Portugal’s new Nationality Law, which substantially amends the legal framework governing Portuguese nationality, was promulgated by President António José Seguro on 3 May, ending months of uncertainty.

The revised Law, which was approved by parliament on 1 April, was published in the Official Gazette (Diário da República) as Organic Law No. 1/2026 on 18 May and entered into force the following day.

The new Law increases the minimum legal residence periods required for the acquisition of Portuguese nationality through naturalisation from five years under the previous regime to seven years for citizens of EU member states and Community of Portuguese Language Countries (CPLP) member states, and 10 years for citizens of other states.

The new Law also introduces a structural amendment regarding the calculation of the legal residence period. The relevant period for nationality purposes is now counted exclusively from the date of issuance of the first valid residence permit by the Agency for Integration, Migration and Asylum (AIMA).

Previously, the administrative waiting time following the submission of the residence application was taken into account. This amendment may have a significant impact on applicants for Portugal’s ‘Golden Visa’ where there are lengthy periods between the initiation of the immigration process and the issuance of the residence permit.

The new Law also introduces amendments in respect of the attribution of nationality to children of foreign nationals born in Portuguese territory. For the automatic attribution of nationality, one of the parents must have legally resided in Portugal for at least five years at the time of birth. Previously, it was only necessary for them to have lived there for one year, regardless of their legal status.

Finally, the new Law strengthens the criteria relating to effective connection with the Portuguese community and suitability requirements. Naturalisation applicants must now demonstrate:

• Proficiency in the Portuguese language (A2 level minimum)
• Knowledge of Portuguese culture, civic rights and duties, and the country’s political organisation through a formal assessment
• A solemn declaration of adherence to democratic principles
• Sufficient means of subsistence
• A clean criminal record – applicants with sentences of three years or more are ineligible.

Parliament first approved amendments in October 2025 but President Seguro then referred the draft legislation to the Constitutional Court, which struck down several provisions in December. It ruled that applying the new, longer residency timelines to existing pending applications would be unconstitutional.

The new Law expressly establishes a transitional regime under which nationality applications already filed at the Instituto dos Registos e do Notariado (IRN) before its entry into force – 19 May 2026 – will continue to be assessed under the previous wording of the Nationality Law.

Seguro emphasised “the importance of guaranteeing that pending processes are not, effectively, affected by the legislative change, which would constitute an undesirable breach of trust in the state, at the domestic and international level.”

He also noted, given the long delays in issuing residence permits by the AIMA, “the importance of ensuring that the counting of legally fixed timelines for obtaining nationality is not affected by the slowness of the state.”

“Following our previous informational notes about the proposed amendments to the Nationality Law, we are relieved that the prolonged period of uncertainty is now over,” said Shelley Wren, Head of Business Development at Sovereign Portugal. “This solution ensures legal certainty and protects the legitimate expectations of applicants who have already initiated their procedures under the previous legal framework.

“However, this amendment represents a significant departure from the previous regime. For those currently holding a residency permit – Golden Visa, Passive Income Visa (D7), Entrepreneur Visa (D2) or Digital Nomad (D8) – the integration requirements for naturalisation are stricter, and the timeline is longer. It is even more significant for recent applicants who are still awaiting their first permit.

“For those investors and retirees and their family members who are focused on long-term residence in Portugal rather than naturalisation, there is no change. But for who have built their strategy around the five-year EU citizenship path will need to assess the potential impact of this new timeline.

“If you have a pending application, you should ensure that everything is documented and monitor how the IRN is handling your case under the transitional regime. If you don’t have a pending application, you should maintain continuous legal residence and ensure that you keep your permits renewed. You should also begin building the documentation required under the new criteria for demonstrating an effective connection with the Portuguese community.”

The government has 90 days from publication to update the implementing regulation (Regulamento da Nacionalidade Portuguesa). AIMA and the IRN are also expected to publish updated procedural guidance.

Over 500 Golden Visa holders, predominantly American, are preparing a collective lawsuit against the Portuguese state. The reported challenge is expected to focus on legal certainty, legitimate expectations and the position of investors who have already committed funds under the previous framework.

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The Portuguese government’s proposed reform of the Nationality Law to introduce stricter requirements for Portuguese nationality has been sent to the Constitutional Court for preventive review after the Socialist Party (PS) formally submitted two requests on 19 November, halting its entry into force.

Parliament voted on 24 October to approve the amendments, which increase the minimum legal residency period for naturalisation from five to seven years for citizens from EU Member States and Community of Portuguese Language Countries (CPLP), and ten years for all other nationalities.

Significantly, the residency period begins from the date a residence permit is issued, rather than from the application date. The law shelters pending citizenship applications from retroactive changes but would apply to residence holders who have not yet initiated citizenship applications.

Applicants will be required to pass a civics and language test, demonstrating adequate knowledge of the Portuguese language, the rights and duties of citizens and the organisation of the country’s political system. They must also make a sworn declaration affirming adherence to Portugal’s democratic principles.

Children of foreign residents born on Portuguese soil will only be eligible for nationality if their parents have lived legally in Portugal for at least three years and expressly request Portuguese citizenship for the child.

Nationality by descent is to be restricted to great-grandchildren of Portuguese nationals. Previously, the right could be extended to more distant generations in certain cases. The extraordinary nationality route for Portuguese Sephardic Jews, introduced in 2015, is also terminated under the new law.

Naturalised citizens who commit serious crimes resulting in prison sentences of five years or more may lose their Portuguese nationality if it was granted less than the length of their sentence ago. The reform also modifies the Law on Foreigners, introducing tighter immigration controls and new visa conditions.

Portugal’s Constitution permits one-fifth of sitting Assembly deputies the power to request preventive constitutional review of any decree sent to the President for promulgation. The PS party, which has 58 deputies in the 230-seat Assembly, therefore invoked its parliamentary prerogative to send the approved Nationality Law amendments directly to the Constitutional Court. The mechanism has only been used twice since the Court was established in 1983.

The PS argues that several provisions in the Nationality Law amendments violate fundamental constitutional principles, including:

• Equality before the law.
• Proportionality in restrictions of fundamental rights.
• Protection of legitimate expectations and legal certainty.
• Determination and clarity of criminal consequences.
• Prohibition of automatic effects of criminal convictions.
• Compliance with Portugal’s international obligations.

Under the Constitution, the Court now has 25 consecutive days to issue a ruling. The law remains suspended throughout the review process and cannot enter into force until judges issue their determination.

If the court rules the law’s provisions to be unconstitutional, then the Portuguese parliament will have to amend or abandon the legisaltion. If the Court uphold the amendments, the President can then promulgate the law for publication in the official gazette.

Sovereign will continue to monitor the process closely to assist all applicants to move forward with clarity and confidence.

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The minority government of Portugal’s newly reappointed Prime Minister Luís Montenegro, under pressure from the far right to reduce immigration, presented a draft law on 23 June that includes amendments to the Nationality Law to introduce stricter requirements for Portuguese nationality.

Portugal has experienced a significant increase in immigration in recent years and the tightening of the rules was a central theme in May’s election, in which the far-right Chega party became the main opposition party. The draft law has yet to be sent to parliament but is expected to be approved with Chega’s support.

“We are significantly strengthening the requirements for access to citizenship, naturalisation, in line with the guidelines we had already included in the government’s programme,” said Cabinet Minister Antonio Leitao Amaro.

