Before You Mourn the Demise of Portugal’s Golden Visa: Some Nuance and Context

Yesterday, the Portuguese Prime Minister announced a set of measures to give a political response to the housing problem in Portugal; high prices on real estate, lack of available properties in the rental market, and preference for the short rental system, among others.

Within the measures announced, the Golden Visa program was also mentioned.

The related and exact words of the Prime Minister were:

Two particularly important measures to combat real estate speculation – the first, the elimination of golden visas, or rather, the elimination of the granting of new golden visas. As for the golden visas already granted, their renewal, in the case of exclusively real estate investments, will only be renewed if they are the owner’s own or permanent home or of his descendant or if the property is placed, on a permanent basis, on the rental market.”

Later, within the clarifications requested, the Prime Minister said:

Meanwhile, a new immigration law for foreigners came into effect. This law already regulates in a very innovative way the granting of residence permits for special purposes; for the purposes of studies, investment, highly qualified, seasonal workers, for various circumstances. This regime must be the ruling regime, not justifying, nowadays, what is the exceptionality of the golden visas. In fact, what we can see is that of the approximately 11,000 Golden Visas granted so far, more than 9,000 came through real estate investment. A very low rate, not to say almost zero, in job creation and a very low contribution to other activities.

There are some golden visas that are active in the field of cultural patronage. What will happen? One thing is a decision not to have new ones, another thing is what happens to those currently granted. Those already granted, at their end, are subject to evaluation. If it is exclusively for real estate, there will be renewals if the real estate investment is for permanent own housing, for descendants, or is placed on the rental market – and here, we do not place the restriction of being placed on the affordable income market; it is purely and simply placed in the rental market. There are others that were granted for other purposes and, in this case, looking at the current law, it is possible to convert them depending on what the concession counterparts were, namely, in the area of cultural patronage, so there will be no disruption there. There will be a reclassification of the legal figure.”

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Also questioned about the scope of the program termination, the Minister of Finances replied:

“The elimination regarding Golden Visas is general, regarding the entire model that is known because the assessment that is done even of the recent changes that have been made regarding the limitation to real estate were not sufficient regarding the continuation of the mechanism. And it has the following characteristics: (i) on the one hand, we are talking about new applicants, new candidates for golden visas. The system will close and will remain active in renewals under certain conditions, and what Mr. Prime Minister referred to is that under the new legislation regarding the entry, stay, and exit of foreigners that there are mechanisms that allow this mobilization, namely, for investment purposes, which are carried out, namely, in the cultural areas and others that I mention. But the assessment we have so far of the use of the instrument is rather residual in other purposes than real estate, and that is why this additional step is taken”.

At this moment, naturally, everybody is surprised and full of questions, and uncertainty reigns in the face of statements that are contradictory, alien to the topic under discussion (lack of accessible habitation), and demonstrating a lack of technical knowledge about the legislation in question. In this sense, it is important to look rigorously at the objective data and proceed with caution.

  • It is important to underline that the Government does not have legislative competence to approve changes to the Golden Visa program. The competent body is the assembly of the Republic, which should then receive a proposal with the content of the measures announced above for voting.
  • It is expected that now there will be one month of public hearings, followed by the sending of the final proposal to Parliament for discussion on March 16th, where it should take 15 to 20 days for approval. After this, the diploma must be sent to the President of the Republic, who may react in one of three ways:
    • Direct ratification: In this case, the proposal will be published in the official journal, subject to a transitional period not yet disclosed;
    • The President does not accept the proposal as it is and returns it to the Parliament for amendment; or
    • The President accepts the document but requests the evaluation of the Constitutional Court to confirm if any fundamental rights or principles are being jeopardized by the new legislation.
  • The governing party holds the parliamentary majority and can, therefore, effectively approve the measures announced above without further amendments – if they wish. However, it is common for all parliamentary parties to present proposals for alternative wording, in addition to being able to still be reflected in the wording of the law to be approved, new measures or amendments to the measures mentioned by the prime minister due to the period of public hearing, which is essential to the process and for the legislator to know the reality of the facts that will be legislating about.
  • Changes to the other immigration programs (D7, D2, or Digital Nomads) were not addressed. But if some of the measures mentioned above are approved, it is necessary to make a formal amendment to the law in force, and this could lead to a new wording with an impact also in the so-called standard residence permits.
  • The Government wants to ensure the renewal of ongoing processes but to subject these to additional conditions in order to use Golden Visas to repair the housing problem.
  • Interestingly, the Government used the concept of “reclassification of the legal framework,” a new concept that seems to emerge to protect the rights of investors.
  • Unusual emphasis was given to cultural heritage in this context, and it is expected that there is something to develop here, despite this already being a viable option for investment under the current regime.

Based on the above, at this stage, we believe it fair to make the following assumptions:

  • We expect the current law to remain in force for at least the next 45 days.
  • At this point, nobody – including the Government and the Parliament – knows what the exact content of the final amendments to the law will be.
  • There is a significant risk of definitive and total termination of the Program in the short-to-medium term.
  • There is no certainty as to the timing of entry into force of the amendments.
  • The door to legal alternatives was opened, which will allow the continuity of the immigration and foreign investment flow to Portugal, either through new programs or through the requalification of ongoing processes under a different framework.
  • There is a willingness from the Government to adopt measures that interfere with (constitutionally guaranteed) property rights and with the principles of legal protection, given the possible adoption of measures with an impact on ongoing processes.
  • Several reactions may arise, including
    • a rush to anticipate the submission of processes so that they are covered by the laws in force;
    • the massive presentation of legal proceedings against the State and even preliminary injunctions to avoid these specific amendments;
    • the renegotiation of ongoing investments for adequacy to other types of residency programs; or even
    • the massive withdrawal of ongoing processes with requests for compensation from the State.

Potential Approaches

In Portugal, there is a saying that “until the baskets have been washed, it’s [still] harvest time.” The truth is that Portugal, unlike other countries, does not traditionally adopt abrupt, disruptive measures. The last change to the Golden Visa program, for example, was also announced by the Government in December 2020, and the changes were only implemented on January 1, 2022.

Thus, the most sensible thing is to wait for the final diploma’s approval, which may undergo significant changes, either through the opposition political parties or through the public contribution to the discussion, in which our firm will actively participate.

In the meantime, and without prejudice to the fact that there is no certainty about what the changes will effectively be and when they will be in force, we believe that investors must make their decisions, considering the risk of the unknown but based on the law in force, with a view to being able to benefit from the legal protection that only a consolidated situation can give.

In these terms, for investors at an advanced stage, it is suggested to submit the process as quickly as possible. For those who are still negotiating, we recommend the extension of negotiations for a period that allows some clarity on the amendments. For those in the early stage of the process, the preparatory steps should be completed in order to be in a position to immediately act when the concrete amendments and timings are known.

For our part, we will monitor the situation as closely as possible, keeping clients and partners aware of any developments that occur.