Regarding whether these funds meet the IRS rules for QEF Elections Under PFIC Rules, I found this article that defines and discusses the criteria. Although, the language is way over my head. Can anyone decipher this and then know how to apply it as a test to the currently available funds that have been posted in this community?
Basically, are these funds PFIC and will any distributions result in US income or capital gains taxation?
This has been extensively discussed in the āInvestment fund vs. real estate for Portugal golden visa; PFIC for US citizensā thread. Itās difficult for you as the investor to make the determination because of a lack of visibility into exactly how the fund is structured - many weāve seen so far use special-purpose-vehicles under the hood and that just adds layers of complexity. Typically you need to expect the fund to hire counsel and figure out their own position on the matter.
Youāll need a CPA or tax lawyer with experience dealing with foreign corporations and funds; the average CPA probably isnāt going to have a great clue on the matter since it is fairly specialized and quite complex. I myself, having once figured to brave it out myself with just a tax lawyer on speed-dial, have given up and hired a firm experienced in such matters to deal with it so that at least I have the āgood faith attemptā argument no matter what.
Hi all - Iām just getting started on my Golden Visa journey. Iāve spent the past few days reading through this entire thread. Many thanks to everyone for contributing and being so open to sharing their experiences and insights.
@faizal - I was wondering if youād be able to point me towards the latest version of your funds tracker spreadsheet? Thanks in advance
anyone considering a three-way split? it seems like thereās not really much difference between two and three funds; either they accept a split or they donāt. Lawyer doesnāt think itās much of an issue, people have been buying multiple apartments adding up to 500k and getting approved and itās just another asset as long as it all adds up.
Jeff
I believe BB was cancelled because they didnāt have enough interest and decided to change focus. I think C2 is a good company and you can speak with Joao.
As for the 3-way split, I agree in principle it should be fine. Other people have reported that it works and they were pre-approved. I didnāt do that because, well, KISS. You are going to have 3 PFIC reporting requirements and 3x the paperwork. To the extent the funds have setup fees and commissions, you may be paying 3x as much. Maybe that doesnāt bother you but I didnāt want to mess with it. You are right though that if one fund fails you are not losing 100% of your money by diversification. On the other hand, with 3 funds you have a higher percentage chance that 1 of the 3 funds would fail. I am not sure exactly how to quantify that but it exists.
Huh. that must kind of suck - imagine the fund gets cancelled, what happens if you already submitted based on your investment - oh, sorry, you no longer have an investment! THAT actually concerns me. If you didnāt do DD before as to whether thereād be enough interest, are you gonna hose it up again?
agreed. no clear answers one way or the other.
Iām giving up and hiring an accountant anyway - my tax situation has just gotten too complicated for unrelated reasons; he handles complicated tax situations as a matter of course so one fund vs three isnāt likely a significant additional hassle for him. But thatās me and my situation.
you are increasing the probability of failure but reducing the impact of failure. it could be quantified but youād need more accurate data than we have in order to make any sort of reasonable assessment; itās all Kentucky windage.
Hi Jeff,
My reading of the BB cancellation is more of Stable Core, the Fund Adviser, thing rather than C2 who is just charging an administrative (management) fee.
In general, i personally more incline to funds actually managed by fund managers who has some track records, not by fund advisers.
Did anybody catch the CGA FCR Fund Webinar presentation today? I thought it was quite good. Diversified portfolio of hospitality, supermarket and residential in both Portugal and the US. Unlike many funds they distribute 3% revenue returns pa and 50% of capital gains, at divestment, to investors after 50% to fund managers. The fund size is 30M euro and the subscription period basically starts now and runs up to 18 months, if needed. Hold time is 8 years. Set-up fee of 1% and 2.23% management fee pa.
actually, if the company is solid and you are getting 3% + 50% of gains a year and you are happy with that, its not the end of the world. It strikes me as a little steep but there are a lot of different factors that come into play.
I kind of wonder how much diversification you can really get with an asset size of 10-30m. That sounds like a lot of money but unless youāre just buying shares of publicly listed companies, itās hard to do much in hospitality or supermarkets of real size - youāre owning one or two assets maybe, which creates a lot of point risk. It was something I was thinking about with medcap. 7 deals total and thatās assuming they raise enough capital to do them all. All you need is for one to go wrong and your returns are in the toilet.
I thought the same thing with MedCap when i first spoke with them. Are you really going to buy a hospital with 20M and if so are you really diversified? You make a great point.
My main concern was around whether private medical could effectively compete with free public healthcare without relying heavily on foreign consumers. They assured me that they target market is Portuguese citizens and that the demand is there. That may well be true but I had some difficulty accepting it.
Private medical co-exists quite well with public healthcare. I imagine itās like the UK - NHS covers everyone, but anyone who can afford it gets private cover in addition to NHS, because NHS is always backlogged and wonāt have latest-greatest and canāt always give everyone what they want. All of the specialists work both sides - they do some hours for NHS and then some for local private hospitals. (We had to spend far too much time at the Royal Infirmary in Aberdeen one summer and I got to explore the depths of UK healthcare.) If you look at job listings in the City youāll see one of the perks is often private health cover. Itās a little different in Costa Rica I think - the private system is pretty separated - but the systems cooperate; the private doctors tend to know what works and doesnāt work about Caja so theyāll actually send you back to Caja for some tests to save you a buck and Caja will happily do the test and send you back to the private doc with the results.
My Portuguese friend has private cover in addition to public health. Itās a thing. I wouldnāt sweat that part of MedCap at all.
Remember guys 20m is committed capital. Called for capital will be less over the lifetime. GV investor capital (I am guessing they will size it up to 5-7m) will be called upfront given the visa requirements.
And you are right, public hospitals are inundated already due to lack of capacity. Working middle class and above all have private insurance - itās a thing.
There have been 2 precedent transactions where a roll up play was sold to a large conglomerate and in one of the transactions the MedCap guys were working in the BD and strategy roles. And hence this idea.
Did anyone attend the Rock Capital meeting yesterday? I missed it because I got confused about the time zone.
Were any updates shared about the market and operations? Did they provide an update on the number of subscribed and paid investors? How does the business climate look? Thanks in advance for any news you can share!
I inquired about PFIC Annual reporting for US investors from STAG Funds. They currently have the CGA and NEXT funds available. They told me that the bank (such as BIG or BISON) that are FACTA compliant would also handle the PFIC. I find this bogus. How can a bank and not an accounting firm or the fund itself not handle details of shares, cost basis, and everything else that are in the fundās books. Am I wrong?
That is absolutely bogus, for the exact reason you say. (Thereās a whole other thread on PFIC here if you want to read that.)
I could get someone like Rock not having a clue, because theyāre two guys who build houses and they expected Lince to deal with all that crap. I could get Iberis or BlueCrow not having a clue, because theyāve had no reason to deal with US investors before to have any clue.
Now that I look at Stag (new name to me), I see a bunch of people, late to a game that now clearly has a bunch of AmCits in it, whose backgrounds are such that they Really Should Bloody Well Know Better Than That. Which immediately makes me wonder What Else Is Wrong Under The Hood.
Somehow, this just irrationally upsets me. Iāve deleted several sentences here about this that Iāve subsequently deleted, thatās how irritated I am. Ugh. Sorry.
