Dateline: Tivat, Montenegro
Europe has a lot of factors working in its favor, from its fascinating history, architecture and culture to its delicious food, iconic cities, and geographic variety including mountains, beaches, islands, rivers, countryside, and more.
It is no wonder, then, that many people in the world consider Europe a desirable place to live. Many of us have traveled to Europe, but more and more people from all over the world have decided to make the region their home in recent years.
As we recently discussed, there are many ways to become a European citizen. One newer path to citizenship takes a slower route that begins with residence via investment and culminates in citizenship several years later.
This particular brand of investment immigration has come to be known as the “Golden Visa.”
The Origins of “Golden Visas”
In the investment immigration world, “Golden Visa” has become synonymous with “residency by investment” just as Kleenex has become synonymous with tissues.
The first Golden Visa program was launched in Portugal on October 8, 2012, in an effort to bring in badly needed funds as the bottom was falling out of the Portuguese real estate market.
To date, the Portugal investor visa program has brought in more than EUR 3.7 billion, having issued over 6,050 “Golden Visas” to main applicants and an additional 10,181 “visas” to family members.
Approximately 90% of that €3.7 billion has gone directly into the Portuguese real estate market. Having vacationed in Porto, Portugal in both 2009 in the middle of the crisis and again in 2017 for my birthday, I can attest to the effectiveness of this program.
Prices have gone up dramatically.
Prices in Porto (which isn’t even the capital city) are relatively high and are already half the price of Amsterdam in some areas, despite being a small city in northern Portugal.
The president of Portugal’s real estate association recently reported that home prices in Portugal are up by 37%. The number of total home sales is up as well – by as much as 30% since last year – thanks to the 50,000+ property purchases made by foreigners.
That’s the power of these programs.
Observing the success of Portugal’s investor visa program, other mid-range countries in Europe that were looking to raise funds (and that were open to immigration) decided to introduce their own residence by investment programs.
Like in Portugal, the main driver for the “Golden Visa” programs in many of these countries has been their dwindling real estate markets. In many cases, their own people cannot afford and/or do not want to invest in the real estate market.
Sometimes, this is because of an economic downturn or foreclosures or high property taxes. Other countries have simply wanted to stimulate their economy. There are many different reasons countries have decided to jump on the investor visa bandwagon.
The one common element is that they have all experienced success.
As these programs grew, their success became so notable that people, particularly in the media, began using the term “Golden Visa” to refer to the fact that anyone willing to put down enough money (i.e., “gold”) for these programs could jump to the front of the immigration line.
In coining the term, the media also managed to misinterpret what the “visa” actually is because, technically, it’s not really a visa. So…
What is a Golden Visa?
The “Golden Visa” is actually a residence permit that grants the holder the right to live in the country and work towards citizenship according to the country’s regular naturalization timeline.
“Golden Visa” is simply the catch-all term for the various residence by investment programs where an individual makes an investment in the country and receives preferential treatment during the immigration process in exchange for that investment.
That means that many programs promoted as “Golden Visas” aren’t technically called that, but the term has stuck as a marketing term. Think “Xerox” for a copy machine (remember those?) or “Kleenex” for tissues.
Alternatives to the “Golden Visa”
There are other ways to become a resident of these countries other than the “Golden Visa” programs. In fact, some of the alternatives may be a better option for you.
For example, I am currently helping someone with a program in Portugal where they can demonstrate certain assets without having to invest them all and still get a residence permit. However, the process is more selective and therefore better for other western citizens and not so much for the Chinese.
You can also get a residence permit in basically all these countries if you get a job there, marry a citizen, or prove that you have been in a committed relationship for about two years or more with a citizen of the country.
I was in a relationship with an EU citizen for two years and, in a case like that, you can not only move to your EU partner’s country but they could also redomicile to Portugal and then bring you with them, as long as you can prove your relationship of at least two years.
As we talked about in our European citizenship article, in some but not all countries, you can also obtain residence by starting a company. Some of the English-speaking countries tend to have a point system, whether they want you to speak the language, start a business, or jump through several different hoops.
The bottom line is that there are numerous ways that you can get immigration permission in different countries. They all set their own terms.
How is the “Golden Visa” Different?
What differentiates the “Golden Visa” is that the program essentially removes all of the other requirements. If you’ve ever looked at the immigration requirements for a lot of these wealthier English-speaking countries, they can be pretty darn strict.
The Golden Visa removes the need to have a job offer, start a business (which comes with complex business plans, requirements to pay social security tax and other hassles), or even marry someone.
It removes most of the headache.
In most cases, it generally removes the language requirement too. If you don’t speak Portuguese, that won’t stop you. You won’t find too many jobs in Portugal if you don’t speak Portuguese, but the “Golden Visa” programs and other residence by investment programs allow you to bypass all the normal requirements and just step right in.
