Azamat S. is a Kazakhstan businessman who needed to often visit the Schengen countries for work purposes. The client’s spouse plans to move to Europe for permanent residence, and an ordinary visa does not allow this. An additional argument in favour of Azamat’s decision was his children’s desire to stay in Europe where they are currently studying.
The client turned to our company in May 2017. Based on our experience, we offered three options of obtaining a permanent status by investment to Azamat.
- 1 Why residence?
- 2 The programs of countries that were considered
- 3 Comparing Malta’s permanent residence program with Portugal’s temporary residence program
- 4 Cost calculation
- 5 Why did the client choose Portugal’s program?
- 6 Expert opinion
- 7 Total cost
- 8 Profitability and exiting the investment in 5 years
- 9 Bullet points
- 10 How much time did the process of getting Portugal’s temporary residence take?
- 11 Expert opinion
- 12 Conclusion
The client and his family members are the citizens of Kazakhstan — the country which does not support dual citizenship. Accordingly, the option of visa-free travel to the EU obtained through getting another passport was not considered. Obtaining the EU residence does not contradict the country law, that is why the client decided in favour of temporary residence by investment in immovable property with the possibility for his children to receive citizenship in the future.
The programs of countries that were considered
Azamat was choosing between the programs of Malta, Greece and Portugal allowing one to enter the Schengen countries without a visa and live in Europe. In Greece, to get the permanent status in the future, a person must live in the country over 183 days a year, which was not an option for the client who is often on the move. The final decision was to be made either in favour of Portugal’s temporary residence, or Malta’s permanent residence.
Comparing Malta’s permanent residence program with Portugal’s temporary residence program
|Country||Cost of status receipt||The obtained status||Requirements regarding residence||Possibility of renting out the object||Possibility of exiting the investment after getting the status|
|Portugal||- €500,000 — the minimum cost of investment objects;|
- up to 10% of the object price — taxes and charges.
possible to get permanent residence in 5 years;
possible to get the passport in 6 years.
|7 days per year||Exists||In 5 years|
|Malta||- €250,000 — purchasing bonds for 5 years;|
- €30,000 — government charge;
- €10,000 a year — renting property (for 5 years) or purchasing property worth at least €270,000.
|Permanent residence for a lifetime||No||No||One has to permanently rent property (in five years the renting cost might be less than €10,000 a year).|
It is clear from the comparative table that expenses on obtaining Portugal’s temporary residence (the so-called Golden Visa) are lower than the expenses on getting Malta’s permanent residence. Another important detail is that in order to maintain the resident status in Malta, one has to pay rent even after a 5-year period. In the meantime, in Portugal one can fully exit the investment in a 5-year period and maintain the lifetime status.
The client also liked Portugal’s program as it allowed him to receive profit by renting out the property throughout the whole period of its ownership, while in Malta this option does not exist at all. Moreover, all the issues connected with property renting in Portugal can be taken up by a local company, which helps the client to avoid organizational complications.
Having compared the benefits of Malta’s and Portugal’s programs, Azamat made a choice in favour of the Golden Visa.
Calculating the cost of getting Portugal’s Golden Visa for the family (Investor + spouse + 2 children)
|Cost, EUR||Cost for a family, EUR|
|Biometrics||527.60 – investor; 80.04 – family member.||767.72|
|Golden Visa issuance||5,274.40 – for 1 applicant||21,098|
|Medical insurance||from 200.00 – for 1 applicant/year||from 800.00|
|]Tax number and taxation representative services (if required)||from 200.00 – for 1 applicant/year||800.00|
Why did the client choose Portugal’s program?
Apart from visa-free travels to the Schengen countries and fast application processing (up to 3 months) for the whole family, Azamat got interested in the possibility to get profit from renting out property in Portugal. Considering immovable property liquidity in the country, one can expect the profit from 4% to 8% per year.
As of September 2018, the Portuguese property market is considered one of the most perspective in Europe.
According to RICS Chief Economist (RICS – Royal Institution of Chartered Surveyors) Simon Rubinsohn, property market activity indicators demonstrate customers unprecedented readiness to make big purchases, which tendency has not been observed since 2002.
Based on the results of the research by Standard & Poor’s, listed among the three most influential ranking agencies of the world, the cost of Portugal’s property will be increasing up to at least 2021. S&P analysts forecast an increase by 7% in property prices in 2019 and by 6% in 2020. They call Portugal the leading country in terms of immovable property prices growth rate in Europe. This growth rate can be explained by the following combination: Brexit that will result in offer deficiency in the European property market, Portugal’s employment market stability and mortgage market revitalization.
The prospect of receiving financial profit was a serious argument in favour of Portugal’s market. The client faced an issue of choosing a reasonable investment object. The employees of Portugal’s office having good knowledge of the local property market helped our client to find the best solution.
