top of page

First Ireland, now Portugal: Why wealthy Indians will find it difficult to get European golden visas

Portugal has become the second European country this week to suspend its ‘golden visa‘ programme for wealthy non-Europeans. The programme gives the rich residency permits and access to European Union’s borderless travel zone in exchange for investment. Golden visas offer the opportunity for wealthy people to essentially ‘buy’ the right to residency – sometimes even without having to live in that country. However, this practice has been seen as posing risks in terms of security, money laundering and tax evasion as well as inflating real estate prices. Earlier this week, Ireland closed its investor visa scheme that provided immigration rights to wealthy foreigners investing at least 1 million euros ($1.08 million) following criticism of such schemes by the European Union. While the scheme did not provide passports, investors and qualifying family members could apply for citizenship after five years of residency in Ireland.The Immigrant Investor Programme offered Irish residence in return for a €500,000 donation or three-year annual €1 million investment in the country. Why did Ireland end the golden visa? “Considering the fact that Ireland’s Immigrant Investor Programme has overseen investments of over 1.2 billion euros over a decade, the decision to terminate the scheme comes due to concerns over security of the country. While the decision to terminate the programme will consequently be shutting off a profitable and substantial source of funds, the concerns over the programme being utilised as an instrument in illicit acts clearly outweighs the former,” said Pratyush Miglani, Managing Partner, MVAC Advocates & Consultants. Point to note: Ireland had already suspended the scheme for Russian citizens in March 2022 as part of sanctions imposed on the country for the invasion of Ukraine. In April 2022, the European Parliament warned that the programme was vulnerable to tax abuse. Ireland’s IIP was dominated by wealthy applicants from Russia and China. According to Irish media reports, this fact led to justice department officials recommending that new applications be halted. While Portugal is scrapping the scheme to “fight against price speculation in real estate”, Ireland had cited EU warnings over the security implications of such programmes. The moves came a year after Britain shut down a similar visa programme for the rich. Countries like Portugal, Ireland, Greece and Spain launched golden visa programmes to attract foreign investment in the wake of the financial crisis. They brought in billions of dollars of foreign money and are credited with rejuvenating real estate markets in cities where demand had been low. An estimated net inflow of 1,300 millionaires into Portugal occurred last year, according to data from Henley & Partners and New World Wealth. What exactly is a golden visa? Residence by investment schemes, otherwise known as ‘golden visas’, offer people the chance to get a residency permit for a country by purchasing a house there or making a large investment or donation. “Golden visa programs give high-net-worth individuals (HNWIs) the option of physically relocating to a favorable jurisdiction — either now or upon retirement — and becoming residents of that state with full legal rights, including the right to live, work, study, and receive healthcare in that country,” said Henley & Partners. What is the benefit of a golden visa? A golden visa provides investors and their families with access to new markets and a host of business, career, educational, healthcare, tax, and lifestyle opportunities on a worldwide scale, for both present and future generations. Many golden visa programs allow the successful applicant to apply for citizenship after a few years of residence, such as the Portugal Golden Residence Permit Program, which offers citizenship eligibility after five years. The Greece Golden Visa Program allows investors to apply for citizenship after seven years, and the Italy Residence by Investment Program after 10 years, explained Henley and Partners. Which one is most popular among Indians? The Portugal Golden Visa program – also referred to as the Resident Permit program – was launched in 2012 to assist the country’s recovery from the subprime crisis. Since then, 11,180 investors and 18,368 family members have benefited from the scheme, with more than €6 billion being invested into the country. In 2022, India emerged as one of the top four nations globally to obtain the Portugal Golden Visa. Its biggest USP is that Indian investors who eventually qualified for citizenship in Portugal can hold passports giving them access to other countries in the EU, which means an HNI India who holds a golden visa in Portugal, for instance, could eventually move to and reside permanently in France or Sweden, even though those countries do not offer them. Since the program’s inception in 2012, more than 130 such visas have been issued to Indians. From just 33 visas in 2019, the number of ultra-rich Indians who have opted for the programme has jumped to 56 in 2022, shows data analysed by LCR Capital Partners – a global private investment and advisory services firm . These ultra-high net worth individuals have shelved out anywhere between Euro 350,000 and Euro 600,000 in the last year to invest in apartments in Lisbon suburbs or in less expensive locations to obtain residency permits. However, since January 1 2022, the program witnessed fundamental changes, namely excluding some areas for residential investment and focusing investments on less populated areas of the country and the autonomous islands of Madeira and the Azores. The purpose was to incentivize investment in the interior parts of the country. Alongside this, many other investment options increased in price, including the capital transfer and investment fund routes. The Portugal Golden visa scheme, which offers EU passports to non-EU nationals in return for investments including in real estate, attracted €6.8 billion in investment since its launch in 2012, with the bulk of the money going into real estate. Why has it been scrapped? In 2022, the European Commission called on EU governments to stop selling citizenship to investors as part of a move to crack down on this combined multi-billion euro industry. In the wake of the Ukraine war, there were concerns that these schemes could be a security risk. Rents and house prices have skyrocketed in Portugal, which is among the poorest countries in Western Europe. Last year, more than 50 per cent of workers earned less than €1,000 (US$1065) per month while in Lisbon alone, rents jumped 37 per cent in 2022. Data analysed by Bloomberg shows home prices in Portugal had the biggest annual rise in more than three decades, defying expectations that rising interest rates would dampen demand for property in the southern European nation. “The rise in property prices has been caused by growing demand from foreign buyers, who have flocked to Portugal in search of a warm climate, lower costs of living and the