Hello to all,
I’m a US citizen and have been a member here for several months. So far I’ve been “lurking” only and have gathered a lot of useful information. In about the middle of 2020 I started to make a serious effort to obtain a Portugal GV (PGV for brevity) via the funds route. Just recently (April 2021), I decided to abandon that pursuit. In part it is due to personal factors (wife and I are pursuing Canadian residency, plus she is entitled to be an Irish citizen by heritage). However, another large part of my decision to abandon the PGV pursuit is my dissatisfaction with quite a few aspects of the process. I will summarize the steps I took and what concerns I had.
After learning of the funds option for PGV, I decided that was the way to go, as I don’t want the responsibility of owning real estate so far away from home. I have owned investment real estate and in my experience, closer is better. I have several decades of experience investing here in the USA in stocks, bonds and mutual funds, so I thought a PGV fund approach would be appropriate to my experience, needs and skills.
After some research, I hired a Lisbon immigration attorney in what appears to be a small to medium sized firm. They wanted the first of 5 installments of €2250 up front and I signed Power of Attorney for them to obtain a tax ID number (NIF) and open a bank account on my behalf. Various documents changed hands, and some of them needed to be Apostilled. I began to research funds, paid another €2250, and that got me to the present time. Below are some of the issues of concern that I encountered. I hope this is helpful to others.
Not too long after my initial payment, the attorney I had been working left the firm and I was assigned to another attorney. I would have preferred to have been given the option of switching to another firm but I was not.
Note that there are two different types of Apostille certification. Documents that were issued at the US state, county, or city level can be Apostilled by an office of the state you live in. That was easy and fast. Documents issued at the Federal level (like the FBI background check) must get their Apostille from the US State Department in Washington DC. This was a problem-- it took them over 4 months to return my certified documents (they blame Covid), during which time my FBI background check expired, per Portugal GV regulations. It’s possible Portugal might accept it with a letter of explanation.
Banking issues: It is expensive and confusing . They wanted a minimum starting balance of €500 and charge €15 or €30 per month maintenance fee (I forget which now). In order to avoid all monthly fees, they require a minimum balance of €50000 (fifty thousand euros)… compare this with how ridiculously easy it is to get free checking in the USA. The bank sent me info needed to set up an app on my phone but I was never able to make it work, despite several rounds of email with my account manager, who contacted their tech support people. I have never received monthly statements, online or by regular mail. Finally, when I got to the point where I felt ready to make a GV fund selection, I was informed that I needed to establish a second bank account in order to hold the fund. This leaves me confused as to why I had to establish the original bank account in the first place, as it hasn’t been used for anything other than to extract money from me.
The funds: The majority of available funds appear to be similar to REITs in the US. As noted, I want to avoid direct real-estate investment and so I focused on GV funds that were not so heavy in real estate. My analysis is that all of the PGV funds are very expensive in terms of annual management costs, performance fees, up-front costs, and possible hidden fees. In comparison with investing in US mutual funds (my main experience base), finding info on the GV funds is very difficult and not terribly transparent. In the US, all fees are clear and presented up front-- Front end fees (or load), annual fees, buy-sell fees are all easily known at the outset. My US investments are all in funds with no load and with annual fees less than 1% (most of mine charge less than 0.2% per annum), and I avoid funds with buy-sell fees. In comparison, the PGV funds I researched typically charge 2-3% per year, along with other fees up front and usually some sort of performance fee, and possibly other hidden fees. The fund that seems to have the lowest fee structure unfortunately appears to be poorly subscribed, at €12.5 million euro invested so far. This translates to only about 35 GV investors have subscribed (as of 29 March 2021), according to my math. This means that my personal exposure to risk is quite high in the case of this fund underperforming. So in the end I was unhappy with the cost, transparency, and/or risk level of all of the available GV funds.
The tax picture for US citizens: There has been a lot of discussion on this topic elsewhere in this forum (search PFIC, FATCA, Form 8938), so in brief there appear to be challenging filing requirements with the US IRS for foreign investments such as this and a non-trivial chance of getting something wrong. To get it all right you will probably need a US accountant with significant international experience. The consequences of misfiling (or not filing) are potentially severe, and evidently even if is done correctly, there is a good chance that your US taxes on the PGV fund returns will be punitively high, wiping out even more of any investment gains you have left after the fund fees take their hit.
The Lisbon attorney: Their fee structure is apparently fixed rate and doesn’t depend on how much time they actually spend on my behalf. I paid out the first €2250 last August and did in fact get value for that. I paid the second installment of €2250 this past January and little has been done on their end except for answering some emails, as I was waiting for my FBI document to return from US State Department and I was researching funds. I am accustomed to the typical US legal-fee model in which the client may pay a retainer deposit up front but is only billed for actual services rendered, and there is always an accounting statement available. In contrast, I have been told that they don’t owe me any accounting for their services as I signed off on their fixed fee agreement (they say I signed it but I cannot find any record of signed copy on my end, so I have asked them to email me a copy of the form they say I signed).
So given all of the above, my gut feeling as well as evidence-based analysis of available information led to my recent decision to abandon the PGV quest. There are certainly a lot of pitfalls and costs, plus the entire process is rather opaque-- different financial and legal systems, the language barrier and working primarily online all contribute to this. That said, I do feel as though the Lisbon attorney’s office could have been much more helpful, proactive and clear in their advice. Instead, I was charged a lot of money, went through a lot of steps (some seemingly unnecessary) and became more confused and concerned over time instead of less so.
Do I accept responsibility for my own due-diligence failings in this? Absolutely! In addition, I probably should have retained a skilled US Emigration attorney! It is a complex process with lots of pitfalls and a lot of information is unclear and hard to find. A good attorney is your best bet to help and I wish I had had a better one. I think if I wanted to obtain a PGV at any cost, I might have proceeded even with a less than ideal legal team, as long as they got the job done. However, my slightly jaded view is that the funds route to a PGV is a great deal for Portuguese fund managers, attorneys, probably developers and perhaps the government, but not for me. If I was to revisit a GV approach, I might choose instead a GV process in which I make a donation to the government (as seen in many Caribbean countries) rather than an “investment” path like I encountered with the PGV.
Sorry this is so long, but I hope that some of this will be helpful, especially to US citizens. I will have limited capacity to respond but will try to check in every few days.