The investment property under consideration was located in the northern part of Lisboa region and in the resort cities of Madeira and Algarve.
The client selected Algarve enjoying high demand in property rent.
According to the results of price analysis on idealista website, prices in Algarve increased by 4.9% in the past trimester of 2018. In prestigious areas Lagos and Loule prices per square meter in some isolated mansions can reach €2,304.
The client also cared about the cost of temporary residence renewal for the whole period and the issue of exiting the investment.
The total cost of getting temporary residence (including all the charges and fees) for the family of 4 (€8,202.00 for one applicant) corresponded €23,465.
The cost of renewal (state charges and insurance): €2,637.40 for one person (twice), total €21,099 for the family of 4.
Property ownership tax: 0.3-0.5% of property estimated value per year + taxes paid by the customer once upon property purchase (IMT is 5-6.5% of property estimated value and Imposto do selo is 0.3%-0.5%, the customer also pays €350.00 for property registration in the local self-government authorities and €650.00 for purchase registration).
Temporary residence is issued under the 1+2+2 formulae, after which one receives permanent residence for a 5-year period, while citizenship can be obtained in the 6th year, after the first year of permanent residence.
The cost of getting permanent residence (state charges and insurance): €1,205.6 for the family of 4 (€301.40 for one person).
The total cost of getting and renewing the Golden Visa before obtaining the country citizenship corresponds €45,769 for the family of 4-х (€13,778 for one applicant) + one-time tax of €33,500 paid upon the object purchase + property ownership tax for 5 years in the amount of €12,500* = €91,769.
Further expenses on getting a citizenship are: €1,200 for the family of 4 (€300 for each family member).
*Taking into account the estimated value of the object equaling €500,000
Profitability and exiting the investment in 5 years
The client calculated possible profits based on the forecasts mentioned above, according to which the expected property price increase in Portugal corresponds 7% in 2019, 6% in 2020 and 5% in 2021. The profit from renting out the object is 5% per year, 25% of which must be paid to the managing company.
As a result, the expected profit from renting out the property for 5 years, excluding the managing company services, corresponds around €95,000*. The cost of the object purchased for €500,000 in the end of 2017 will be €630,000 in a 5-year period, based on the forecasts by Standard & Poor’s.
Thus, the profitability of the object completely covers the expenses on status receipt and renewal up to the moment of getting citizenship.
* the forecast is composed considering that price growth in 2022 will be 5%, like in 2021
Having considered all the pros and cons, the client made a choice in favour of Portugal’s Golden Visa program, based on the following criteria:
- possibility of getting a Portuguese citizenship for children in the future // in Malta permanent residence does not lead to citizenship;
Visa-free travel map for the citizens of Portugal
- getting profit from renting out the object + the right time for investing in Portugal’s property // in Malta one is not allowed to rent out the purchased object or has to spend €50,000 on renting property for 5 years + afterwards, one has to continue renting property to maintain the status;
- the cost of getting permanent residence and citizenship in the future is lower than the cost of receiving Malta’s permanent residence, under the condition of renting out the object and its sale in the future. Thus, 6 years after exiting the investment the profit will fully exceed the expenses on getting the status // in Malta the expenses correspond €105,000 + one has to be renting property even after a 5-year term, the amount will be at least €5,000 per year.
How much time did the process of getting Portugal’s temporary residence take?
With the help of the Russian-speaking employees in our Portuguese office who were responsible for the whole process from A to Z, Azamat received the Golden Visa just in three months, in August 2018. The CIS team provided support with the case preparation locally, eliminating the risk of rejection.
Khrystyna Kurkuliak: “Portugal’s Golden Visa program allows to receive a citizenship in 6 years. With the passport of Portugal you can live, work and study in the UK and any EU country 365 days a year and also visit the USA and Canada without a visa. It is possible that in the future the issue of second passport relevance for the citizens of Kazakhstan will change, if the Government starts treating dual citizenship milder or even abolishes this prohibition of dual citizenship. Then Portugal’s Golden Visa holders will have a choice: either to receive citizenship or simply renew the 5-year permanent residence. In order to get a Portuguese citizenship, one has to pass the test on the basic understanding of the Portuguese language. However, now there are talks about the possibility of abolishing this norm.”
- While choosing the program based on investment in property, one should pay attention to property liquidity indicators, potential increase in value and the forecast profit from renting it out;
- Now is the best time for purchasing property in Portugal as there is an increase in value. In a 5-year period one will have not only annual profit received from renting out the property, but also the profit from its increase in value. And it will fully cover the expenses on getting the status;
- Apart from the cost, the following factors should be taken into consideration:
- possibility of getting citizenship in the future and the correspondent requirements;
- family members allowed to obtain the status and the limitations regarding the age of applicants’ children and parents;
- complexity of the procedure of receiving the status (rejection rates, requirements to provide the documents related to funds source, etc.);
- requirements for maintaining the status in the future.