The facts about buying a GREAT property for the Schengen Visa Portugal to travel the Schengen with a Golden Visa Portugal.
When obtaining the Schengen Visa Portugal we will enable you to search fair local prices and full solutions to make money and the Golden Visa Portugal
The Schengen Visa Portugal Real estate investment has proven to be the most popular option for portuguese Golden Visa applicants. Three main reasons account for this. One of these reasons is the fact that the prices of properties are still relatively low when compared to other European countries especially as tourism has a spectacular growth and Portugal is rapidly becoming a top European destination for most tourists. Though the future economic cycle is uncertain, patient investors can benefit from nice capital gains if they are patient enough to wait for a market upturn.
The other reasons for the popularity of Schengen Visa Portugal real estate are; the relatively low amount of the minimum required investment which is €280,000; and the relative security and potential return on a property investment.
Golden Visa Real Estate Investment Options for the Schengen Visa Portugal
The only item that counts towards your Portuguese Golden Visa real estate investment are the price you pay for the property, and the cost of contracted renovation works in the case of renovation option. Professional price fees, government fees and taxes are not included in the calculation that determines whether you meet the minimum investment requirements.
Under the Golden Visa regulations of 2015, only the minimum required investment for property purchase for >€500,000 has been reduced to > €400,000 for properties in ‘low density’ areas (These are NOT well known areas in Lisbon ans coats ! you will suffer much lower growth in these areas and very low yields) we advise the 350k option or the 500k. check this page for the definition of ‘low density’ areas). But when it comes to the option of property renovation investment, the investment (of at least €350,000 or €250,000 if in a ‘low density’ area) must be made in both the property purchase and the respective renovation works, net of VAT (check this page for the applicable rates).
Unlike a normal property purchase, a Promissory property agreement is not accepted as proof of an investment under the property renovation option. This means you have to submit a copy of the final purchase deed together with the Golden Visa application. Some of the documents among others to be submitted in conjunction with the copy deed include:
- The renovation work contract (or proof of the planning permission application in case the contract has not been signed),Schengen Visa Portugal
- the official receipt for any payments made to the contractor in case the property purchase plus the payments to the contractor have not yet reached the minimum required amount.
- A statement by the investor’s bankers confirms that at least the remainder is kept in a deposit account by the investor.
Golden Visa 350,000 renovation
Details of what renovation works (‘rehabilitation’ in the official parlance) involve are provided by law. It should be noted that the official body with the power to confirm whether or not an intended renovation work is deemed rehabilitable is the Town Hall (“Câmara Municipal”). Renovation works considered as ‘rehabilitation’ are entitled to some benefits as provided by law. Such benefits include the Golden Visa legal provisions and some tax benefits (check this list for details). In practical terms, you can enjoy these benefits if you either buy a property that has already obtain the Town Hall confirmation, or you hire an architect to plan the works and then submit the plans to the Town Hall for confirmation.
Though not impossible, it is most often difficult to find properties for renovations that meet the Golden Visa requirements. You may be fortunate to find a property renovation option that appeals to you. But you should note that this is possible because some developers have offered a deal that combines the property purchase and renovation works to make it eligible for the Golden Visa property renovation option without the need for you to hire an architect. When this is not the case, you can demand the contractor to hire an architect and an independent qualified building works supervisor to report the progress of the work and their conformity with the contract. Depending on the contract wording, the architect’s and investment fees can count towards your Golden Visa investment if they were included in the contract’s bill. But in cases where they are excluded from the contract bill, they will not only count towards your investment, but you will also be required to pay a 23% VAT on their fee.
Short term rental that is usually less than a month is considered as a business activity by the Portuguese government. As a result, it is subject to VAT and special regulations. For this reason, it is best for non-resident investors to enter into a general agreement with a local manager. The manager will take care of the business and pay the investor a portion of the net profit which is typically 70%. The best occupancy rates are obtained in areas that attract more tourists with the best of such areas being the historic centre of Lisbon where some operators have an occupancy rate that exceeds 80%. 1 or 2 bedroom and even studios attract more demand for short-term rental. Though car parking may not be necessary, it may equally give a property an edge over others.
It is shocking for most people when they learnt that smaller apartments are easier to lease and even have a higher yield than their larger counterparts, yet this is true in this market. Yields usually range between 4% and 10% with the best yields mostly obtained in the short-term rental market. Though a foreign owner’s net rental income (gross rent less all documented direct costs except for financial cost) will be taxed at 28%, under a partnership agreement with a short-lets operator, the owner’s profit will be treated as a dividend for tax purposes. This will enable the investor benefit from the maximum tax rate (typically not more than 15%) provided for under a relevant double taxation agreement.
The Management of Short-Term Letting for Schengen Visa Portugal
Portugal has many vocational rental managers offering their services by a monthly management fee usually calculated as a percentage of gross rental income with the common percentage being 30%. Alternatively, the rental manager can be the one paying monthly variable rates calculated as a percentage of the gross income to the property owner; this rate is typical 70% or less. The owner is then expected to deduct expenses such as utility and telecom bills from his 70% income.
A property owner accepts Whichever of the above arrangement, he/she is required by law to register and be taxed as a sole trader. This makes the property owner subject to several legal obligations including social security contributions and the charging of VAT in case the sales exceed the maximum threshold which is currently at €10,000 per year. In a case where the sales are below this threshold, and no VAT is being charged, the owner will not also be able to recover VAT including the23% VAT on the manager’s bill where applicable.
Now, it will not be a wise idea for a non-resident to engage in business in Portugal as a sole trader for the Schengen Visa Portugal . This is due to the many negative consequences both in practical terms and compliance costs and taxation. Though property owners solve this problem in many ways, establishing a general partnership (“associação em participação”) with a manager who will act as a general partner while the property owner act as a limited partner is the ideal solution to this problem. This partnership agreement allows the owner to transfer the running of the property to the manager. The manager’s contribution to the partnership is running the business on behalf of the property owner. The property owner, therefore, becomes a passive investor Schengen Visa Portugal as compliance with the various legal and tax requirements concerning short-term rentals (“a Loja mento local”) is handled only by the manager. The relationship between the owner and the manager has no VAT involved in it. The manager can equally recover VAT on all the expenses made by the business. Under the Portuguese law, the property owner’s portion of the partnership profit is treated as a dividend. When the property owner also known as the limited partner is a resident of a country having a double taxation with Portugal, taxable income on the dividend is withheld by the manager at a reduced rate between 10% and 15%. If he/she is not a resident of a country with double taxation agreement with Portugal, a tax rate of 28% will be applied.