What drives Chinese demand for Portugal?

Portugal is the No.1 immigration destination for chinese in Europe. What drives so many chinese to Portugal? Wealthy chinese immigrating to other countries also take their wealth to a new country.

Portugal was among the hardest hit in 2007 financial crisis and the subsequent 2011 budgetary crisis. The Portuguese government has introduced a wide array of austerity measures aimed at economic reform. In 2012, a legislative proposal for ARI/Golden visa program was introduced in 2012 offering residence permits to foreigners against specific investments to boost the economy of Portugal. On 26 Nov 2017, two new categories were introduced for capital investment under Law 102/2017

In 2012, only two applications were approved, today May 18, 2018 statistics indicate, Portugal has received €3.8 billion euros and  3,854 chinese have received residence permits to live in Portugal and demand is still there.

A total of 6279 Residence permits for pursuing investment activities (ARI) and over 10,000 residence permits issued for family members. 95% of the investment came through real estate acquisition.

• 2012 – 2
• 2013 – 494
• 2014 – 1526
• 2015 – 766
• 2016 – 1414
• 2017 – 1351
• 2018 – 726

Presence requirements

In the first year, the investor is obliged to be present in Portugal for at least seven days per year. In the subsequent years, this requirement is raised to fourteen days per period of two years. The residence permit is valid for one year, later  it can be extended for periods of two years.

Chinese interest for Portugal

According to a paper by Luuk van der Baaren and Hanwei Li Portugal’s investment programme for several reasons been successful in attracting rich migrants from China.

• The low presence requirement of the Portuguese scheme is especially important to Chinese investment migrants. It enables investors to legitimately hold a Portuguese residence permit while spending most of their time in the country of origin. Presence requirements is sometimes referred to among Chinese emigrants as a ‘migration prison’
• Chinese get free movement in Europe through golden visa. Holders of a Portuguese residence permit can reside in other Schengen Area Member States for 90 days in each 180 day period and are therefore exempted from cumbersome visa application procedures.
• According to interviews among Portuguese real estate agents, the vast majority of Chinese investment migrants choose to stay in China. In the meantime, their properties can be rented out. The low requirement meets the Chinese investors’ demands, since they would often prefer to continue to reside in China after obtaining a residence permit for Portugal.
• Chinese investor migrants love to invest in real estate, which is regarded by wealthy Chinese as a safe and stable investment. In the majority of cases, the property acquired through investment programmes will not be used as a primary residence and can therefore serve as a holiday home and eventually be rented out.
• Wealthy Chinese investors also emigrate to Europe in search of political stability away from problems in China.
• Investment migration is also an important family livelihood planning strategy for the wealthy Chinese seek to invest in their children’s quality of life, a way to secure their children’s primary and secondary education abroad.
• As the investment migration procedures tend to be complex, Chinese investor migrants are prepared to hire agencies that help them handle the investment migration procedures.

Foreign investment has increased the value of properties in certain areas, most notably the historical centre of Lisbon. Within certain areas, sales prices per square meter have reportedly increased as much as 30% within one year.

China Restrictions on Foreign Exchange

SAFE Circular on Regulating Large Overseas Cash Withdrawals on Bank Cards  effective January 1, 2018, provides that an individual may withdraw no more than RMB 100,000 (approx US$15,530) annually from outside of mainland China.

New rules from July 1, 2017, banks and other financial institutions in China will have to report all domestic and overseas cash transactions of more than 50,000 yuan ($7888), compared with 200,000 yuan previously.

The Circular also imposes a cap on daily overseas withdrawals, which may not exceed RMB 10,000 (about US$1,555) on a single card, and prohibits evading the restrictions by using cards borrowed from others.

Non-Habitual Residence Tax Regime

The Non-Habitual Residence Tax Regime is an often overlooked advantage of taking up residence in Portugal is the existence of the Non Habitual Residence Tax Regime. This taxation scheme was introduced in 2009, with the aim of (re)attracting talent and high net worth individuals. Anyone who has not been a tax resident in Portugal during the preceding five years and takes up residence in Portugal is eligible to participate in this scheme. For ten years, the migrant can profit from advantageous tax rates. The migrants’ Portuguese sourced income will be taxed at a flat rate of 20% if the income is derived from ‘high value activities’, while many forms of foreign source income (including foreign source pensions) are exempted from taxation. Moreover, Portugal does not impose wealth taxes.

Becoming a Portuguese tax resident requires residing in Portugal for at least 183 days in a 12 month period. 46 A person who does not fulfil this requirement can still be considered a tax resident in Portugal if he has a home in Portugal which is intended to be his permanent residence. It must be noted that Portugal is not the only EU Member State that has introduced a beneficial taxation scheme for third-country nationals. The Netherlands, for example, has introduced the so-called ‘30% facility’, which entails that highly-skilled workers from a third country are exempted from taxation on 30% of their remuneration.

French nationals (16%), reportedly attracted by the Non-Habitual Residency Tax programme.

Portugal Golden Visa at a Glance