If you are looking to become a legal resident in the European Union, consider the Portuguese golden visa program. A ‘golden visa’ is a legal residence permit in Portugal and an opportunity to freely visit all other Schengen countries. There are several routes to the golden visa – but the most popular one is making an investment into real estate property in Portugal.
Advantages of legal residence in Portugal by investing into real estate
Those who would like to become legal residents in Portugal choose to make investments into real estate in the country for the following main reasons:
- Prices for real estate are lower in Portugal compared to other Western European states. The country is a popular tourist destination, so there are opportunities to make a passive income by renting out the property that you own in Portugal. Of course, it is hard to say how the world economy is going to develop with the view of the current coronavirus crises, but the value of real estate located in Portugal should grow with time.
- The minimum required investment amount is comparatively low (it starts at 280,000 euro).
- The investment is safe and potentially profitable.
Types of investment into property in Portugal that will make you eligible for a Golden Visa
The requirements for acquiring a Portuguese golden visa have basically remained unchanged over the last five years. You can make an investment into one of the following:
- You can buy a piece of property in a densely populated region such as the cities of Lisbon or Porto, for example. If the property is less than thirty years old, the required investment amount is 500,000 euros.
- If you buy property less than thirty years old in a sparsely populated region of Portugal, then the required investment amount is 400,000 euros.
- If you purchase property that needs repairs and/ or renovations and it is located in a densely populated area, the required investment amount is 350,000 euros.
- If you buy such property in a sparsely populated area, the required investment amount is 280,000 euros.
When applying for the Golden Visa legal residence permit, you will need to submit to the Portuguese immigration authorities all the documents that confirm your ownership of the property. Besides, documents confirming that the property qualifies for the golden visa program have to be submitted. You will need to show that the property is worth the minimum required amount of money depending on the region where it is located and its age.
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Purchasing property in Portugal that needs renovation
When applying for a golden visa via an investment in a tattered building in Portugal, you can pay just a flat sum (350,000 or 280,000 euro) including the costs of the future repairs. The municipal planning authorities where the building is located will consider as part of the normal process what renovations are allowed or not allowed. The option of buying a building that needs repairing can be very attractive.
Here is what some foreign investors do. They form a group of investors who buy a run-down building in the center of a popular city such as Lisbon, Porto or Braga. Each investor contributes 350,000 euros to the project and thus all of them qualify for golden visas. Then the building is turned into a hotel and it goes under the management of a hotel management company.The owners of the building receive shares of profits that the hotel makes.
Citizenship of Portugal
After holding the residence permit for five years, the Golden Visa investor can apply for full citizenship of Portugal. After becoming a citizen, of course the investors are free to sell part or all of their investment.
This route to legal residence in Portugal allows each investor to invest 150,000 euro less.Therefore, even if the option to invest into a tattered building in Portugal may involve a little more work, it still has great potential.
Purchasing property in a rural area in Portugal
The Government of Portugal tries to attract foreign investors to lesser-developed areas in the country by offering discounts on the required investment amounts.
If you choose this investment option, you will save:
- A hundred thousand euros if you are investing into a new habitable building;
- Seventy thousand euros if you are investing into a building that needs repairs.
In addition to that, the prices for real estate are lower (per square meter) in the Portuguese regions that are located away from the cities.
Of course, this investment option has some disadvantages too:
- Fewer possibilities to rent the property to tourists and thus a smaller chance to obtain a stable passive income.
- Difficulties in finding efficient property managers in the remote regions of Portugal.
- Possible difficulties of reselling the property later as the market in rural areas ids less liquid.
As this investment option requires less outlay, it is attractive if you intend to settle down in Portugal. A quiet place in the Portuguese countryside could be a great place to enjoy early retirement or remote working. For 400,000 euro in the countryside you will get a large luxury house with plenty of land… as opposed to a small flat in Lisbon or Porto.
