It has been a volatile few weeks for those considering a move to Portugal, its government having called time on two long-term schemes used by international buyers: the golden visa and the non-habitual residence (NHR) regime. The news was delivered with little fanfare and even less detail. We take a look at what it means for potential homebuyers there.
Golden visas shine
Eleven years ago, desperate for inward investment, the Portuguese government introduced the golden visa scheme, also known as the residence permit for investment activity. Non-EU foreigners buying property worth more than €500,000 who were approved for the visa had the right to work, live and study in Portugal for five years, along with access to Europe’s Schengen area.
It was an immediate hit. Figures from Global Citizens Solutions, a “migration consultancy firm”, show that between October 2012, when the scheme was introduced, and August 2023 more than €6.4 billion was spent on qualifying properties by almost 12,000 successful applicants. Most came from China, followed by Brazil and the US, with UK applicants joining in after Brexit.
In that time property prices in Lisbon, Portugal’s capital, increased steadily — from 4.9 per cent growth in 2015 to 11.2 per cent in 2021. Figures from the estate agency Savills for the first six months of 2022 show that property price growth in Lisbon outpaced London and Berlin. All well and good, but this resulted in a shortage in affordable housing in the city, and in Portugal’s other popular destinations for overseas buyers. The Portuguese government responded last year by exempting golden visas for Lisbon, Porto and most of the Algarve; this year it removed property purchases altogether.
“We saw multiple reactions,” says João Cunha Vaz, an immigration lawyer with Edge International. “Those not yet in the visa system hoped to proceed quickly before it closed. Those already approved for residency were concerned that [their visa] would not be renewed when it expired. They have now been reassured that it will be.”
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Alternatives to the golden visa
There are options for those still hoping to relocate to Portugal. “In the past, over 90 per cent of investors applying for a golden visa did it through real estate,” Cunha Vaz says. “It was the most straightforward way. But other ways to qualify for Portugal’s golden visa remain open, including investing €250,000 in cultural or artistic projects, or €500,000 in businesses, research activities or investment funds.”
British passport holders planning to relocate have a range of other visas to consider: the D2 for entrepreneurs, D3 for “highly qualified” professionals and D4/D5 for students. The D7 “passive income” (such as from a pension or investment income) visa is perhaps the most comparable replacement for the golden visa, and the best option for those who are retired or not working. It allows non-EU nationals an initial stay of two years, renewable for a further three years, after which they can apply for citizenship. Applicants must spend six consecutive months or eight non-consecutive months in Portugal each year.
Miguel Lacerda from Savills Lisbon says the golden visa represents only 4-5 per cent of his market of mainly higher-end buyers, while Alison Buechner Hojbjerg, a director of QP Savills in the Algarve, says she has only sold six properties to buyers using the golden visa scheme. “For our wealthy international buyers, the NHR is of far more interest. There’s no doubt that it has attracted them,” she says.
Non-habitual residency
The decision to call time on Portugal’s NHR regime was announced by the prime minister António Costa during a TV interview this month. The scheme was introduced in 2009 for anyone who had not been resident in Portugal for the five years previous, and was aimed at attracting high-net-worth individuals and their families.
With certain restrictions, it introduced a flat tax rate of 20 per cent on income from “high-value activities” and allowed anyone spending 183 days or more in Portugal to benefit from tax-free international income for ten years.
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“The current NHR programme has a closing date for applications of December 31, 2023,” says Christina Hippisley from the Portuguese Chamber of Commerce in the UK. “For those not already resident in Portugal, the short time frame will make it difficult to become tax resident in Portugal and apply for NHR tax status by that date because since Brexit UK nationals wishing to move to Portugal must apply for residency in advance, then apply for the NHR once they are resident.”
Jason Porter from the specialist tax adviser Blevins Franks confirms that while applying for the NHR is a relatively simple process, the difficulties lie in the pre-application timeframe. “Anyone able to move to Portugal on the day the NHR announcement was made [October 2], with accommodation in place and who started the visa process immediately, is still likely to struggle to obtain it by the December deadline,” he says.
Lloyd Hughes from Athena Advisers, an international property agency, reports an immediate spike in demand on resales and completed properties as foreign buyers rushed to advance their plans. “Others are choosing to rent with a view to buying in the near future,” he says.
Chitra Stern has developed five hotels and residential projects in Portugal with her husband under the Martinhal brand. “Portugal really has so much to offer,” she says. “[But] I am against limiting the scope of the NHR when we have had so many benefits from it in the last 14 years. It’s unclear the exact amount of tax income generated, but hundreds of millions of euros are significant to the Portuguese economy. The houses that the non-habitual residents bought or rented represented merely 1-2 per cent of those sold annually … the reduction in scope of the NHR is not going to even contribute to solving Portugal’s housing crisis, just as the end of the golden visa will not.”
Porter adds: “While the NHR scheme has grabbed the headlines over the years, Portugal has always been an attractive country from a tax perspective. For those with capital to invest who intend to live off their investments, there’s a simple, compliant structure that can reduce taxation to a minimum.”
‘Lisbon ticked our boxes’
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After ten years in San Francisco working as a designer for Apple, Julian Hoenig and his wife, Nina, wanted to return to their European roots — he is from Austria, Nina is from Germany. They had three criteria for their new home: it must be close to the ocean so Julian could continue his passion for surfing, have a good climate and offer the cultural buzz of a large city. Lisbon ticked all the boxes and they moved there four years ago.
“Our move was about the lifestyle — we didn’t even know about the NHR when we chose Lisbon,” Hoenig, 47, says. “When we heard about it, after we had chosen Portugal, it was a nice bonus. But Lisbon is why we chose. The people are so friendly and welcoming, and there’s a vibrant and interesting group of international people here.”
The couple, who have a ten-year-old son, Leo, bought a property in Lisbon four years ago and are now nearing the end of a housebuild in Caparica, 30 minutes from Lisbon. “We love the lifestyle and the people. Caparica is a special place, still with fishermen but also some high-end beach bars and clubs,” Hoenig says. “And great waves, of course.”