so-called “golden visa” program, which ties residency permits to real estate purchases. These buyers are willing to pay more than twice as much as domestic buyers for a home in Lisbon, the country’s National Statistics Institute said in a report in April, exacerbating concerns over housing affordability,” reported Bloomberg. Portugal’s decision to end the scheme was primarily driven because of an uproar over the surge in house prices that has left many struggling to find adequate accommodation, particularly in Lisbon and Porto, the biggest cities. Property prices have been driven up in recent years by foreigners purchasing second homes or apartments to rent out to tourists via platforms such as Airbnb. Low salaries, a red-hot property market, policies encouraging wealthy foreigners to invest and a tourism-dependent economy have for years made it hard for locals to rent or buy, housing groups have said. Portugal’s 8.3 per cent inflation rate has exacerbated the problem. To try to regulate real estate demand, in 2021 Portugal began restricting its golden visa program to property purchases outside Lisbon and Porto. While Portugal is not cancelling existing golden visas, the government said the visas could only be renewed if the property they were linked to was the permanent residence of the holder or a family member or if it was put on the rental market. “While Portugal has enjoyed €6.8 billion in investment through the Immigrant Investor Programme since 2012, the decision is clearly a step of desperation due to the unwinding surge of housing prices that have resulted in their own people struggling to find proper accommodation and housing. The step might seem like an unwise financial decision but the intention to address the issue of the housing crisis does seems paramount to be addressed at the moment.,” said Pratyush Miglani, Managing Partner, MVAC Advocates & Consultants. “In Portugal, grant of a Golden Visa enables a foreigner to obtain a temporary residence permit to conduct business activities with visa waiver for travelling within Schengen Area, amongst other benefits, subject to certain conditions. The move to stop issuing a Golden Visa, in Portugal, is understood to be to curb the rising real estate prices, as investment in real estate property (by purchase) with a value above €500 Thousands is one of the routes to apply for Golden Visa,” said Shashank Agarwal, Advocate, Delhi HC. Other countries also scrapping such programmes In February 2022, the UK government scrapped its golden visa scheme that allowed wealthy foreign nationals to settle in the country in exchange for bringing part of their wealth with them. The decision to end the scheme came as part of a move to clamp down on dirty money from Russia. In October 2022, the European Commission urged Albania to “refrain from developing an investors’ citizenship scheme (golden passports)”. Such a scheme would “pose risks as regards security, money laundering, tax evasion, terrorist financing, corruption and infiltration by organised crime, and would be incompatible with EU norms,” it warned in a report. Australia is also set to review its visa for people who invest at least A$5 million ($3.4 million) in the country. The Significant Investor visa is designed to attract funds into the country, with holders required to maintain their investment for the term of the visa, which can be up to five years. The Grattan Institute, an Australian public policy think tank, has called for the Business Investment and Innovation visa program, under which the Significant Investor falls, to be scrapped, saying it leads to projects being financed that wouldn’t normally be green lit, and that holders provide relatively little tax income for the government. While some countries are increasing the investment limit to make it tougher for the wealthy to obtain the visa Data shared by La Vida, a consultancy firm that focuses solely on residency and citizenship through investment, shows that Greece will be doubling the cost of their popular Golden Visa Residency programme this year. The price increase will only apply in certain regions of Greece in a bid to spread foreign investment more equally across the country. 36 municipalities in total will see a price increase and this includes the Attica region of Athens, Mykonos, Santorini and Thessaloniki, amongst a few others. From 1 May 2023, investors purchasing in the mentioned municipalities will have to make a higher investment of €500,000 plus, to qualify for the Greece Golden Visa programme. The minimum value of €250,000 will be maintained for the rest of the country. What should Indian investors do? “The last change to the Golden Visa Programme was announced in December 2020 but only came into effect in January 2022. Investors at the advanced stages should complete their investment and documentation, and submit their application within the next one month. Those who are mid way through the process should complete documentation, open bank account and shortlist the investment opportunity and wait till the final proposal is presented in Parliament,” said Paresh Karia CEO, Acquest Advisors. ““It’s still not clear when this announcement will become effective. They have to draft the proposal, debate it and pass it the parliament and announce the effective date. This may take some time. For people desirous of taking up European Residency/Citizenship through the Portugal Golden Visa, there might still be a window of opportunity. But they have to act fast and start the documentation work, which anyways doesn’t cost much” added Karia. While the demise of these programmes signals a change in the way international travel and residency is handled, it doesn’t mean the practice will completely end. Some believe that it’s simply a matter of time before it’s reintroduced in other forms. “These programs have opened and closed in many different countries for a very very long time,” Nuri Katz, the founder of a citizenship-by-investment services firm, told Bloomberg. “My guess is in Portugal they’ll reform the program, not close it permanently.” While Europe may be making it tougher for wealthy Indians to obtain the golden visa, certain countries in the Caribbean are conducting comprehensive reviews of their programmes, aiming to reduce costs and processing times for applicants. St Lucia announced last month that they are reducing the minimum investment for their real estate option by 33 per cent, bringing it down from $300,000 to $200,000, and St Kitts and Nevis will reduce their government contribution with their ‘Limited Time Offer’ from $150,000 to $125,000 until June 30. In 2022, over 2.25 lakh Indians renounced Indian citizenship, the highest since 2011, showed data by the Ministry of External Affairs (MEA) in Parliament on February 9. According to the Henley Global Citizens Report, so far 8,000 high-networth individuals (HNI) have moved out of India. The country also ranks third in terms of HNI movements, coming only after Russia at 15,000 and China at 10,000. HNIs are individuals who have a wealth of $1 million or more. With inputs from Bloomberg

1 view