uncategorized

On February 16, 2023, the Portuguese Government announced its intention to discontinue the Golden Visa program. This residence-by-investment program allows non-EU citizens to obtain residency permits in Portugal in exchange for certain types of investments.

The immediate reason for the program’s termination (or at least amendment) relates to housing affordability concerns: the program has been criticized for increasing housing prices in some areas of Portugal. In Lisbon and Porto, for example, some have argued that the influx of foreign buyers has contributed to a shortage of affordable housing for local residents.

On the other hand, it’s no secret that pressure from the European Union on countries offering Residence by Investment programs is constant. The European Commission has expressed concern that the program has been used for money laundering and tax evasion. In addition, it could pose a security threat by allowing criminals or terrorists to gain residency in Portugal and travel freely throughout the EU. Domestic political pressure is also at play from left-wing parties that argue that it unfairly benefits wealthy foreign investors and does not do enough to promote economic growth or create jobs for Portuguese citizens.

The Golden Visa termination is part of a package of policies unveiled by the Prime Minister intended to provide a political response to the country’s housing crisis, including high real estate prices, a shortage of rental homes, and a preference for landlords to put their properties on the short-term rental market.

The presented measures aim to increase the number of properties allocated to residential use, simplify construction licensing processes and increase the number of properties in the long-term rental market.

Some of the most controversial measures/goals presented are the ones impacting the Golden Visa Regime. Fortunately, changes to other residence programs were not mentioned. 


The buildup – 2022 changes

In late 2020, the Portuguese Government announced changes to the Golden Visa program, which were set to take effect in July 2021 but were only implemented on January 1, 2022. 

The main changes to the Golden Visa program were limitations on the eligibility of real estate investments. As a result, real estate investments in Lisbon, Porto and the coastal region of Portugal are no longer eligible for the program. The change aimed to redirect investment to other parts of the country and promote development in neglected areas.

In light of these concerns, the Golden Visa program eligibility rules were changed to focus on attracting investment to poorer areas of the country.


The announced plan

The Government announced plans to implement further changes to the Golden Visa program to curb real estate price hikes. But unfortunately, this new objective comes without considering current and future investors’ confidence and legitimate expectations.

As stated by the António Costa, the Prime Minister, “Two particularly important measures to tackle real estate speculation – the first, the termination of Golden Visas, or rather, the termination of the granting of new golden visas. As for the Golden Visas already granted, their renewal, exclusively in the case of real estate investments, will only be renewed if they are the owner’s own or permanent abode or of their descendants or if the property is placed, on a permanent basis, on the rental market.”. In later declarations the Minister of Finance stated that “The elimination of Golden Visas is general, regarding the entire model that is known, because the assessment that was done, even considering the recent changes that have been made regarding the limitation to real estate, was deemed insufficient regarding the continuation of the regime. (…)”.

Indeed, not only the regime’s continuity is at stake. The Government wishes to change the game’s rules for real estate investors by restricting the renewal of the permits if the Golden Visa holders place their properties on the real estate market or make it their main abode (which may require them to move to Portugal).

The official document announcing the measures is also cryptic and only provides limited guidance in relation to GV renewal requirements: 

End of Golden Visas

End the Golden Visa regime.

In this context, it is intended to safeguard that the renewal, every two years of visas already approved only occurs if:

  1. i) the property is allocated to the permanent residence of the owner or descendant;
  2. ii) if it is the subject of a lease agreement for own and permanent housing for a period of not less than 5 years.

No other significant details are provided.


On why this is just a statement of intentions 

The proposed changes are, at this stage, mere intentions and no draft of a bill has been presented.

The Portuguese Parliament has exclusive legislative competence for matters determined by the Portuguese Constitution – this matter is one of them.

The intents of the Government must still be drafted into a bill to be presented to the Portuguese Parliament. The time it takes for a bill to be passed in the Portuguese Parliament can vary depending on several factors, such as the complexity and controversial nature of the proposed legislation, the level of support for the bill among the various political parties represented in the Parliament, and the urgency of the matter at hand.

The Government’s party (Socialist Party) currently holds the majority of the house and can quickly approve any bill. 

The process of passing a bill in the Portuguese Parliament involves several stages, including the introduction of the bill, debate and discussion in committees, further debate and possible amendments in the plenary session, and a final vote. Bills can also be sent back to the committee for further discussion and revision. Bills must be discussed in committee within a period of 30 days from the date they are submitted. After this period, the bill can be discussed and voted on in the plenary session.

We believe it will take at least two months to pass any bill. 

After Parliamentary approval, a mechanism of “checks and balances” is attributed to the President, who can oppose some of the provisions, ask for amendments or forward the bill to face the Constitutional Court’s scrutiny. The presidential decision would take at least two further weeks after receiving the approved bill from the Parliament.


Possible scenarios

Implementing a package of measures that will restrict the current Golden Visa holder’s renewal process will most definitely cause significant damage to investors’ trust in Portugal.

In our view, applying new restrictive rules to already approved Golden Visa Permits violates constitutional principles of confidence and legitimate expectations. Therefore, if all aspects of the announcement made by the Prime Minister come into force, a massive wave of litigation will ensue.

Because tackling the housing crisis is the main objective behind the announcement, we expect the main focus will be on the eligibility of real estate investments – which should be scrapped altogether or severely restricted. It is unclear how other investment routes will be impacted.

We expect a midterm cut-off date to be introduced to the program and that current applicants and permit holders will be grandfathered in and benefit from existing rules. However, investors who still need to file an application may face new rules governing their eligibility for the Golden Visa.


The data behind the decision

Since 2010, Portuguese real estate prices have increased by 80.54% – the 11th most significant increase of all EU Member States, according to Eurostat. Furthermore, data from the National Institute of Statistics (INE) shows that in the third quarter of 2022, residential property prices soared by 13.1%, while rents increased 7.6%. The increases in the two largest Portuguese cities are more pronounced: in Porto, prices rose 18.5% in prices and rents 10.5%, while in Lisbon, the increase was 7.6% in prices and 16% in rents – data from the second quarter of 2022.

Several reasons explain this uphill trend, which not even the pandemic slowed down. 

Taking the rises in prices and rents, the Government already limited the eligibility of residential real estate investments under the assumption those acquisitions were translating into a decrease in the supply of affordable housing.

However, many experts point out that the lack of new construction and supply restrictions are the real cause of the rising property prices. Of the 170.000 properties sold in 2022, only 11% were new builds. Golden Visa property acquisitions represent only 0,6% of these transactions.

Furthermore, many find that properties acquired by Golden Visa Investors will not be compatible with affordable housing as they are, in most cases, properties with a price tag in excess of EUR 500,000. A 5% pre-tax yield would place the rental payment around EUR 2.080,00 – an amount far exceeding the average monthly income in Portugal.


How to react?

Investors considering investing in property acquisition for Golden Visa purposes are recommended to stand still as further clarification from the Portuguese Government is needed. Applicants and Golden Visa holders should expedite any input from their side to either be granted the residence permit or renew it.

We understand that this is a time of uncertainty and that changes to tax and immigration policies can be challenging. We will closely monitor the situation and are committed to providing you with the best guidance and advice on how to proceed.

Our team is ready to work diligently to review the new legislation yet to be presented and identify the most effective course of action for our clients.

We will keep you informed of any new developments as they arise and provide you with the guidance and advice you need to make informed decisions about your investments and personal affairs.



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