Can Golden Visa Applicants qualify for NHR 2.0 and receive tax benefits in Portugal?

Residencies & citizenships Portugal Golden Visa šŸ‡µšŸ‡¹
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21

I have two answers to you.

The first is that the concern of companies failing is obviously valid. We see this from clients and the common solution to this is to invest in a fund that invests regularly in startups. Our plans at Fresh are emerging rapidly and include operating an accelerator, so there will be multiple early stage companies. Of course, the company still needs to agree to hire you or put you on the board.

My second answer to you is that you seem to take a very entitled approach to this. Portugal does not owe you anything. You do not need to get tax benefits. There are many people who live in Portugal and pay full tax rates and many of them are very successful. They are called ā€œPortugueseā€ and some of them are pretty pissed that they need to pay full tax whilst foreigners get tax benefits.

So, whilst I have been a major advocate for the merits of tax benefits, it is also entirely reasonable of Portugal to expect people to actually do something useful fort he economy, e.g. support a local company. Those of us expats that are living in Portugal want to be seen as well integrating and helpful members of the community.

So Iā€™m really sorry for you that you see the notion of having risk or downside as a terrible scenario. To be absolutely clear, you do not need to invest anything. If you find a job in a certified startup or add enough value, you may well be able to find a place on a board without spending any money. Investment is just an easy form of adding value, but it doesnā€™t have to be investment. But the general concept is that a country that welcomes you and gives you benefits have the right to ask for something in return. It is really a shame that you donā€™t understand it, or that you need to have the ā€œhoneyā€ conversation if you are asked to pay what the locals are paying.

I dare say that it is precisely this approach that led to the cancellation of the NHR in the first place. If you donā€™t want to contribute to Portugal, donā€™t come. There are other places that will be a better fit for you.

22

Money is mobile and nomads are mobile. Sometimes people make a lifestyle choice and choose to pay higher taxes, but no one here is looking for a treatise preaching the virtue of paying high taxes.

If one wants to make a VC investment, look at the US, China, Southeast Asia, parts of Europe but not Portugal:
(1) a small market that has a very high cost of doing business;
(2) a GREAT number of rent seekers promoting various schemes that have nothing with the quality of companies;
(3) distorting effect of less efficient investments. For example, a less deserving start-up that should have failed in year 2, is kept alive with GV equity and now the 100k from peopleā€™s tax play. Would anyone call this a healthy startup scene??
(4) brain drain of local young people is nowhere near reversing. Surely people can run successful breweries, restaurants, etc. in Portugal, but letā€™s not pretend Portugal is competitive when it comes the brightest tech entrepreneurs.
(5) think about the selection bias. If you were a bright entrepreneur in Portugal with a good company, would you accept some random person on your BOARD just for money from schemes like this? More likely, the best companies will be able to raise capital elsewhere (e.g. from a proper VC fund), and only bad companies will do schemes like this because they canā€™t raise enough capital elsewhere.

If one wants to pay a lump-sum tax and bring down the % tax rate, there are many options in Europe where the execution is simpler and cleaner, e.g. Switzerland, Italy, Greece. Or Ireland, with lower taxes and non-dom. Or look outside Europe and pay territorial taxes.

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23

This is astonishingly offensive and tone-deaf. First, because of the assumptions about me personally that are entirely unwarranted and unnecessary. You launched a personal attack at me simply because I was expressing a concern.

Second, I already made a contribution to Portugal ā€” my Golden Visa investment. Every person on this forum who would come to Portugal and qualify for IFICI has already made a financial contribution to Portugal. My money is invested in Portuguese funds, who invest in the Portuguese economy. And after almost 3.5 years thus far, Portugal has given me absolutely nothing in return, with no indication of when I will ever receive anything for my contribution.

Third, you overlook the contribution to the economy that the presence of HNWIs in Portugal has. Whether itā€™s starting businesses or simply consuming high value goods and services, having new HNWI residents who would not otherwise have settled in Portugal stimulates the economy. Certain entire countries derive large parts of their GDP from this.

Fourth, the implication that only people who deserve or pay for board seats have any worth to Portugal is elitist and unseemly.

Finally and worst of all, despite your role in arranging / managing investments, you appear to have no concern for preserving the capital of your investors, and even to be irritated by the concept. I didnā€™t say that I wasnā€™t willing to make another contribution to Portugal, only that the outcome of having to choose between being financially worse off than ever having come to Portugal or having to flee the country on a few weeksā€™ notice would be a disaster.

But you completely lack empathy for that. In fact, you appear to be implying that the outcome of investors losing their investments is what should be happening to serve as a contribution to Portugal. When I suggested otherwise, you felt so threatened that you told me to piss off. Why would any financially sane person ever invest their hard-earned money with you?

