In many countries in Europe, including Portugal, Greece, and Spain, there is a visa known as the “golden visa” which allows foreign residents with capital to invest and purchase real estate in these countries, thus establishing their status in the country even without permanent residency.
In the Spanish program, residents from outside the European Union could invest a minimum amount of 500,000 euros, thereby obtaining a residence permit that allows them to live and work in the country for three years. This program, which has been in place in Spain for a decade and has brought approximately one billion euros in investments to the state coffers, exists in various forms in other European countries that have experienced economic difficulties, such as Portugal and Greece.
However, these schemes have led to a sharp increase in the housing situation in various countries, particularly Spain, thereby preventing their citizens from buying properties, even in areas far from the center.
For further reading on the cancellation of the golden visa in Greece, click here.
The housing crisis in Europe
As stated, the attraction of investors from around the world to purchase real estate in Spain, Greece, and even Portugal has led to an increase in housing prices, thereby displacing working citizens who simply wanted to purchase a reasonably priced home to live in. Consequently, taxpayers in these countries may find themselves without proper housing, due to wealthy investors who invest large sums in real estate and leave the citizens destitute.
However, economists believe that the housing issue in Spain does not stem from the issuance of golden visas, but rather from changes in supply and demand in the country, where a lack of supply and a surge in demand lead to increased housing prices. Therefore, the solution might be to add new properties to the market rather than canceling visas for investors.
The cancellation of golden visas and the tightening of conditions for their issuance
Due to the housing crisis and attempts by foreign citizens to evade taxes and launder money, have led to stricter requirements for obtaining golden visas across Europe, and even to their outright cancellation. Consequently, senior EU officials have urged governments to end these visas, warning of potential consequences that could extend to organized crime.
For example, Greece, while still issuing golden visas, has hardened the conditions for obtaining them by increasing the minimum investment amount in populated areas and changing the investment tiers. Additionally, Portugal has removed the option to purchase real estate for investment under the visa in order to reduce tax fraud and rehabilitate the housing market. However, it is worth noting that foreigners who want to secure their status in Portugal can still invest in local funds.
According to the Prime Minister of Spain, Pedro Sánchez, these measures are intended to make housing affordable for locals and to turn it into a “right rather than a speculative business.” He stated that the government plans to present a plan to cancel the visa next month. However, it appears that the cancellation of these visas will not have a widespread impact on real estate prices in Spain, as less than 0.1% of the apartments sold during the visa issuance period were purchased under them. Therefore, it is unclear whether the cancellation and change plans will achieve the desired effect and lead to a decrease in housing prices or will only damage the income from foreign investments to the state coffers and nothing more.
The dynamic changes in the tax systems of foreign countries, as well as changes in the characteristics of various residency visas, raise many questions from foreign investors. Therefore, it is important to consult with a professional who is updated on the daily changes in international tax law to choose investment sources in the best possible way. To make contact and arrange an introductory call with us, click here.
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