That is why these programs are seen as a “golden ticket” for those who have the money that these countries want.
Where Are “Golden Visas” Available?
As you’ve probably ascertained by now, most “Golden Visa” programs are available within Europe and, more specifically, within the European Union.
There are other programs where you can get a residence permit in exchange for making an investment, but the term “Golden Visa” largely applies to the programs specifically found in the European Union that leave the path to citizenship open.
If you are interested in learning more about second residency and second passport programs in general or about residence by investment programs available outside of the EU, feel free to read these articles I’ve written, below:
- 9 Second Residencies through Cheap Real Estate Investments
- Get Second Residence and Pay No Tax in These 18 Tax-Free Countries
- 10 Factors to Consider with any Second Residency
- The Five Best Second Residency Programs in Central and South America
- It’s Getting Harder to Qualify for These Second Residency Programs
- The 10 Easiest and Cheapest Second Residencies in the EU
- 5 Reasons Every Crypto Investor Needs a Second Residency and Second Passport
- Where is the cheapest place to buy citizenship?
- The Best Citizenship by Investment Programs for 2018
You can go to Montenegro and buy property to qualify for a residence permit, but that residence permit is only valid for one year at a time and will not lead to citizenship.
Montenegro’s investor visa program and many of those mentioned in the articles above may be considerably cheaper than a “Golden Visa” in both minimum investment amount and legal fees, but it’s not a true “Golden Visa” by the term’s definition.
For our purposes, the rest of this article will only discuss true “Golden Visas,” meaning residence permits offered by EU countries that allow for eventual naturalization.
These are highly sought-after residencies that allow you to spend as much time as you like living and traveling in the entire EU and Schengen Area and that make travel to non-Schengen countries like Romania and Cyprus much easier as well.
Who is a “Golden Visa” Good For?
As we discussed in the article on how to become a European citizen, there are several different nuanced groups of people who are looking for a second residence.
- US Citizens who plan to renounce their US citizenship now or in the future and who want a Tier A passport to replace their US passport. These individuals may be getting a second passport now that is not as powerful and they want to work towards EU access so they can increase their travel options. In general, their aim is not just residence but eventual European Union citizenship.
- Emerging-world Citizens who have “bad passports” and want access to the EU for the schools, the opportunities for their kids, the safety, the stability, whatever it is that they deem important. They want to live in Europe and eventually become citizens.
- Business owners and investors looking to spend all of their time in Europe. Some “Golden Visa” programs require you to live in the country to eventually get citizenship but others do not. All of them give you unlimited access to the EU. So, if your goal is to be able to live, do business and travel to the EU beyond the 90 or 180 days of visa-free access that you have on your current passport, an EU residence may do the trick.
The European “Golden Visa” may not be the ultimate solution for everyone in these three groups.
The first group may be better off building a passport portfolio of various Tier B passports rather than giving up US citizenship just to take on the taxes and bureaucracy of another big government.
The “Golden Visa” may be a good fit for the third group – those who may want or even need to spend more than half of their time in Europe – since a second residency in the EU allows you to travel around the entire Schengen Area.
There is also a potential tax benefit for these folks. If planned properly, they could pay no tax under many of the countries’ tax programs by simply traveling to different countries.
While the focus of this article is not on specific tax strategies, there are certain “Golden Visa” countries where this may be possible. However, the burden of proof to show that you are using those strategies is on you, which is why it is so important to have a comprehensive plan.
The group that really benefits from the “Golden Visa” program is group number two, those with bad passports who cannot go to Europe without the never-ending hassle of getting visas.
This need is evident in the data from these investor visa programs that shows who is actually applying for “Golden Visas” in these countries.
In Portugal, almost two-thirds of all “Golden Visa” holders are Chinese, followed by Brazilians with 8.6% of the total applicant pool and South Africans with 4%. In Spain, Chinese and Russian investors have dominated the applicant pool, while Greece has seen an increase in Turkish applicants alongside their Russian and Chinese counterparts.
How Does the “Golden Visa” Process Work?
The idea behind the “Golden Visa” is that the process should be faster. In some cases, that’s actually not true. You can get processed faster as a spouse or domestic partner, or even as a person of means, in countries like Portugal where the Golden Visa program has become slower to approve.
Other countries simply do not follow their own mandated laws for how quickly they are supposed to process applications.
In theory, you’re supposed to be put to the front of the line. In practice, you are still put to the front of the line in the sense that you don’t have to meet the other requirements like job offers, partner, etc.
All you have to do is have the money. (Of course, some “do-gooders” who don’t understand free markets hate allowing people with money to jump the line, but that’s for another article.)