Under the draft law, the minimum legal residency requirement to apply for citizenship is to be increased from five to 10 years for most foreigners. Immigrants from the Community of Portuguese Language Countries (CPLP) – Angola, Brazil, Cabo Verde, Equatorial Guinea, Guinea-Bissau, Mozambique, Sao Tome and Principe, and Timor-Leste – will benefit from a reduced seven-year period.

Significantly, the residence period now starts counting from the date the residence permit is granted, not from the date of initial application. According to the government statement, the new citizenship rules will not apply to complete naturalisation applications submitted before 19 June 2025, but incomplete applications submitted before that date may not be accepted.

Under existing rules, aside from the five years of residency, foreign citizens must demonstrate sufficient knowledge of the Portuguese language, have no previous criminal convictions resulting in a prison sentence of more than three years, and must not constitute a threat to national security.

This is to be strengthened. Under the draft law, applicants will further be required to demonstrate familiarity with Portuguese culture, the rights and duties of Portuguese citizens, and make a declaration of support for the fundamental principles of a democratic state. Assessment tests are expected to be introduced as part of this process.

Applications will no longer be admissible for individuals with criminal records for crimes punishable by imprisonment, regardless of the sentence applied.

Children born in Portugal will no longer automatically qualify for Portuguese citizenship. Children of foreign parents will only be granted Portuguese nationality if both parents have had legal residence in Portugal for at least three years and the parents actively apply for the child’s nationality.

The law will also curtail the Sephardic Jewish ancestry route, which was specifically introduced in 2015 to grant Portuguese nationality through naturalisation to the descendants of Portuguese Sephardic Jews who were expelled from Portugal and Spain in the fifteenth century.

Acquisition through ancestry will be limited to the third generation – great-grandchildren – subject to proof of an effective connection to the Portuguese community.

There will be a provision allowing naturalised Portuguese who are convicted of serious crimes with effective prison sentences of five years or more to be stripped of their citizenship as an accessory penalty. This will be determined by a court on a case-by-case basis.

A separate draft law also seeks to regulate key migration channels, with emphasis on family reunification, CPLP residence and the Job Seeker Visa, also known as the DP (Documento de Posse) visa, which enables non-EU citizens to enter Portugal to look for employment.

It is proposed that family reunification would require at least two years of legal residence in Portugal. In-country applications would be permitted only for minors, while other family members must apply via consular channels. Applicants would also require proof of adequate housing, sufficient financial means, and integration efforts such as language and school attendance.

It is proposed that CPLP applicants would no longer be possible to obtain a residence permit based on a tourist visa or visa exemption. Security clearance by the Unidade de Coordenação de Fronteiras e Estrangeiros (UCFE) will also be required.

The Job Seeker Visa is a temporary visa valid for 120 days, with a possible extension for another 60 days. During this period, visa holders can search for jobs and even begin working until the visa expires or a residence permit is granted. It is proposed that this will now be restricted to highly qualified professionals, with technical qualifications and eligible professions defined by ordinance.

A new National Unit for Foreigners and Borders (UNEF) will be established within the police force with responsibility for border control, in-country inspections related to foreign nationals, and carrying out deportation and removal orders.

The Agency for Integration, Migration and Asylum (AIMA), which manages all matters concerning foreign documents, permits and visas, will be authorised to plan appointment schedules according to its operational capacity.

AIMA, which continues to process an enormous backlog of over 400,000 residency applications, reported in May that 123,000 residence permits had been approved and 23,500 immigrants had had their residence permit applications rejected. Of these rejected applicants, 4,500 have already been notified to voluntarily leave the country within 20 days. A further 171,000 applications had been cancelled due to lack of payment.

AIMA estimates that more than 1.5 million foreign citizens were legally residing in Portugal as of the end of 2024. Brazilians are the largest group, with over 450,000 legal immigrants.

The new government proposals do not include any further changes to residency rights under Portugal’s Golden Visa programme. Once a Golden Visa application is submitted, the applicant’s right to residency remains protected and the option for permanent residency after five years of residence under the Golden Visa remains. However, depending on timing, access to naturalisation may be affected by the proposed law.

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The UK government announced in its Autumn Budget last October that, from 6 April 2025, it is replacing ‘domicile’ as a connecting factor for liability to applicable UK taxes, including inheritance tax (IHT), and adopting a residence-based regime instead.

Accordingly, as from 6 April 2025, individuals who have been UK resident for at least 10 out of the past 20 tax years – for example, a person who was UK resident for 11 tax years from 6 April 2014 to 5 April 2024 – will be classified as a ‘Long-Term Resident’ (LTR) and exposed to IHT on their worldwide assets.

To ensure that long-term UK residents do not escape tax obligations immediately upon leaving the UK, the legislation also introduces a ‘tail’ provision. This means, if they pass away within the residence tail period, the worldwide estate of an LTR will still be subject to UK IHT for up to 10 years after they cease to be a UK resident.

The length of the tail will depend on the duration of the individual’s residence in the UK. The minimum length of the tail is three years, which applies to individuals who have been UK residents for 10 to 13 of the past 20 UK tax years. The length of the tail increases by one tax year for each additional year of residence, up to a maximum of ten years.

Individuals who do not meet the criteria for LTR status will generally remain liable for IHT on UK-based assets only. This aligns with the previous system, under which non-UK domiciled individuals were taxed on UK situs assets but non-UK assets were out of scope for IHT purposes.

For LTRs who have moved to Portugal, or wish to, this could present a serious problem; the residence tail provision may extend their UK IHT liability on non-UK assets for several years post-residency. It will particularly impact individuals with global property holdings, offshore trusts, or diversified investment portfolios.

Former UK residents assessing their potential IHT exposure should, as a first step, review the history of their UK residency to determine whether they meet the threshold for LTR status. They should also review their global asset structures because the residence tail could expose previously sheltered non-UK assets to tax.

Although the domicile concept is being replaced for tax purposes, it may remain relevant in certain trust and estate planning structures. For individuals holding assets in trusts established before April 2025, legacy rules may still provide certain exemptions or protections.

It may also be worth considering taking out IHT insurance. Insurance cover has long been a useful tool to protect lifetime gifts of property and assets, known as known as potentially exempt transfers (PETs). Gifts made from an individual’s estate are exempt from IHT provided they survive for a period of seven years after the date the gift is made.

But if an individual dies within this seven-year period, there is still a potential IHT liability. The most common way of protecting the beneficiaries of these gifts from the potential tax liability is to set up life assurance policies to cover the potential liability. The insurance policy doesn’t alter the IHT liability but will pay out a lump sum to meet the IHT bill.

Similarly, life assurance policies can be set up to cover the potential liability to UK IHT if an LTR policy holder was to pass away within the applicable residence tail period, up to 10 years, after they cease to be a UK resident.

It is strongly recommended that such life assurance policies should be placed into trust. This ensures that any pay-out is not considered part of the estate, which would defeat the purpose of the cover. It also means the policy does not get caught up in probate, so beneficiaries can be paid quickly and can settle the liability as soon as possible.

If you are or are likely to be classified as an LTR and exposed to UK IHT on your worldwide assets for a period of up to 10 years, a life assurance policy can give you peace of mind that your beneficiaries won’t be subject to a huge IHT bill if you don’t survive through the whole of the residence tail period.
It is essential to get expert advice before taking out any policy – especially given the new rules about registering trusts.

