Since the end of 2022, Portugal has been experiencing a serious housing crisis, which the government claims it is a result of the Ukraine war and the oil crisis, causing a considerable increase in the cost of living and housing values.
Golden Visa
The popularization of the so-called “Golden Visa” is also understood by specialists as a direct cause of the housing scenario in Portugal. This visa was created in 2012 with the aim of boosting the Portuguese economy through foreign investment.
Under this visa, the investor could acquire residence in the Portuguese territory and, later, acquire Portuguese citizenship by acquiring a real estate with a minimum value of €350.000 to €500.000, depending on the area where the property was located.
Since this program intensified the acquisition of real estate in the country, the local population ended up being ‘pushed’ to more remote areas, leading the government to no longer seek conceding Golden Visas.
In February, the government proposed ending the visa program, which is currently under public consultation, and it is expected that the end of the legislative discussions and the enactment of the new law – if approved – shall take place by the end of June.
It is important to highlight that the proposal will not have a retroactive effect for those who already bear the Golden Visa, in addition to ensuring that all requests made until the date of entry into force of the new law are met under the terms of the previous legislation.
Due to the government’s interest in ending the Golden Visa program, there is a growing interest from foreign investors to take advantage of this last opportunity to still obtain a Portuguese residency visa.
Exemption of capital gains on real estate
After several demonstrations by segments of the population, in addition to the change in the Golden Visa, the Portuguese government formally presented, in February, a plan to try to solve the lack of affordable housing for the local population.
Thus, as part of the “More Housing” (“Mais Habitação”) plan, the Portuguese government decided to exempt taxation on capital gains on the sale of residential properties to the State.
Although the plan is still subject to amendments, contrary to what was expected and even brought by the media, investment funds and companies based in low tax countries will not be eligible to this benefit.
In other words, at first it was announced that the tax exemption would be unrestricted and that it would be granted to all individuals and entities that joined the plan. However, the government has withdrawn this extended benefit, removing from the scope those who earn income from low tax countries .
It is worth mentioning that the last financial crisis in the country benefited numerous investors, who were able to purchase real estate at reduced prices. The government had the understanding that, in the long term, these same people could make an even bigger profit if they opted to sell real estate now.
However, with the tax exemption out of the reach of this public, the Portuguese government will have to rely on the sale of the houses of the other beneficiaries to finally be able to sublet these properties at more affordable prices and contain the current crisis.
Contact us for further information.
Published on May 15, 2023