And you’ll need to have more money in some countries than in others as some of these programs charge relatively high fees. This is not the kind of residence where you go in, flash some papers around, pay a $200 fee and come back and get your card.
There are, in some cases, substantial fees involved because the entire program is set up so that they can make money off of the process. They know their audience is made up of wealthy investors who want a European passport and/or never-ending access to the EU and are willing to pay for it.
Bulgaria, for example, just decided to substantially raise the processing fees for its “Golden Visa.” They know they can do this because they also happen to be the only program that will fast-track the naturalization timeline for applicants.
In some cases, Bulgaria can get you a second passport in as little as about two years, but the standard “shortened” timeline is actually five years. The rest have normal naturalization timelines as long as ten years.
Portugal adjusts one of their naturalization requirements, but they do not reduce the timeline itself. Instead, they reduce the amount of time that you have to spend in the country each year in order to qualify for citizenship.
If you are considering a “Golden Visa” program, it is important to note this difference. “Golden Visa” programs are not the type of program where you put up a lot of money and get a passport quickly, all they are doing is allowing you to get in as a resident.
And, in many of these countries, while you do not need to learn the language to become a resident, you will need to learn it to become a citizen.
What are the Benefits of Having a “Golden Visa?”
Getting in as a resident still comes with many of its own benefits beyond the pathway to citizenship.
Having a temporary or permanent residence in certain EU countries will give you greater visa-free travel in and of itself. There are several countries throughout the world that will grant visa-free access to permanent residents of the EU, even if their passport doesn’t give them access.
One country that does this pretty liberally is Ethiopia, but there are some better countries that do so as well. Mexico, for example, grants visa-free travel to visa-holders in the EU. Georgia does this as well along with a number of other countries.
It really differs based on which country your residence is in and whether it is temporary or permanent.
In general, having a Schengen residence permit will not only grant you visa-free access to more countries than are available on your passport but it also gives you more legitimacy when applying for visas in countries that still require you to obtain one.
This could be a good strategy for Americans who want to renounce their US citizenship on less powerful passports and then secure their travel freedom in the EU. You can potentially add some visa-free countries that you wouldn’t get with your new passport and increase your chances of securing visas for other countries.
Six Countries Currently Offering “Golden Visas”
These six countries all currently offer some form of an investor visa:
Portugal – Click here for our full article on Portugal’s “Golden Visa” program.
Spain – Click here for our full article on Spain’s “Golden Visa” program.
Latvia – Click here for our full article on Latvia’s “Golden Visa” program.
Greece – Click here for my video on Greece’s “Golden Visa” program.
Bulgaria – Click here to learn why Bulgaria is a great place to plant a business flag. (“Golden Visa” article to come!)
Ireland – Click here to learn more about Ireland’s Immigrant Investor Program.
Create a Holistic Strategy
One final note that cannot go unmentioned when it comes to Europe’s “Golden Visas” is that most of these programs do not waive their taxation requirements for “Golden Visa” residents.
Many people erroneously believe that if they get a “Golden Visa”, they don’t have to pay tax. In Portugal, there is a way to do it. The challenge is that it’s in the EU so not only is it more expensive, it’s more complicated.
There are so many rules about controlled foreign corporations and how different things work that you will definitely need to do some tax planning if you’re making income overseas. Certain income may be taxed there regardless of where you earn it and that could affect your choice of programs.
If you spend enough time in your new country of residence to qualify as a tax resident – generally, 183 days in any of these countries – they will tax you.
And even in the countries where it is possible to avoid taxation, you have to be structured properly. You can’t just put your company in the British Virgin Islands (which is on the EU tax haven blacklist) and then go to Portugal and claim to get a tax exemption.
It’s not that easy.
People think that the EU is so easy, but it isn’t always so simple. This is why a holistic plan is so important. If you mess up, you’ll pay a fortune! Hundreds of thousands, even millions of dollars!
It all has to be structured very carefully like a work of art. If you do want to do this, be prepared for some planning and to make an effort. It’s going to be more difficult than in Montenegro.
Now, if you do all that planning properly and you don’t spend time in the country, then there is a way that you can legally pay no tax. And, in the case of Portugal, you can still obtain citizenship in six years (plus processing time). But you have to plan it properly!
In the other countries, such as Latvia, Spain and Greece, you actually have to spend time there to qualify for citizenship and that time you have to spend there will likely subject you to tax obligations… which, you can imagine in Greece and Spain you’d rather hang yourself.
In some cases, you may need to pay a little bit of tax somewhere else. It’s very situation-specific. This is why I urge you to talk to someone who understands the global picture before settling on a specific “Golden Visa” program or choosing one at all.
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