For any further information on the changes to the UK’s IHT regime, or to talk to us about your IHT planning, please contact our Portugal office. Our services will be tailored to your individual circumstances and are designed to help you plan for your future.

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The IFICI offers a highly attractive tax framework for new tax residents in Portugal but is more limited in scope than the previous NHR regime. It is restricted to highly qualified individuals who carry out scientific research and innovation activities or hold qualifying jobs in Portugal.

The IFICI regime was approved as part of the State Budget Law for 2024 and has been in effect since 1 January 2024, but regulations were awaited to activate it. These regulations under Ordinance 352/2024/1 came into force on 24 December but have retroactive application to 1 January 2024.

What Are the Key Benefits of Portugal’s IFICI (NHR 2.0) Regime?

The Ordinance regulates and defines the eligible activities, the covered sectors, the criteria and procedures, as well as the requirements necessary for confirming the applicable conditions.

Like the previous NHR regime, the key benefits under the IFICI / NHR 2.0, which are available for 10 calendar years from the time the applicant become tax resident in Portugal, are as follows:

• A special Personal Income Tax (IRS) rate of 20% on employment income (category A) and professional income (category B) obtained in the Portuguese territory.
• An IRS exemption on income obtained from abroad covering categories A (dependent work), B (professional activities), E (capital income), F (rental income) and G (capital gains), which will be aggregated to determine the rate to be applied to the remaining income.

Unlike the previous NHR regime, however, income from foreign pensions – as well as income from ‘blacklisted’ low tax jurisdictions – will be fully taxable in Portugal.

How Do You Apply for the IFICI / NHR 2.0 Regime in Portugal?

The Ordinance provides that taxable persons who are resident in Portuguese territory must submit their application for the IFICI / NHR 2.0 by 15 January in the year following the year in which they become resident in Portugal. A transitional period applies to applicants who became tax resident between 1 January and 31 December 2024, with a deadline of 15 March 2025.

Individuals can either establish tax residency in Portugal voluntarily by securing a residence permit and establishing a permanent address, or automatically by residing in Portugal for more than 183 days within any 12-month period or establishing a habitual residence.

Applicants must generally not have been tax resident in Portugal in the five years preceding their application. They must also not have previously benefited under the former NHR regime or Portugal’s ongoing Return Programme.

The application of the IFICI is dependent on prior registration with the Portuguese Tax Authority (AT) and/or the government agencies listed below, as well as on accreditation by the respective employers or those contracting their services.

• Foundation for Science and Technology (FCT)
• Portuguese Trade and Investment Agency (AICEP)
• Portuguese Agency for Competitiveness and Innovation (IAPMEI)
• National Innovation Agency (ANI)
• Startup Portugal

These agencies are responsible for receiving and verifying registration applications, as well as ensuring compliance with the specific requirements for the IFICI regime.

Who Qualifies for Portugal’s New IFICI (NHR 2.0) Regime?

The list of highly qualified professions and industrial and service companies comprises:

• Directors (general managers and executive managers of companies).
• Directors of administrative and commercial services.
• Directors of production and specialised services (except directors of other specialised services and professions with command, direction or leadership in the security forces and services).
• Specialists in physical sciences, mathematics, engineering, and related technical fields (excluding architects, urban planners, surveyors and designers).
• Industrial product or equipment designers.
• Doctors.
• University and higher education professors.
• Specialists in information and communication technologies (ICT).

Workers in these fields must have at least either a level 8 qualification (Doctorate) under the European Qualifications Framework (EQF) or an EQF level 6 qualification (bachelor’s degree), plus three years of verified professional experience.

Which Companies Are Eligible Under Portugal’s IFICI Regime?

Highly qualified professionals that can benefit under the IFICI / NHR 2.0 regime must be employed by eligible companies, which include recognised technological and innovation centres, entities certified as start-ups, and those benefiting from specified investment incentives such as Portugal’s Investment Support Tax Regime (RFAI).

The Ordinance sets out a list of codes from the Portuguese Classification of Economic Activities (CAE) for industrial and service companies, which must also export at least 50% of their turnover in the fiscal year in which the applicant commences employment or in any of the two previous years:

• Extractive industries.
• Manufacturing industries.
• Information and communication activities, including –
  • Publishing activities (can include books, newspapers, computer programmes)
  • Film, video, television programme production, sound recording and music editing activities;
  • Software programming activities;
  • Software consultancy activities;
  • Data processing, hosting and related activities;
  • News agency activities.
• Research and development in the physical and natural sciences.
• Higher education.
• Human health activities.

What Documents Are Required for an IFICI / NHR 2.0 Application?

Applicants must submit the following documents, as applicable:

• If the activity is a job – copy of the individual employment contract.
• If the activity involves being a member of a corporate body – up-to-date permanent commercial certificate.
• If the activity involves scientific research: copy of grant contract.
• For highly qualified professions – proof of applicable academic qualifications.
• Declaration from the competent agency certifying compliance with the requirements related to the activity.
• Any other requested documents.

The relevant employer company must also prove compliance with the requirements established in article 58-A.1.c) of the established in article 58-A.1.c of the Tax Benefits Statute (EBF) by verifying that it meets the qualifying conditions and the taxpayer works in a highly qualified profession.

What Are the Record-Keeping and Verification Requirements?

Both the competent agencies and the respective employer companies are required to maintain and provide documentation that proves compliance with the IFICI / NHR 2.0 regime requirements.

Taxpayers are required to keep a record of their activities and income earned during any of the years the IFICI regime is applied. This documentation must be presented at the request of the AT.

How Long Do the IFICI / NHR 2.0 Benefits Last?

Like the previous NHR regime, the benefits under IFICI / NHR 2.0 are available for 10 calendar years from the time the applicant become tax resident in Portugal.

Taxpayers are required to notify the relevant authority if they no longer meet the requirements to benefit from the IFICI regime or if there is a change in their registration details. Notification must be submitted by 15 January of the year after the year in which the change of circumstances occurred, specifying the date on which the eligibility ended.

Taxpayers are also required to submit a new registration application if there is a change in the company that must verify the requirements for highly qualified professions or in the agency to which the registration application is submitted.

Is Portugal’s NHR 2.0 Regime Still Worth It?

The IFICI / NHR 2.0 has a much more targeted scope than the former NHR regime in terms of the eligibility criteria, but still offers highly attractive special tax incentives for a 10-year periods for expats and investors seeking long-term residence in Europe.

“NHR 2.0 is all about attracting talent and fostering the growth of Portuguese companies. Eligible businesses must have economic substance in Portugal, so it does does not apply to freelancers or anyone working for non-resident companies that are not operating in Portugal,” said Shelley Wren, Head of Business Development at Sovereign Portugal.

“Designed to position Portugal as a hub for scientific research and innovation, when placed alongside the other attractive residency options the NHR 2.0 regime further consolidates Portugal’s status as a leading destination for residency and inward investment in the European Union.”

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According to an informed source working in the Portuguese revenue authority – Autoridade Tributária e Aduaneira (ATA) – most NHRs appear to be filing tax returns stating that they have no discernible income, despite seemingly living a luxurious lifestyle. They are now being targeted by the ATA.

