Portugal is ‘still open for business for expatriates’

The announced closure of the golden visa scheme in Portugal sent shockwaves into the financial advice market.

The golden visa programme made Portugal a very attractive country for expats around the world.

The scheme, called Authorisation of Residence for Investment Activity, targets non-EU nationals and allows them to receive residence rights in return for investments in the local property sector or the economy.

The Portuguese prime minister António Costa, said on 16 February that the government would stop issuing new golden visas in order to “fight against price speculation in real estate”. However, it also came after members of the European Parliament (MEPs) overwhelmingly decided to demand a ban on golden passports.

But John Westwood, chairman at financial advice giant Blacktower, told International Adviser that the closure of the scheme does not mean Portugal will become unattractive to expats.

‘Open for business’

He said: “The closure of the golden visa scheme is centred around what the government thought was unfair escalation of property prices in Portugal due to the expatriate community driving up property prices. Not everybody agreed with that. As of today, there have been no changes in the law in Portugal. So, if you wish to apply for golden visa today, it is technically still open.

“We are expecting changes. We don’t know the full extent of those changes. As an organisation we’ve consulted with professional advisers in Portugal and we’re all waiting for further news. What we do know is that if and when they do announce the changes in the golden visa programme, it has to go through and be voted on by Government and they have to change the law.

“This is not going to happen overnight. There is technically still a process open for people to apply for golden visa, and while the golden visa programme is still open, applications are still being accepted, although this my change. However under current Portuguese rule of law changes should not be applied retroactively.

“My hope for the golden visa is they replace it with something that’s perhaps better for Portugal in the long run, but still keeps the arrangement open making it attractive for expatriates to come here.

“It hasn’t affected the NHR regime. This is purely the golden visa regime. NHR remains an attractive proposition for qualifying expatriates together with D7 and D2 visas.

“The whole expatriate process in Portugal hasn’t been overturned. I think there’s been some misreporting. I think what needs to happen is people need to think about what’s really going on. Portugal is still open for business for expatriates.”

American desk future

Since its inception, Portugal attracted €6.5bn (£5.7bn, $7bn) in investments by foreign nationals, mainly from China, Brazil and South Africa, with most of the money going into property.

US expats are also among the most attracted to the scheme. This led to Blacktower Financial Management launching an American desk specifically targeting those looking to move to Portugal.

But Westwood said that at this point in time, the firm has not changed its strategy with the American desk.

In fact, he added: “We are currently working on an active growth plan to roll our American desk out to the whole of Europe and beyond. We see no limitation to this. Our personal business view is wherever Americans are wishing to go and reside, we should be able to support them with our service offering.

“If we look at what the American desk is trying to achieve, we had increasing inquiries from American or US-connected persons who wanted to move over into Europe. Because we had an American business already, we were seeing both sides of the story.

“We became increasingly frustrated in the way the European marketplace was trying to cater for American inquiries, and I don’t think very many firms were geared up and focused on what is a business opportunity for European wealth management.

“We decided to carry out quite a bit of research and look at what was going on in that market. It became clear to me that instead of moving away from the American inquiries, we should actually be going towards them because they were genuine quality business inquiries that just had to be dealt with in a different way.

“You need to have an understanding of the relationship between what European countries and taxation authorities deem the correct way of doing things, and what the IRS in America deems the correct way of doing things.

“Between those two there are tax agreements in place, so you can structure something that works for both sides. Essentially it’s a change in the way you structure any advice, but it certainly is possible.

“The overriding message is we should welcome American inquiries and that’s what we did as an organisation.”

Attraction of US expats in Europe

The Blacktower chairman also gave an insight as to why he thinks that American expats and US-connected persons are flocking to Europe.

He added: “The whole premise of why they’re doing it is purely lifestyle. It seems to be that Americans are increasingly fascinated with Europe and the history of Europe.

“They can come here in their retirement years and have a completely different lifestyle, which is quite affordable for them.

“Whether they wish to come here and never go back to the States is not a debatable point because I don’t know many Americans that we are dealing with that are renouncing their citizenship. They’re all doing it for a period of time in retirement for lifestyle reasons.”

Brushed aside

Unfortunately, as Westwood said, the US expat is notoriously dismissed as a client – mainly because of their complicated taxation arrangements with the Foreign Account Tax Compliance Act (Fatca).

This requires these clients to share their financial and personal information with the Internal Revenue Service (IRS) for tax purposes. This is because the US has a citizenship-based taxation system.

Westwood said: “Very few wealth management organisations are geared up to service the American connected person.

“There has been no development of product that caters for this kind of client. It is easy to do provided you understand the rules.

“I think what you’ve got to work out is what part of the client’s assets have to remain in the states, and you have to have suitable arrangements in the states to cater and manage those assets.

“That entails opening up relationships with platforms in America, therefore then you have to be Securities and Exchange Commission (SEC)-registered in the states to do that.

“On the other side of the equation is if you’re dealing with the US-connected person in Europe, you have to have a relationship with a platform that understands what has to be done for American expats and is also compliant within the EU.

“There are not many of those. We work with a very large US platform that supports us in Europe as well. They helped us bridge the US/European advice gap. However, to achieve this you have to have assets in the US and assets in Europe, and you’ve got to be compliant in both jurisdictions. You cannot provide a full pallet of services to American clients without both sides of that equation being in place.”