Thank you for showing your true colors, though. And thank you for crystallizing into a few short paragraphs the ingratitude, predation, and hostility that Portugal has shown those of us who are simply looking for a fair deal.

24

@ZeevFisher does make a good point though, which is that from the perspective of average Portuguese who is paying high incomes taxes and by definition canā€™t qualify for NHR of any generation (because theyā€™re already HABITUAL tax payers) these schemes are all very unfair.

Maybe Portugal could become more competitive by cutting income taxes in a more fair way. Maybe they could tax land more, to encourage construction, and income less.

25

The Portuguese tax system is confiscatory. This is a key reason why Portugal has a brain drain and capital flight issue that necessitates tax incentive and investment migration programs in the first place.

If Portugal doesnā€™t value the contributions of HNWIs and instead chooses to confiscate their wealth earned elsewhere, thatā€™s Portugalā€™s choice. Meanwhile the Portuguese (and international) UHNWIs staying in PT already have tax structures in place to shield their wealth and pay far lower taxes than the average Portuguese or even NHR / IFICI participant. Isnā€™t that more unfair to the average Portuguese than a new HNWI who chooses to invest in Portugal in exchange for a non-confiscatory, but still reasonable, tax rate?

The populistā€™s playbook is to convince the people that foreign HNWIs are their enemy while allowing the UHNWIs and billionaires who actually control the government to gobble up increasing shares of the nationā€™s property and economy while paying minuscule taxes. This ideology is a social disease.

Though it would be great for Portugal to cast off populism and adopt a tax system in line with or even more competitive than its peers such that special incentives are no longer needed, this is outside my and any international investorā€™s control. We can only control where we invest and where we live, and I wonā€™t be investing with someone who feels entitled to burn my money.

26

I have made no assumption about you personally. I just echoed how you sound. I am a tax lawyer who makes a living helping expats coming to Portugal pay less tax and I have been advocating for tax benefits and making essentially your points for quite a while. Ideologically and practically, I am completely in your camp.

I donā€™t know why you would say that I launched a personal attack or that I donā€™t care about people losing their money. I simply pointed out that Portugal can impose conditions on tax benefits and that there is risk in making an investment.

I did not know that you are a GV investor and I completely agree that Portugal messed up GV. can understand why you are upset, but I donā€™t really understand why you want to come to Portugal. I am here to offer a solution to a problem. I can assure you that Iā€™m not threatened by you nor do I represent Portugal in any way.

I understand your concerns but as someone on the right wing of politics is supposed to know - you are free in this world and if you donā€™t like my solution, you donā€™t need to use it. It seems that all you want to do is rant about Portugal, so by all means - be my guest, but please understand that telling you to piss off as you put it is just my inherent response to whining - whether it comes from the populist left in Portugal or from a disgruntled HNWI on a GV NG forum.

27

Portugal is a much better place to live than where I came from. Itā€™s safer, more peaceful, and has a lower crime rate. The food tastes better and is objectively healthier. The cost of living is more reasonable. The culture and history are fascinating. The climate is relatively pleasant. The vast majority of the people (excluding government officials and those linked to investment migration programs) I met in Portugal were honest and kind. These, I believe, are some of the reasons most people want to move to Portugal.

On top of that, at the time I and may of the others on this forum applied for GV, we were told by lawyers, fund managers, and promoters that we would receive our residence cards within 6-9 months, enjoy the NHR while living in Portugal, and have the opportunity to apply for Portugalā€™s top-tier passport within 5 years. This turned out to be false.

The new deal is, no residence card for 3+ years, you can apply for citizenship after 7-10 years including extended physical presence, and after that will take 3-5 more years to receive the passport. In the meantime, if you want to keep your international assets free from confiscation, you need to make another contribution. If you donā€™t like any of this, too bad! The money you already invested is locked until at least Year 7. Even to go somewhere else, you need to save and invest another sum of money.

Maybe you feel that we were stupid to believe what we were told, and that we should stop whining about it. And maybe youā€™re right that we shouldnā€™t have believed the hype, but as long as those same lawyers, fund managers, and promoters are feeding hype to another round of applicants, I will not stay quiet.

Iā€™m warning, not whining.

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28

Thank you for taking the time to put this together. This is an argument that I can relate to and get behind. It sounds very different then the stuff you said before.

I actually have this discussion internally at FRESH, with me typically taking the position you took. The counter argument (which I disagree with, by the way) is that the GV deal is invest in exchange for residency. Not citizenship, not tax status. These may have been implied but they werenā€™t promised.