Anecdotal evidence suggests that most NHRs believe they are entitled to reside in Portugal for ten years without Portuguese taxation. This can be true if all their arrangements are correctly structured but most seem to have taken little care with their tax affairs and will be legally liable to pay tax on most of their worldwide income at rates of up to 48%.

It is probably fair to say that the ten-year tax-free deal under NHR does not do “precisely what it says on the tin”. Portuguese tax is not payable on overseas income if, but only if, it has either already been taxed, or been liable to tax, abroad. And that is the catch.

The legal position is quite clear. An NHR is required to file a return detailing their worldwide income and claiming exemption for any qualifying foreign income or capital gains that should not be subject to Portuguese tax. However, most NHRs appear to be filing returns that fail to declare any overseas income when much of their foreign income and capital gains does not qualify for exemption.

Portugal has stringent anti-avoidance laws that ‘look through’ most offshore (non-resident) structures and income and gains derived by the foreign entity are allocated to the Portuguese-resident shareholder. These laws are common to most high tax countries and are specifically designed to prevent profit shifting though low taxed entities. The rules are generally known around the world as controlled foreign company (CFC) or attribution rules.

Portugal’s CFC rules apply to tax resident individuals holding, directly or indirectly, at least 25% of the shares or voting rights of non-resident entities that are domiciled in a country, territory or region that is either on Portugal’s extensive ‘blacklist’ of tax havens or that are subject to effective rate of tax that is lower than 50% of the tax that would be due in Portugal.

Income or gains from any such non-resident entities are treated by Portugal as belonging directly to the beneficial owner and are therefore declarable and taxable in Portugal, irrespective of whether any distribution is actually made.

Under the OECD’s Common Reporting Standard (CRS), reports are made automatically to ATA by the tax authority of any jurisdiction worldwide in which a Portuguese resident has an account. The CRS applies globally, except in the US. The US has its own equivalent legislation, the Foreign Account Tax Compliance Act (FATCA), so there is nowhere to hide.

These CRS reports contain details of the amount of income and gains generated on the account, whether that be a personal, corporate or trust account.

The ATA seems to be very good at sifting through this information and contacting the relevant Portuguese residents if their tax return does not align with the information they are receiving from abroad. And that, of course, will trigger an investigation that is likely to result in a bill for the unpaid tax, as well as large fines for failing to properly declare worldwide income or gains.

The ATA seems to be extremely efficient in this area as this author, who is resident in Portugal and has NHR status, can personally attest. I had a mortgage loan on a Spanish property with Jyske Bank in Denmark. Jyske Bank reported the existence of the account used to service this loan to the ATA.

The ATA mistakenly concluded that I was receiving interest on the loan amount. This was an error. I was paying interest to service the mortgage loan. The confusion was swiftly resolved, but it was interesting to note that the ATA not only knew about the existence of the account but had details of the amount it contained and the interest paid in the previous tax year.

It was perhaps assumed that Portugal would leave the NHRs well alone because they were not a fruitful source of income and the Portuguese government would not want to deter the very same foreign investors that the NHR regime was designed to attract.

That may or may not have been true, but now that the NHR regime is largely being phased out there is no longer any disincentive on the part of the government to target taxpayers who have clearly ignored their tax obligations in Portugal and who are filing returns which bear little resemblance to reality.

The net is closing, and it is closing fast. Any NHRs who are in any doubt about their current, or past, tax obligations in Portugal are advised to seek professional advice without delay.

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Even more telling was the location of the searchers on the Google Trends platform. Although Google searches on Portugal were recorded in 29 regions, it was the states of Colorado, Oregon and Washington that topped the list. These were all Democrat strongholds that Vice President Kamala Harris managed to hold.

In a repeat of 2016, the re-election of Trump as US president has driven many Americans to take stock of their options to leave the country and, in some case, renounce their citizenship altogether.

Many wealthy Americans had already been making preparations to leave the US as a ‘Plan B’, regardless of which candidate won the presidency. But surveys have showed that an increasing number of Americans at all income levels also want to leave the country, with political and social unrest being a top concern, followed by the high cost of living.

Most Americans moving abroad look north to Canada or across the Atlantic to Europe, where popular destinations include Portugal, Spain, Malta, Greece and Italy. But all such destinations have stringent requirements.

Generally, immigration depends upon working in an in-demand trade or profession, making a substantial investment, buying real estate, having a spouse or partner who is a citizen, having sufficient passive or retirement income or having the ability to work remotely. Typically, the initial residence visa will be of limited duration, but will offer the potential to lead to permanent residence and / or naturalisation.

Portugal is an increasingly popular destination for Americans and offers a number of different routes for those who want to move there, including the well-known Portuguese ‘golden visa’ programme and the D7 visa scheme for retirees with passive income.

It is already one of the top holiday destinations for Americans when booking a vacation. Between January and June, Portugal received more than one million tourists from the US, an increase of 15% compared to the same period in 2023.

This increase in overnight stays was recorded across all regions, with the biggest increases recorded in Alentejo (18%) and the Azores (17.6%). The lowest were in Algarve (5.2%), Madeira (5.6%) and Greater Lisbon (5.7%).

According to data from Eurostat’s 2023 Migration and Asylum Report, more than 14,000 Americans are now living in Portugal, an increase of more than 40% over 2022. In that year, less than ten thousand North Americans still resided in Portugal (9,794).

In the Algarve region, 30% of houses were purchased by foreigners in 2023, according to relative data published by the National Statistics Institute (INE) in March.

There are many considerations that Americans should take into account make before moving abroad. The obvious ones are safety, accessibility, community, health care and opportunity, but they should consider how it might impact on their financial and tax position and how difficult it might be to adjust to a new culture and language.

Immigration laws and the rules for various residency programmes are also always changing. Politicians in many European countries have started pushing back against the golden visa programmes, particularly due to the unintended consequences for local economies, house prices and infrastructure. Anyone interested in moving abroad should always seek up to date advice on the best options available to match their particular circumstances.

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Portugal’s Prime Minister Luís Montenegro announced, on 4 July, that his government had approved 60 measures to “accelerate economic growth”, including a proposal to reduce the standard rate of corporate income tax by two percentage points a year from the current 21% to reach 15% by 2027.

Montenegro leads the centre-right Democratic Alliance (AD) coalition minority government, which won the March elections by a slim margin over the outgoing Socialist Party (PS). It holds just 80 seats in the 230-seat legislature.

“Our aim is to make life easier for companies so they can generate more wealth and, accordingly, pay better wages,” said Montenegro when presenting the programme ‘Accelerating the Economy’, following approval by the Council of Ministers.

The government, he said, wanted “companies with greater scale, more capitalised, prepared to invest and get return on their investments”.

To this end, the current 17% corporate income tax rate for small and medium-sized enterprises (SMEs), which applies to companies with profits up to €50,000 per year, will also be reduced to 12.5% by 2027.

At the same time the government pledged to transpose the EU Minimum Tax Directive, which introduces a global minimum effective rate of corporate taxation at an agreed minimum rate of 15% for multinational enterprise (MNEs) and large-scale domestic groups in the EU. The European Commission had set a deadline of 31 December 2023 by which member states were to have transposed this Directive into their national laws.

Montenegro said his government’s programme was also committed to innovation and sustainability. It is about “reinforcing all the mechanisms to enhance human capital and all the technology instruments so that research capabilities and scientific knowledge have a practical representation in companies’ lives,” he said, and about realising “the social and environmental goals, which we want to be beacons for the entire corporate fabric.”