Letting your Portuguese property for Passive Income
You do not have to permanently live in Portugal to retain your Golden Visa. Therefore, you may want to buy property to let. If this is on your horizons, you have three options:
- Let your property on a long-term lease (1 year plus). In this case, your apartment can be unfurnished (there should be built-in kitchen equipment though). Parking is highly desirable. The most popular rental apartment would be located in the downtown area and have two bedrooms.
- Let you property on a medium-term lease (1 month to 1 year). Such apartments are normally furnished or partially furnished. Students and foreigners working in Portugal on short- or mid-term contracts will be your target group. The apartment should have one or two bedrooms and it should be located in the downtown area with good transportation facilities nearby. Parking is not necessary but is desirable.
- Let your property AirBnB styler: a short-term lease to tourists that visit Portugal. This type of rent is considered a business activity and is therefore taxed. The historical center of Lisbon is the location where the occupancy rate is the highest in Portugal (up to 80%). Tourists also mostly look for one- or two-bedroom apartments.
Generally, smaller apartments are easier to rent out than large ones. The rental return varies between 3% and 6%. Short-terms rentals bring the highest return.\
The non-resident owner of a rental apartment has to pay a 28% tax on the net profit that he or she obtains (the gross rent pay minus the operational costs). A return of more than 6% is hard to achieve in Portugal.
Rental apartment management in Portugal
There are several property management companies in Portugal that can help you with rentals. They will charge between 20% and 40% of the gross rent paid, or a fixed sum per month – you choose. This will naturally depend on the location and the quality of your house or apartment.
Under Portuguese law, if you let your apartment on a short-term lease via an agent you are obligated to register to pay taxes, social security payments and VAT.
Additional costs of acquiring Golden Visa in Portugal by Property Investment
Your travel costs, state duties, taxes, and the costs of professional services will have to be added to the sum of money that you need to invest in order to become a legal resident of Portugal. Of course, these are also tax deductible.
Every applicant for Portuguese residence has to pay an application processing fee and a residence card fee. As residence permits need to be renewed regularly, the cost can mount up. The amounts are as follows:
- Application processing fee – 533.90 euro for the main applicant and 83.30 euro for each dependent family member.
- Residence card fee – 5,336.40 euro per person and 2,666.20 euro per person for renewal.
If you choose to apply for full citizenship of Portugal after five years, the fees are going to be considerably lower (a couple hundred euros per person).
Depending on whether you are going into business in Portugal or not, take the following costs of professional services into account:
- Professional assistance in applying for legal residence in Portugal, renewing the permit, and acquiring Portuguese citizenship;
- Document translation and legalization;
- Tax representative service;
- Preparation and submission of the annual tax return if you derive an income from letting your apartment in Portugal on a lease, for example.
- Professional realtor’s services;
- Assistance in registering and maintaining a company in Portugal if you choose to start one.
There is a property sales tax in Portugal of 0.8% and the property seller will typically add it to the price. If you purchase property for renovation, you will have to pay VAT and social security when getting the work done.
Professional assistance in acquiring Portuguese residency
If you are interested in becoming a legal resident in the EU by investing in property in Portugal, please request our professional assistance in the matter. Our Portuguese lawyers are true experts in their field. Well connected, they know all the ins and outs of the process of applying for legal residence in Portugal. You are welcome to contact us by email, live chat, or a messenger. We always reply promptly!
Why should I acquire Portuguese residence via purchasing real estate there?
The main reasons for choosing this route to Portuguese residency are as follows: comparatively low costs and high returns for real estate in the country; the opportunity to have a passive income by renting the property out; a comparatively low required investment amount. Not forgetting, of course, the most important return on the investment: the Golden Visa itself!
What is the minimum amount of money that I have to invest into real estate in Portugal to qualify for legal residence there?
The minimum required investment amount is 280,000 euro. You will qualify for Portuguese residency if you invest this sum in real estate located in a sparsely populated region of the country requiring renovation.
Can I rent out the house or apartment that I have in Portugal?
Yes, of course! You have the right to rent it out. The most popular type of rental property is a two-bedroom apartment in a city frequently visited by international tourists.