Can Americans Use IRA Account to Invest for Portugal Golden Visa?

U.S. citizen here, very interested in Portugal’s ‘Golden Visa’ by investment program. I have a SEP-IRA account (Self-Employed). Here’s my plan:

  1. Roll SEP-IRA to Self-Directed IRA
  2. Invest the Self-Directed IRA into the 350,000e investment fund option
  3. Leave it there until we achieve Portuguese citizenship

I foresee two things I need to verify:

  1. from the American side, I need to make sure investing in a Portuguese investment fund isn’t a prohibited transaction that would cancel my IRA’s tax-sheltered status.
  2. from the Portuguese side, I need to ensure that, even though the investment will be made by my self-directed IRA… that the investment will be linked to me personally and qualify me and my family for the visa, and eventually citizenship.

Has anyone heard of this before? I think it should work but know of no precedent. Would be so grateful for any insight. I plan to reach out to an ERISA lawyer in USA and an immigration lawyer in Portugal so would appreciate any referrals as well.

Thanks,
Lucas

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Unless the IRA will let you transfer the funds (€350,000) and fund units to a Portuguese bank account in your name (both requirements for getting the GV) I don’t think that would work, unfortunately.

Thanks!

I know IRA funds can be transferred to a Portuguese Bank. The name of my IRA account now is my name with “SEP-IRA” at the end. So, after rolling to a self-directed IRA, it would be my name with “SD-IRA” at the end.

So… I dunno. Seems having the “SD-IRA” after my name shouldn’t disqualify me… but maybe it does. Thanks for the response!

If the IRA itself can be transferred there might be hope, but as you suggest this is probably uncharted territory.

Your best bet would be to get a legal opinion by a lawyer, check if you can find a Portuguese bank that seems OK with this idea and will let you buy fund units with your IRA, and then try to find an investment fund that will let you invest on the condition that your Golden Visa is actually granted (meaning they will buy back the units if your application is denied).

I suspect the real rub may be on the US end: the US Internal Revenue Act section that governs IRAs is notoriously complex. My impression has always been that all qualifying IRA accounts must be in US-registered financial institutions – although i could be wrong about that. I’d talk either to the IRS directly (and then, get it in writing!), or find a good tax attorney who can dig out the answer.
I had more or less the same thought as you (but for Italy), but gave us without doing the further research.
I’d love to know what you discover.
DR

I’ve too been interested in this option. This is the one thing that gives me pause:

The IRA Rules of Investment Don’t Allow You To Unfairly Benefit

If you do any amount of research about self-directed IRAs on the Internet, you’ll come across the term self-dealing quite a bit. Self-dealing is simply a prohibited transaction between yourself and your IRA. This could include buying something personally from your IRA or selling something that you already own to your IRA. The IRS created prohibited transaction IRA rules to prevent you from unfairly benefiting yourself or your IRA by giving overly generous “deals” to one or the other. Another rule is that you may only make cash contributions to your IRA; this eliminates the idea of assigning something to your IRA and considering it a contribution. (SOURCE BELOW:)

https://www.sunwesttrust.com/news/self-dealing-prohibited-ira-step-transaction/.

I’d love to get a legal opinion confirming that self directed accounts CAN be used for GV investments.

Thanks for all your responses!

Here’s a little progress update:

  1. The Portuguese government is likely to credit me with the investment because they will consider my IRA to be a wholly-owned entity. So, the Portuguese side of things looks hopeful. This still needs to be verified and I may have to actually transfer my money to a Portuguese bank before this is fully confirmed. So far, I’m dealing with a lot of theoreticals.
  2. Self-Directed IRA accounts can definitely make investments in foreign countries (foreign real estate is more common than foreign investment funds, but either should be fine).
  3. The biggest problem I foresee: the IRS might interpret me obtaining citizenship as a disallowed personal benefit achieved as a result of my IRA’s investment… that would possibly put me in the ‘self-dealing’ situation Marco305 points out. Citizenship is not a financial benefit… but it’s possible the IRS would consider that as improper.

Best

Great summary. I wonder if there is a lawyer who might be able to opine on this to protect you? In other words, if you got a letter from a tax or ERISA lawyer, that said it was ok to move forward, then you could do so with certainty and avoid legal problems in the future since you were following the guidance of a lawyer. What do you think?

PS- I found what I think is the relevant IRS regulation. The personal gain prohibition is discouraging:

Hi Lucas, I am looking at the same route for my wife and I - invest €350k through an SDIRA in a fund in Portugal to become eligible for their Golden Visa application. Have you been able to find out more information on this? The investment is just used as evidence in the application process. So you could make an investment in the fund and decide (or not) to apply for the Golden Visa. They are two separate and independent transactions, no? I’ll also update if/when I find out more. travelcouple

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Any progress? I’d be very interested in this approach for either the investment or real estate options.

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I haven’t confirmed with the IRS or a tax lawyer, but the IRS publication 590A (page 33-34) states the following about Exempt Transactions:

Exempt Transactions
The following two types of transactions aren’t prohibited transactions if they meet the requirements that follow.
• Payments of cash, property, or other consideration by the sponsor of your traditional IRA to you (or members of your family).
Chapter 1 Traditional IRAs
• Your receipt of services at reduced or no cost from the bank where your traditional IRA is established or maintained.

Payments of cash, property, or other consideration. Even if a sponsor makes payments to you or your family, there is no prohibited transaction if all three of the following requirements are met.

  1. The payments are for establishing a traditional IRA or for making additional contributions to it.
  2. The IRA is established solely to benefit you, your spouse, and your or your spouse’s beneficiaries.
  3. During the year, the total fair market value of the pay-ments you receive isn’t more than:
    a. $10 for IRA deposits of less than $5,000, or
    b. $20 for IRA deposits of $5,000 or more. If the consideration is group term life insurance, requirements (1) and (3) don’t apply if no more than $5,000 of the face value of the insurance is based on a dollar-for-dollar basis on the assets in your IRA.
    Services received at reduced or no cost. Even if a sponsor provides services at reduced or no cost, there is no prohibited transaction if all of the following requirements are met.
    • The traditional IRA qualifying you to receive the services is established and maintained for the benefit of you, your spouse, and your or your spouse’s beneficiaries.
    • The bank itself can legally offer the services.
    • The services are provided in the ordinary course of business by the bank (or a bank affiliate) to customers who qualify but don’t maintain an IRA (or a Keogh plan).
    • The determination, for a traditional IRA, of who qualifies for these services is based on an IRA (or a Keogh plan) deposit balance equal to the lowest qualifying balance for any other type of account.
    • The rate of return on a traditional IRA investment that qualifies isn’t less than the return on an identical investment that could have been made at the same time at the same branch of the bank by a customer who isn’t eligible for (or doesn’t receive) these services.

So, if the bank that holds your funds is allowed to give benefits to the IRA holder as long as those benefits are the same for non-IRA funds, it should follow that the Golden Visa application should get the same treatment? A person is eligible for the Golden Visa whether or not the funds are from an IRA or from a non-IRA source.