The fourth vector of the economic programme was “investing in areas of specialisation where we are more competitive and have more growth potential”, he said. He cited tourism, where diversification and qualification “can remove seasonality and contribute to attracting more visitors as well as making its relative importance to the economy more sustainable.”

In this area, the government has already begun the parliamentary process of dismantling many of the restrictions that were imposed by its predecessor on the regulation of Alojamento Local (AL) licences governing short-term rentals. These measures formed part of a wider programme called ‘Mais Habitação’, aimed at easing the housing crisis.

In May, the new government abolished the special contribution to local accommodation (CEAL), a 15% tax based on factors such as the economic coefficient of local accommodation and urban pressure, which was due to apply from 25 June.

It also revoked the ‘coeficiente de vetustez’ (coefficient of agedness), which was to assess properties for the purposes of the IMI annual municipal property tax based on the year of their construction or last major renovation.

In addition to these changes, the new government has announced the end of the ban on issuing new AL licences, the end of the rule that prohibited the transmission of AL licences when the ownership of properties change and has given local authorities autonomy to manage the Al licensing system.

The post Portugal Prime Minister presents new ‘Accelerating the Economy’ programme appeared first on The Sovereign Group.

If you are considering buying residential property in Portugal as an investment, with a view to renting it out, you are advised to appoint a fiscal representative to handle the necessary accounting services in Portugal and to ensure that you stay in compliance with the Portuguese tax system.

Obtaining a Portuguese tax number and banking setup

On agreement to purchase, you will need to obtain an individual Portuguese fiscal number (‘Numero fiscal de contribuinte’), a nine-digit number that is used on all documents relating to the purchase of the property. This number can be applied for by your fiscal representative and is also required to open a bank account in Portugal.

For married couples, both individuals must obtain a fiscal number even if only one party is to purchase the property, or the Tax Department will not accept payment of the IMT Property Transfer Tax. If you are purchasing through a company, the company will also need a fiscal number.

When is a fiscal representative still advisable?

Non-EU residents no longer need to appoint a fiscal representative providing they adhere to online notifications from the Tax Department. However, these are in Portuguese, and it is easy to miss a deadline because the Tax Department generally requires responses in 10 to 15 days. It is therefore advisable to appoint a ‘fiscal representative’ to liaise with the Tax Department and deal with taxes and all communications on your behalf.

Annual property taxes on rental properties in Portugal (IMI and AIMI)

As a property owner in Portugal, you will then be liable to pay the annual municipal property tax (IMI), which is based on the ratable value as assessed by the Tax Department based on a property’s size, location and construction.

An additional property tax (AIMI) is also applied to individual property owners, including non-residents. This is an extra property charge levied if the tax value of the individual’s total properties exceeds €600,000. Properties owned by a company are also charged the AIMI but on the full tax value of the property.

Tax and registration rules for long-term rental income

All long-term rentals require the rental contract to be registered at the Tax Department and invoices should be issued accordingly. While this should be a straightforward task, it is conducted in Portuguese, so it is easy for errors to go unnoticed. You must also be fully aware of all the rules and obligations attaching to a landlord in Portugal, as well as those of the tenant.

Short-term rentals (Alojamento Local): licensing and tax treatment

Short-term rentals, known as Alojamento Local (AL) in Portuguese, are more complex. Any property owner who rents their property, either privately or through an agent, is legally obliged to register this activity, obtain a licence and pay taxes on the income earned.

VAT, social security and reporting obligations for AL landlords

To obtain the AL licence, you must first register the activity at the Tax Department and the Social Security office. Effectively this means you are registering as a ‘self-employed’ person and your business activity is renting your property.

You will also be automatically registered under the simplified VAT (IVA) regime but unless you exceed €15,000 rental income in the first year, you will be exempt from charging and paying VAT. If, however, you exceed the €15,000 income you will be obliged to submit quarterly VAT reports from your second year of renting. This is often the case now in Portugal with the higher value properties on the rental market.

When registered, you are required to apply for an AL touristic licence at your town hall (Câmara Municipal), where you must submit all necessary documentation and ensure that your property is fit for purpose. This should include up-to-date certifications for utilities, and compliance with standards of quality and safety, in case the property is subject to council inspection.

Ongoing compliance duties for Alojamento Local operators

As soon as you start operating your AL, there are various obligations with which you have to comply:

• Issue invoice receipts (recibos verdes).
• Account for and pay tax on the annual rental income, as well as IVA if applicable.
• Certain Portuguese municipalities have also implemented a Municipal Tourist Tax (Taxa Municipal Turística) on overnight stays.
• Report to AIMA (Portugal’s immigration agency) details of all foreign guests on each visit.
• It is mandatory to have landlord’s insurance.
• It is mandatory to maintain an official complaints book.

Recent changes to Portugal’s short-term rental rules

The picture was set to get even more complicated with the entry into force of the ‘Mais Habitação’ legislative package in October 2023, which introduced several restrictive measures for short-term rentals in Portugal, including increased tax through an Extraordinary Local Accommodation Contribution (CEAL).

Fortunately, the new government, which came into power in April, has recognised the contribution of tourism and has now revised these policies. In May, a decree-law amended the framework for short-term rental to give each municipality autonomy on AL licensing and, in June, the Portuguese parliament approved legislation to repeal the CEAL.

When an AL is granted, the Tax Department will allocate the property from personal use to business use, which can alter the tax profile of the owner. If resident in Portugal, you should assess how this could impact your personal tax returns.

Capital gains tax implications when selling a rental property

If the property is later sold, it is very important to remember that the capital gains tax (CGT) treatment of an AL property is different because it will be classified as a business asset for CGT calculations. Unless the business activity is ceased three years prior to the sale, the vendor will not be permitted to deduct any costs from the sale price.

Professional support for rental income compliance in Portugal

Renting out your investment property requires careful planning and management. Sovereign can act as your fiscal representative, register you as self-employed, apply for the AL licence, register the long-term rental contracts and provide accounting services.

Sovereign can further provide calculations to assess how renting could impact your personal tax position.

The post How Rental Income Is Taxed in Portugal: Rules Landlords Need to Know appeared first on The Sovereign Group.

Portugal’s new government announced that it plans to reintroduce tax breaks for foreign residents, as part of a package of 60 measures to stimulate growth that were approved by the cabinet on 4 July. The aim is to attract highly skilled workers and the proposed incentives will not be extended to wealthy expatriate retirees.

Last October, then socialist prime minister António Costa announced that the government would close the special Non-Habitual Resident (NHR) special tax status for new entrants in 2024.

Under the NHR tax regime, first introduced in 2009 during the global financial crisis, qualifying entrepreneurs, professionals, retirees and high net worth individuals could benefit from a 20% flat rate of tax on Portuguese-source income for 10 consecutive tax years, while most foreign-source income was exempt.

NHR status applied to qualifying applicants of any nationality, including non-EU/EEA citizens, provided they were tax resident in Portugal for the relevant tax years and had not been resident in Portugal in any of the five preceding years.

According to data from the Tax and Customs Authority, over 74,000 people benefited from the NHR tax exemptions in 2022, costing the state budget more than €1.5 billion, an annual increase of 18.5%.

