Portugal remains a popular alternative residence for South Africans, but time is of the essence

South Africans looking for a second residency or an offshore investment locale have long found Portugal an attractive destination. With its EU membership, stable political and social environment, transparent tax rules, sound infrastructure, favourable investment climate, skilled labour force, and excellent health and education systems, Portugal is an ideal location for an alternative residency.

Since 2012 it has facilitated over €6-billion of inward investment since through its Golden Visa program.

Recent changes to the scheme would seem to deter financial immigration and investment – but at a closer look - international investors are as welcome as ever.

Ceri Pratley, Head of Residency and Citizenship-by-investment Services at Sovereign Trust, says that a new ruling prevents international investors from purchasing property to qualify for Portuguese residency-by-investment, which was previously permissible under the Golden Visa scheme.

However, says Pratley, non-EU nationals still have a number of investment options, including the establishment of a single-shareholder private limited company that creates at least 10 sustainable, Portugal-based jobs. The scheme also allows for the investment of €500,000 in an accredited public or private institution involved in qualifying scientific research, or €250,000 in an accredited institution that conducts qualifying projects related to artistic production and cultural heritage.

Other qualifying Golden Visa investments, all with a €500,000-entry requirement, include acquiring units in an investment or venture capital fund that has at least 60% of its capital in the country, with a maturity of at least five years; incorporating a new company that creates five new job positions that are sustained for three consecutive years; and injecting capital into an existing company that leads to the maintenance of 10-plus existing jobs positions. These funds and companies must all be based in Portugal.

Further, Rone Silke, Business Development Consultant at Sovereign Trust South Africa, explains that some foreign workers who become tax residents benefit from a favourable tax regime for 10 years: “If your employment income is derived from high-value-added activities of a scientific, artistic or technical nature you could pay a flat taxation rate of just 20% while, with certain provisos, other income (like that from foreign-source dividends, interest, capital gains, and property rentals) could be entirely exempt from personal income tax.”

This ‘tax holiday’ is entrenched in Portugal’s non-habitual resident (NHR) scheme but Silke warns that the fate of NHR – like that of the Golden Visa – hangs in the balance. “The current conditions will remain in place for those who enter Portugal before the cut-off date in 2024, which remains to be confirmed. Likewise, all who are currently under the umbrella of the Golden Visa will remain unaffected by the plan to remove property as an entry mechanism.”

Silke notes that the ruling is a reaction to foreign investment into property contributing to inflated property prices and rents, which have driven the cost of living up for Portuguese citizens. The option to gain residency by making a capital transfer of at least €1.5-million (R30.4-million) to Portugal has also been rescinded.

Other Golden Visa benefits remain unaffected. As before, the visa enables Portuguese citizenship within five years, at which time visa-free access to the Schengen states is possible; and applicants are only required to spend seven days per year in Portugal.

The D2 and D7 visas (respectively, for entrepreneurs, freelancers, and independent service providers who plan to move to Portugal; and for skilled workers with monthly income that is at least equal to the Portuguese minimum wage of €822 (approximately R17 000.00), either from a passive source or remote work) also remain unchanged and provides viable means for non-EU citizens to become permanent residents and citizens of Portugal.

Pratley notes that demand for Golden Visas is high, with 180 being issued in May 2023 alone, but that this number could be attributed to people taking advantage of the benefits before the government shuts down both the Golden Visa and the NHR schemes in 2024.

“If you’re looking to invest offshore in, or emigrate financially to Portugal, time is of the essence,” says Pratley. “It’s also essential that you work with a professional consultancy that is able to advise on how best to generate, structure and protect your income and assets in foreign jurisdictions, as well as on which visa is the best fit for your requirements.”