Cultural Golden Visa: Program background
Where did this artistic support funding option come from, and why do I only hear about it now?
The legislation supporting the creation of an “Artistic Production Funding Golden Visa” has been in existence since 2015 (Also see Order 2360/2017). Yet while it was still possible to buy residential properties in Lisbon and Porto for as little as €280K or €350K, most applicants preferred buying a Portuguese vacation home as a way to obtain their golden residency status. (Owning a real asset in a rapidly appreciating European market was a no-brainer for the majority of applicants.)
For the past 10 years, property values in Portugal have been growing in the high single digits. And given pre-pandemic tourism demand in the country, Golden Visa holders were able to sweat their residential property assets effectively – so their ROI was good.
But as of the end of 2021, new program regulations took effect, which meant that Lisbon, Porto and the massively popular Algarve region in the South were no longer eligible locations for residential Golden Visa property purchases. (You can, however, still buy commercial property in these locations to qualify for a Golden Visa.)
This change effectively reduced the “lifestyle” focus when it comes to Golden Visa property selection: Returns tend to be inferior in the country’s interior, and most people prefer being closer (or in) the large urban centers of Lisbon, Porto and Faro.)
So for a large percentage of applicants, capital preservation, projected yield and opportunity cost, rather than any associated lifestyle benefits, are now once again the key considerations.
Combined with the fact that the minimum threshold for fund-based investments went up from €350K – which was on a par with the “standard” property option – to a whopping €500K, many prospective applicants are now searching for cheaper Golden Visa options.
Today, the cheapest property Golden Visa eligible property options in Portugal start at €280K (Only Greece offers a cheaper property based Golden Visa, at $250K). In Portugal, the cheaper €280K opportunities typically involve a share scheme investment in a new hotel, aparthotel project or similar touristic property development, rather than acquiring an individual title-deeded property.
(Although some guaranteed buy-back options exist at the €280K price point, they tend to offer 0% yield. To earn a guaranteed yield of 3% per year, you typically need to look at a €350K option.)
Moreover, given that your capital will be locked up for at least 6 years (and possibly more), the opportunity costs on these higher amounts are quite high.
Another challenges has been the fact that the property based Golden Visa has not been treated as a priority residency category by SEF, which, since the pandemic, has led to processing delays of up to two years for scores of applicants.
The situation is not much better when it comes to many funds based options. Many offer projected yields of only around 2%, with varying risk profiles – and with a capital lock-up of €500K for at least six years, the opportunity costs are even higher.
So what other options are there then?
The cheapest Golden Visa option would be to start an active business and create 10 jobs in Portugal – but this option is neither attractive nor viable for the majority of applicants.
Hence, previously, that left only the €250K Cultural Heritage Preservation option, a non-refundable donation that has literally only been used by four GV applicants to date.
However, the same supporting legislation, namely Law 63/2015 of 30 June 2015, which came into effect on 1 July 2015, also makes provision for a €250K investment “support of artistic production” (see Section VI). This could include, as two simple examples, the funding of a feature film or a touring stage production.
And if the artistic production is based in a low-density area, a 20% discount applies, making the minimum capital investment requirement only €200K. (This is similar to the 20% discount convention that applies to GV properties based on their location.)
So to qualify by funding a movie filmed and produced in Lisbon, you’d need to invest €250K. Whereas for a film set and produced in a low-density part of the Portuguese interior, you’d only need to commit €200K.
The problem was that no productized option leveraging the above legislation previously existed. But that changed around the time of the pandemic, with the introduction of a “Cultural Golden Visa” option, which meets the Golden Visa criteria via an innovative funding mechanism for Portuguese feature films.
Critically, these productions are pre-sold to media outlets and distribution channels. This significantly mitigates the risk of these productions’ financial under-performance. In fact, this option guarantees the principal and a minimum yield of 4% per annum.
And with a projected yield of 4%+, the artistic support option compares very favorably to both the property and fund based alternatives.
Essentially, the Cultural Golden Visa option is THE most affordable Portuguese GV option on the market, and its yields are competitive. It’s consequently received significant interest from Canadians, Americans, Australians as well as Chinese, Indian and Taiwanese nationals.
(While Russian applications are not currently accepted, we encourage prospective Golden Visa investors from Russia to get in touch regarding some potential alternatives and solutions.)
What’s more, during the pandemic period, when property based Golden Visa application processing ground to a halt, the Cultural Golden Visa’s application processing at SEF remained unaffected, thanks to this being a priority residency category.