New prime minister Luís Montenegro, who won an election in March as leader of the centre-right Democratic Alliance (AD), leads a minority government after he rejected entering a formal coalition with a far-right partner.

Speaking to the Financial Times, Finance Minister Joaquim Miranda Sarmento said the reintroduced regime would offer the same 20% flat rate of income tax but only cover “salaries and professional income”. As well as foreign nationals, the special tax breaks would also be available to returning Portuguese citizens who have lived abroad.

“It will exclude dividends, capital gains and pensions, which was a problem between Portugal and countries like Finland or Sweden,” he said.

The Nordic countries led complaints that the NHR regime, which initially made pensions exempt from tax, was attracting retirees who stopped paying tax in their home countries. In response, Portugal introduced a flat 10% tax rate on pension income received in Portugal, while capital gains were only exempt in a few cases.

“This will attract some people,” said Sarmento. “It’s not sufficient, but it’s something the government can do.” He added that the government would not reverse the previous administration’s decision to end ‘Golden Visa’ real estate investment options.

In effect, the proposals will expand the list of professions and business activities that are eligible under the Tax Incentive Scheme for Scientific Research and Innovation (IFICI) regime, which came into effect as of 1 January 2024 to replace the NHR regime and applies to:

• Professors and scientific researchers.
• Research and development activities.
• Job positions and members of the board of certified start-ups.
• Job positions or other activities carried out by tax residents in the Azores and Madeira.

This means that individuals who reside in Portugal for at least 183 days per year and establish their tax residence in Portugal will be taxed at a 20% flat rate on income from qualifying employment or self-employment in Portugal for a period of ten years, renewable.

The changes should be implementable through regulations under the IFICI regime and will not therefore require additional approval by the Portuguese parliament.

“It is imperative to take guidance on how you will be taxed in Portugal and if any of these proposed changes to the fiscal landscape may be of benefit to your personal circumstances,” said Shelley Wren, Head of Business Development at Sovereign Portugal.

The 60 measures unveiled by the government included a cut in the standard corporate income tax rate from 21% to 15% by 2027, and a new mandatory minimum tax rate of 15% for all multinationals operating in Portugal and for large Portuguese companies. Other tax proposals introduce incentives for start-ups and research and development, as well as support for tourism and defence.

For further information or to discuss the current options available for establishing residence in Portugal, please contact Sovereign Portugal by phone on +44 7718 538 758 or by email at serviceinfo@SovereignGroup.com.

The post Portugal to reintroduce NHR-style tax breaks for skilled foreigners appeared first on The Sovereign Group.

Given its high quality of life and low cost of living, an attractive climate, and beautiful urban and rural settings, it is not surprising that Portugal is a top destination for expats looking to relocate, either for work or retirement. Many foreigners have also invested in a second home in Portugal. The Portuguese real estate market is well developed and attracting an ever-wider variety of nationalities.

The government of Portugal maintains an open-door policy toward foreign direct investment (FDI) and sees it as a driver of economic growth. Portuguese law is based on non-discrimination principles, such that there is no legal distinction based on nationality and there are no restrictions on foreign property ownership. As a foreigner, you can own land, apartments, houses and commercial properties just like a Portuguese citizen.

Real estate continues to attract investors to Portugal. In the first quarter of 2024, foreign direct investment in real estate was €682 million, although this figure fell compared to the €853 million recorded in the last quarter of 2023 when the clock was ticking on the exclusion of all real estate investment options available under the Golden Visa scheme.

Despite this, the Portuguese real estate market continues to represent the largest share of the €1 billion in foreign direct investment in Portugal registered between January and March this year. According to the Bank of Portugal, investors resident in European countries invested the most in Portugal between January and March, totalling €544.03 million, followed by those from Asia (€211.81 million), America (€159.53 million) and Africa (€108.83 million).

Since the removal of all real estate-related qualifying investments in October 2023, the most popular passive investment option for the Golden Visa is to make an investment of €500,000 in qualifying investment or venture capital funds. It is worth remembering that the Golden Visa remains the only route to an EU passport without a minimum six-month stay at this investment level.

Once an individual and/or family member has maintained legal residency in Portugal for five years or more (calculated from the submission date of their initial residency application), they are eligible to apply for Permanent Residency in Portugal or Portuguese/EU citizenship.

Buying property in Portugal

To buy a property in Portugal, non-residents must obtain a Portuguese taxpayer number for tax purposes. EU residents may obtain this number directly from the tax administration (in person or by means of an appointed proxy), while non-EU residents must appoint a Portuguese resident ‘fiscal representative’, such as Sovereign, to handle matters with tax authorities.

Buying a new property in Portugal can be expensive, but ultimately the cost depends on the location and the age of a house. In some locations such as city centres or historic villages, the new property options may be extremely limited.

The Property Buying Process in Portugal

1. Legal due diligence and appointment of a lawyer

   Once you have made the decision to purchase a Portuguese property and have confirmed with the seller, you will need to appoint a lawyer (‘advogado’). It is important to confirm with the lawyer precisely what is to be included in the conveyancing fee and to fully describe the land and construction details of your purchase. Conveyancing fees are usually 1% of the purchase price but can be negotiable, particularly with higher value acquisitions. The lawyer will carry out due diligence checks on the property details – the legal ownership, registration at the tax department (‘Serviço de Finanças’) and Land Registry (‘Conservatória do Registo Predial’), as well if there are any charges against the property.

2. Portuguese tax number and fiscal representation

   On agreement to purchase, you will need to obtain an individual Portuguese fiscal number (‘Numero fiscal de contribuinte’), a nine-digit number that is used on all documents relating to the purchase of the property. This number is also required to open a bank account in Portugal. For married couples, both individuals must obtain a fiscal number even if only one party is to purchase the property, otherwise the Tax Department will not accept payment of the IMT Property Transfer Tax (‘Imposto Municipal sobre Transmissões Onerosas’). If you are purchasing through a company, the company will also need a fiscal number. Non-EU residents must appoint a ‘fiscal representative’, who will obtain the fiscal number from the tax department. Sovereign will charge an initial registration fee and an ongoing annual fee for continued representation. This representation can only be cancelled by the appointment of another representative or if the individual becomes an EU resident.

3. Promissory contract and deposit payment

   A promissory contract (‘Contrato de Promessa de Compra e Venda’) setting out the terms agreed between the vendor and the purchaser will be drawn up and signed, at which time a deposit (usually between 10% and 30% of the purchase price) is also paid. This contract stipulates the date by which the property Deed must be completed and cannot be broken without one of the parties receiving compensation. Provisional registration of the intended purchase should also, where necessary, be made at the Land Registry (‘Conservatória’).

4. Transfer taxes and pre-completion payments

   Up to 48 hours before the purchase and sale contract (‘Escritura de Compra e Venda’) is signed, the lawyer will pay the IMT Transfer Tax based on a variable percentage of the purchase price from zero to 8%, depending on whether the property is a primary or secondary residence, is in an urban or rural area, the value of the transaction and whether the buyer is an individual or company. Stamp Duty (‘Imposto de Selo’) at 0.8%, is calculated on the acquisition value of the property, which is recorded in the final acquisition deed.

5. Property deed execution before a notary

   The purchase and sale contract serves as the Deed of the property. This must be prepared and verified by a Notary (‘Notário’), who will identify the relevant parties agreeing to the purchase / sale of the described property and the price agreed. A further Stamp Duty may be payable to the bank if the transaction involves mortgage financing.

