Over the recent years. Americans are the top investors in Portugal golden visa program. We have compiled important tips to make informed decisions when investing Portugal.
Portugal with the exemption of real estate offers two popular routes such as cultural donation and PE/VC investment funds under golden visa program.
Reporting
Americans applying for Portugal must file (and potentially pay) federal US taxes.
- Foreign Bank Account Report (FBAR): Mandatory for expats with over $10,000 cumulatively across foreign financial accounts
- Statement of Specified Foreign Assets (Form 8938): Mandatory for expats whose foreign financial holdings exceed $200,000 on the last day of — or $300,000 at any point during — the tax year
Compliance
- FATCA – Be sure the Portuguese bank you open an account at is FATCA compliant and that they can provide custodian services to US investors.
- PFIC – File IRS form 8621 annually starting from the first year of investment; otherwise, you will likely be subject to high-interest penalties. It’s highly recommended to use a qualified expert for this. Must for U.S. person that is a direct or indirect shareholder of a passive foreign investment company (PFIC)
- PFIC – It’s best to do the QEF election in the first year and annually after that. (It’s possible to make the election in a subsequent investment year, but it becomes more complicated). Ask if the fund provides a PFIC annual statement—for it to be valid, the statement needs to be issued by the PFIC and signed by the authorized representative.
Ask Questions
Nomad Gate community has put together a nice guide for choosing the best investment fund. Prospective investors must be mindful and must do their own research, to be on a safe side.
- Which strategy do I prefer (Conservative, Balanced or Aggressive)? Is capital preservation or maximizing potential return more important? How much risk am I willing to take?
- Which sector do I want to invest in (real estate, farmland, healthcare, tech companies, wine industry, etc.)?
- Is it important that it’s an ESG fund?
- How long can I keep my capital locked in?
- Do I want to invest only in one fund or further diversify the investment? Some funds require you to make the full €500,000 investment solely into their fund. Others let you acquire units for a smaller amount if you wish, allowing you to split the investment into more than one fund.
- You must ask the following questions to fund manager or advisers
- What are the credentials and track records of the fund’s managers and advisors? In case it’s a real estate focused fund, what is the developer track record? Do they have experience with Golden Visa investors?
- What are the fund’s investment strategy and risk profile?
- How diversified is the fund (how many companies, real estate projects, etc. does it invest in, and how different are they)?
- How much leverage do they use for investments?
- What is the target fund size, and how much have they raised so far? Have they reached their first close? What is their contingency plan if they don’t raise as much funding as expected?
- How much “skin in the game” do the managers/advisors have (how much have they invested themselves)?
- What is the expected target return per annum?
- Does the fund distribute dividends (how often and how much)?
- What are the fees (subscription fee, management fee, performance fee)? Is the subscription fee additional or included in the investment amount? Does the stated management fee assume a specific fund size (will the percentage be higher with a smaller size)? Does the performance fee have a hurdle?
- Do they provide annual PFIC information statements (for US investors)?
- What is the exit strategy for investors? Is it possible to exit before the fund term ends?