I think that there are reasonable prospects of an argument re the protection of legitimate expectations will win in court. We will only know if someone tries.

That all said, itā€™s a bit simplistic to read the promises you were made 3 years ago together with what I am doing with my team now and grouping it all under ā€œPortugal did, Portugal doesā€. Portugal changed the rules of tax benefits. You would argue an element of retroactivity and I would agree, but the rules changed and itā€™s a fact. The new rules require one of a few routes and one of those routes is a startup route. The new rules DO NOT require an investment, but they will open the door to a board member of a startup. What Portugal wants is more startup companies. I believe that funding startup companies and supporting them is a desirable outcome of this regime, so I designed s solution around this. My benefits in this context are, like all other ā€œrent-takersā€ as you not so very kindly charactarised me, are tied to both people wanting to do this and also to the success of the investments. I am therefore doing A LOT (and Iā€™m happy to share more) to derisk the investments, but you I also donā€™t want to sell anyone dreams or present a false picture (which is your primary complaint, right?) so itā€™s important for me to remind that investments can be lost, particularly in tech.

I donā€™t think that you were stupid to believe what you were told, nor do I think you were naive. I think you acted reasonably, knowing what you knew then and I doubt anyone knew it will be so bad.

I do think that although you are clearly capable of rational analysis, you now group together different things that are said and done by different people into one big ā€œPortugal did, Portugal doesā€ in your head. Iā€™m sorry that promises to you were broken, but I didnā€™t promise you anything. Iā€™m trying to help people solve a new problem that has been created and Iā€™m trying to do it in the best way possible and being up-front and honest about the advantages but also the limitations. I would argue that I try to do precisely what you say wasnā€™t done with you when you were sold a GV. My solution (Mine - not Portugalā€™s) involves investment. Then you come and tell me that it would be TERRIBLE if you make another investment and will lose it, after I accepted that investment entails risk. So yeah, my gut reaction is to tell you to piss off.

I can see things from your angle, so I suppose thatā€™s the empathy you were missing. Can you see them from mine?

29

Guys, I think this latest flare-up in arguing has run its course, and itā€™s only tangentially relevant to this thread. Letā€™s keep this thread focused on ways to qualify for IFICI, the route pitched by @ZeevFisher or alternate routes.

However, before closing this discussion fully Iā€™d just like to add a bit of balance to this statement:

@Hippopotamousse This first part (no residence card for 3+ years) is unfortunately accurate, however the rest is entirely speculation. Not even a single concrete proposal has been made, only a few comments during the current election campaign.

While I agree that the time to apply for citizenship might increase (my guess would be to 7 years, if it happens), I think itā€™s extremely unlikely that PSD would significantly increase the physical presence requirements for the ARI. What might happen is that other residence permits get more stringent requirements, but letā€™s see.

Anyway, Iā€™m not looking for a response, just providing some balance to your speculation. Letā€™s get back to IFICI in this thread.

30

If you reread what I said originally, the catastrophe I mentioned was the case that the tax benefits could suddenly evaporate along with the investment amount due to the failure of the company. The tax reclassification would cause a loss well in excess of the original invested amount and / or the necessity to vacate Portugal find a new home in a new country promptly in order to avoid continuing tax losses.

As a longtime investor, I am accustomed to accepting the risk of loss of the invested amount that comes with any investment. If anyone doesnā€™t believe they risk losing their invested principal, they are almost certainly taking a greater risk than they think. But I cannot recall ever considering an investment where I am at risk of losing multiples of my original investment along with my home and country of residence.

The original question still stands: What does happen to the IFICI board memberā€™s tax status if the investee company goes bankrupt, particularly if such taxpayer has already stayed in Portugal for more than 183 days in that tax year? Does the taxpayer suddenly lose IFICI status for that year? Or does the taxpayer have until the beginning of the following tax year to sell their home and vacate the country? Can one board position be replaced by another without needing to reapply to IFICI and risk application denial?

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31

If you lose your board position, you have 6 months to find a new one. The way we do it is not through a direct startup investment but through a fund investment. Some of the fundā€™s cash funds an accelerator to have many early stage startups. The idea is that a Startup lives for 3-4 years so we will need people to have more than 1 position over 10 years and the plan accounts for that.

Best
Zeev

32

I thought other residence permits are already very stringent. For example a 3 year D7 card only allows 8 months outside Portugal, that is 28/36 = 78% time must be in Portugal.

That is even more stringent than e.g. a US green card where you only need to spend majority (51%) of time in the USA to naturalize.

The strictness of D7 is what encourages some people to go for GV even when they do want to move to Portugal.