6. Land Registry and tax authority registration

   Once the Deed is signed, registration can then be completed at the Land Registry. The lawyer should also confirm the registration of the new owner(s) at the local Tax Department (‘Finanças’). You will not need to be present if you have given your lawyer power of attorney.

What Taxes Apply to Property Ownership in Portugal

Annual Property Taxes

In the calendar year following the Deed date, the Tax Department will issue the first IMI Municipal Property Tax (‘Imposto Municipal sobre Imóveis’) assessment, which will be due for payment in May. As your fiscal representative Sovereign will receive all your correspondence from the tax department and will contact you to arrange payment.

The IMI is charged at a maximum of 0.5% of the rateable value of the property (Valor Patrimonial Tributário or VPT) as set by the Tax Department based on a property’s size, location and construction. The rateable value is usually less than the purchase/market value. IMI bills are generally issued either twice a year in May and November. For higher values a further instalment may be issued in August.

An AIMI additional property tax (‘Adicional ao Imposto Municipal Sobre Imóveis’) is also applied to individual property owners, including non-residents, if the sum of all property tax values is equal to or exceeds an allowance of €600,000. Married couples who own a property jointly can combine their allowances to gain a tax exemption of up to €1.2 million before attracting AIMI taxation.

AIMI is charged at a rate of 0.7% on an amount over €600,000 up to €1 million, 1% on an amount between €1 million and €2 million and 1.5% over €2 million. AIMI is due for payment in September.

Properties that are held by companies will pay a flat AIMI tax bill of 0.4% on the full property tax value. However, properties held by non-resident companies that are registered in ‘blacklisted’ jurisdictions will pay an IMI of 7.5%, plus the additional AIMI of 7.5%.

Owning a property overseas, even if you do not intend to live there throughout the year, could impact your tax residency. An individual is deemed to be resident in Portugal for tax purposes if he/she either:

• Spends more than 183 days, consecutive or not, in Portugal in any 12-month period starting or ending in the fiscal year concerned.
• Maintains a residence in Portugal during any day of the above period with the intention to use it and retain it as their primary residence.

If an individual is classified as a tax resident in Portugal, then all their worldwide income and assets will be subject to Portuguese taxation.

Capital Gains Tax on the sale of property in Portugal

If a property in Portugal is sold by an individual, the sale must be declared to the Tax Department and a tax return must be submitted in the tax year following the sale of the property.

Portuguese Capital Gains Tax (‘Imposto sobre Mais-Valias’) is paid at progressive rates on 50% of the difference between the purchase value as declared on the Deed of purchase and the sale price as declared on the deed of sale, less any costs incurred during the transfer of ownership and any property improvement costs that have incurred within 12 years of the sale.

If land was initially purchased and a property subsequently built, there is the option of either:

• Taking the land purchase price plus the cost of construction as the starting price for the CGT calculation.
• Or using the tax value allocated to the property when construction has been completed.

If the vendor is a tax resident of Portugal, generally 50% of the capital gain will be added to annual earnings and will be subject to tax at the standard income tax scale rates. The same applies to non-tax residents, but their worldwide income will be assessed in determining the applicable tax rate.

In the case of tax residents, the gain may be wholly or partially exempt if the property sold was the taxpayer’s primary residence in the previous 24 months and the sale proceeds, less any outstanding loans, are reinvested in the acquisition, improvement or construction of another primary residence in Portugal or within the EU or EEA within 36 months from the sale or in the period of 24 months previous to the sale.

Further exemptions apply to retirees over the aged of 65 who reinvest, within six months, capital gains arising from the sale of real estate into a pension scheme or insurance fund.

It is very important to remember that the CGT calculations may be very different if the property being sold is registered for short-term letting under an ‘Alojamento Local’ (AL) licence. This is classified as a business activity, so the Tax Department will automatically assume that the property was a business asset for CGT calculations. Unless the business activity is ceased three years prior to the sale, the vendor will not be permitted to deduct any costs from the sale price.

Inheritance Tax in Portugal

The Portuguese inheritance law provides for the payment of a ‘stamp duty’ of 10% (Imposto de Selo) on the value of the assets located in the country, which can be real estate, movable assets and copyrights, shares or works of art. In the case of real estate, the stamp duty is calculated on the VPTof the property.

However, in most cases the heirs do not pay any inheritance tax in Portugal. Since 2009, the spouse or unmarried partner, descendants (children and grandchildren) and ascendants (parents and grandparents) are exempt. Known as the ‘legitimate heirs’, they do not have to pay inheritance tax but do have to declare the assets received to the IRS.

CGT implications for Corporate Ownership

If a property in Portugal is held by an offshore company, the vendor has the option of selling the company shares or selling the property out of the company.

Transferring ownership of the company shares to the buyer means avoiding many of the procedures associated with buying or selling a property in Portugal and means that the buyer will avoid the IMT Transfer Tax on the purchase, as well as the Stamp Duty charges, notary and registration fees.

Before 2017, corporate ownership also had the advantage that, if the property was sold by transfer of ownership of the company, there was no requirement to submit a CGT declaration in Portugal. However, beneficial owners, directors and shareholders are now required to register on the Central Register of Beneficial Owners (RCBE). This means that a share transfer must be declared in Portugal and CGT must be paid at 28% on the whole of any gain unless the gain is taxed in the company’s place of residence in accordance with the Double Taxation Treaty in place.

CGT also applies if the property is sold out of the company. A declaration must be submitted within 30 days of the date of the deed of sale. Structural improvements and repairs on the property from the last 12 years may be offset against the CGT if the invoices are in the vendor’s name and include the vendor’s Portuguese fiscal number and the property address.

Sovereign will provide clients with a tax assessment and guide them on the best corporate structure suitable to their individual needs.

Many properties in Portugal may still be held by a company incorporated in a jurisdiction on Portugal’s ‘blacklist’ of tax havens and are subject to higher taxes in Portugal.

Clients should not be afraid to purchase a property in this situation providing all the necessary tax obligations have been met prior to the transfer of the property to their name. The company can generally be re-domiciled to a white-listed jurisdiction.

The two most widely used white-list jurisdictions are the US (Delaware) and Malta. Neither are considered fiscally privileged by the Portuguese government, and both have established legal systems, simple corporate compliance requirements and re-domiciliation legislation in place.

The post Portugal Property Ownership: Benefits, Rules and Tax Considerations appeared first on The Sovereign Group.

A full member state of the European Union since 1986, Portugal has emerged as the primary destination for individuals, families and businesses seeking residence and a trading presence in the EU. Portugal’s key attractions are a stable political and social environment, clear and transparent tax rules, good infrastructure, a favourable investment climate, a skilled labour force and an excellent quality of life.

The Sovereign Group opened its office in Portugal in 1999, specifically to meet the increasing demand from foreign residents and foreign property owners for ‘fiscal representation’ and accounting services in Portugal. Following the introduction of a range of residence-by-investment (RBI) programmes, our Portugal-based team has also been assisting investors, retirees, and their families to establish and maintain residency under Portugal’s ‘Golden Visa’, Corporate Establishment and Passive Income (D7) programmes.

Golden Visa Residence Permit

First introduced in 2012, the Portuguese ‘Autorização de Residência para Investimento’ (ARI) – more commonly referred to as the Portugal Golden Visa Residence Permit – provides qualifying individuals and their family with full rights to live, work and study in Portugal.

The Golden Visa also provides visa free travel access throughout the Schengen zone and, after five years of residence in Portugal, the right to apply for permanent residency or citizenship.

The programme is particularly attractive to those who do not intend to move to Portugal immediately but wish to put in place an alternative option, or ‘plan B’, in case they, or any of their family members, might wish (or need) to relocate in the future. This is because the Golden Visa has only a token ‘minimum stay requirement’ to maintain the visa – an average of only seven days per year.

Golden Visa Benefits

Benefits of the Golden Visa programme include, but are not limited to:

• Multiple investment options.
• An applicant may include dependent children and parents.
• Visa-free travel within the Schengen Zone for 90 days within any 180 days.
• Low minimum stay requirement, averaging just seven days per year.
• A route to qualification for citizenship or permanent residency after five years.
• No tax on global income if the holder is resident in Portugal for less than 183 days per year.

Golden Visa Qualifying Investment Options

1. Invest €500,000 in a qualifying investment fund(s).
2. Establish a single-shareholder private limited company that creates at least 10 sustainable jobs that are based in Portugal.
3. Invest €500,000 in scientific research in Portugal that will benefit the national scientific and technological infrastructure.
4. Donate €250,000 in support of an artistic production, or the maintenance or recovery of cultural heritage.
5. Invest €500,000 into a new or existing company that causes the creation of 5 or 10 jobs respectively for a minimum period of three years.

The minimum investment amounts for options 3, 4, and 5 can be reduced by 20% if the investment activity is carried out in a low-density area (defined as areas with fewer than 100 inhabitants per square kilometre or GDP per capita of under 75% of the national average).

Golden Visa Qualifying Investment Funds

Since the removal of all real estate-related qualifying investments in October 2023, the most popular passive investment option is to make an investment of €500,000 in qualifying investment or venture capital funds.

To qualify, investment funds must be registered and regulated by the Portuguese Securities Market Commission (CMVM), have at least 60% of capital invested in Portugal, and may not, either directly or indirectly, be invested in real estate.

The benefits of choosing to invest in a qualifying investment fund include:

• Qualifying minimum investment requirement of €500,000.
• Fully managed solutions are available.
• Regulated by the Portuguese Securities Market Commission (CMVM)
• A wide range of assets classes to choose from.
• 0% tax applicable to the purchase or sale of units.
• 0% income tax on investment income for non-tax residents and only 10% for tax residents.

Applicants can choose to diversify their investment across any number of qualifying funds to gain access to different asset classes, sectors and fund managers and thereby to reduce the overall risk in their investment portfolio.

The Sovereign Group does not provide investment advice, but we have conducted preliminary due diligence on a panel of qualifying investment fund managers that we are comfortable to introduce to interested parties. The enables applicants to examine and discuss the investment strategy, terms and conditions across a range of funds before determining which overall investment strategy is most suitable to their personal needs.

Additional Qualification Requirements

All Golden Visa applicants must also provide evidence of the following:

• Medical insurance
• Valid Passport & Schengen Visa
• Confirmation that they have made a qualifying investment.
• A Portuguese bank account and tax ID
• Evidence that they have submitted their application and biometrics to the AIMA.
• No previous criminal convictions of a crime punishable in Portugal by more than 1-year imprisonment

EU, EEA and Swiss citizens do not qualify for the Portuguese Golden Visa Residence Permit. Sovereign does however provide alternate residency solutions for EU, EEA & Swiss citizens who would like to establish residency in Portugal.

Application Process

With a long-established office, team and professional service partners in Portugal, Sovereign is very well placed to assist, advise and support applicants throughout the application process. We work closely with applicants during each stage to ensure that they will qualify for and ultimately receive the Golden Visa Residence Permit.

The application process involves the following:

Stage 1 – Hold an initial consultation with a Sovereign residency and citizenship adviser to determine the most suitable programme and investment options available.

Stage 2 – Sovereign will prepare and provide a comprehensive proposal detailing the benefits, requirements and investment options applicable. Our team will introduce applicants to qualifying investment providers.

Stage 3 – Working with a Power of Attorney, Sovereign will assist with opening a local bank account and obtaining a Portuguese tax identification number.

Stage 4 – Sovereign will work with applicants to prepare and submit their Golden Visa application. Once submitted and approved online, all applicants are required to personally attend an appointment with the Agency for Integration, Migration, and Asylum (AIMA) to submit the original documentation and their biometric data.

Stage 5 – If all application requirements have been met, the related documentation is in order and the biometrics data has been verified, the application will be approved.

Stage 6 – Once approved, individual residency permit cards will be issued.

Minimum Stay and Permit Renewal Requirements

Once an application has been approved, applicants are issued a Portuguese residency card, which is valid for two years. To maintain residency, the card must be renewed at the end of the second year, at which time a three-year residency card will be issued. The following chart provides an overview of the ongoing minimum stay and permit renewal requirements.

To ensure the successful renewal of residency cards, all initial investments and application requirements must continue to be met.

Documentation required for application

From the applicant’s country of origin:

• Valid passport and Schengen visa.
• Criminal Record Certificate.
• Proof of residence.
• Proof of professional occupation.
• Marriage certificate, if including a spouse.
• Birth certificates of any children to be included.
• Birth certificates of the applicant, if including dependent parents
• Certificates of no income for parents under the age of 65.

All foreign-language documents must be translated into Portuguese and certified by a Portuguese consulate-accredited translator or a Portuguese lawyer.

From within Portugal:

• Completed application and permission to search for Portuguese criminal record.
• A Portuguese tax identification number.
• Certificate of no debts from the Portuguese tax and national insurance offices.
• Signed statement by the applicant confirming that they have fulfilled qualifying investment requirements.
• Evidence that the minimum investment has been made.
• Receipt of payment of the application fee.

Sovereign representatives will be on hand to assist applicants and their families to secure and complete the documents required to successfully submit and process their application.

Portuguese Citizenship or Permanent Residency

Once an individual and/or family member has maintained legal residency in Portugal for five years or more (calculated from the submission date of their initial residency application), they are eligible to apply for Permanent Residency in Portugal or Portuguese citizenship.

Please note applicants must also meet a Portuguese language requirement (Level A2), provide evidence that they have developed ‘plausible links and connections’ to Portugal and have not been convicted of a crime that is punishable in Portugal by a prison sentence of three years or more.

Upon approval of either option, investors can sell and recuperate their initial Golden visa qualifying investment.

Comprehensive Residency, Tax residency and Citizenship planning

Sovereign’s global office network, experienced local teams and professional service partners ensure that we are well placed to assist clients in the development and implementation of the most suitable overall residence, tax residence and/or citizenship strategy for their needs.
Sovereign works closely with applicants during each stage of the planning and implementation process. When combined and managed correctly, the following Sovereign Group services will also enable clients to develop and implement a comprehensive, flexible and tax efficient strategy:

• International residency and citizenship programmes.
• Corporate structures and banking.
• Tax residency programmes and planning.
• Trusts and foundation structures.
• Estate and succession planning.
• International retirement plans.
• Wealth management.
• International life and medical insurances.

For further information, to discuss your requirements and/or to determine whether you qualify for any of our residency or citizenship programmes, please contact Sovereign’s Residency and Citizenship Planning team below.

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