Successful applicants gain the right to reside in Portugal, travel freely throughout the Schengen Area, and—after five years—apply for permanent dual citizenship and an EU passport.

For individuals connected to the United States—whether citizens, green card holders, or tax residents—the Portugal Golden Visa alternative investment fund-investment pathway can be attractive.

However, it also raises some U.S.-specific tax considerations that merit careful attention.

The Fund Route Explained

Due to recent legislative amendments, real estate investments, whether direct or indirect, are no longer eligible for the Golden Visa. As a result, many applicants now choose to invest in one or more of the over 50 Portuguese alternative investment funds.

These typically include private equity or open-ended funds that allocate capital to Portuguese-listed equities and bonds. All such funds are regulated by the Portuguese Securities Market Commission (CMVM).

The minimum required investment is €500,000, and the investor must retain this holding for a minimum of five years. To maintain residency status, individuals are only obliged to spend seven days per year in Portugal.

In practice, many U.S. investors hold their Golden Visa residency for about seven years, allowing sufficient time to apply for permanent citizenship and to cover the inclusion of relevant family members on the visa.

Portugal Pathways can support U.S.-connected investors throughout the Golden Visa process.

Key U.S. Tax Implications

Under U.S. tax law, most non-U.S. funds are classified as Passive Foreign Investment Companies (PFICs). Unless these funds provide Qualified Electing Fund (QEF) compliant annual statements, investors may face tax consequences.

Specifically, any gains or distributions could be subject to U.S. progressive tax rates, along with an interest charge.

This issue can be addressed if the Portuguese alternative investment fund includes QEF-compliant language in its annual reporting to U.S. taxpayers. Not all funds do, as it is not a requirement under Portuguese regulations.

Paul Stannard, Chairman and Founder of Portugal Pathways and the Portugal Investment Owners Club, states:

“It is U.S. people’s responsibility to make annual returns on their worldwide income and assets, and whilst it is not a requirement of the Portuguese authorities, we make it an absolute priority to validate this before any investment considerations are set in motion.”

Portugal’s Golden Visa investment fund index includes a list of major funds that meet QEF standards and are open to U.S.-connected investors. This can serve as a starting point for due diligence.

Credits: Supplied Image; Author: Client; Golden Visa investors can obtain dual citizenship and an EU passport.

Reporting Obligations for American Investors

U.S. taxpayers are accustomed to extensive reporting requirements. Any foreign financial accounts or investments that, in total, exceed $10,000 must be reported each year to the U.S. Treasury via the Report of Foreign Bank and Financial Accounts (FBAR).

In addition, the Foreign Account Tax Compliance Act (FATCA) obliges individuals to declare foreign financial assets when their value exceeds a certain threshold.

For single filers living in the U.S., this threshold begins at $50,000. These disclosures are mandatory, even if no tax is owed, and the penalties for non-compliance can be severe.

Navigating Inadequate Fund Documentation

Not all Portuguese investment funds are structured to produce U.S.-recognised tax documentation, such as a Schedule K-1. Cross-border tax advisors who understand both jurisdictions can help translate the fund’s reports into a format that aligns with U.S. tax reporting. Portugal Pathways can facilitate access to these professionals and assist in making the process more straightforward for both investors and their accountants.

Credits: Supplied Image; Author: Client; Golden Visa investors should ensure they work with a cross-border tax advisor

Cross-Border Estate Planning

Estate planning presents additional challenges for U.S.-linked individuals who take up residence in Portugal or elsewhere in the EU. While Portugal does not impose inheritance or gift taxes, U.S. tax rules continue to apply.

In some cases, heirs may not benefit from the step-up in cost basis typically granted for domestic U.S. assets. This can result in higher tax liabilities when foreign assets are inherited.

As a result, investors should work with advisers experienced in both U.S. and Portuguese law to ensure their estates are properly structured. Portugal Pathways can connect investors with appropriate professionals to manage both their cross-border estate planning and overall wealth strategy.

Evaluating the Fund Route

Despite its complexities, the fund-based Golden Visa route remains a viable option for many.

These funds often provide diversified exposure to sectors such as renewable energy, technology, healthcare, hospitality and tourism, as well as media and international events.

Moreover, fund-based applications are often processed more swiftly than other investment types.

Paul Sheedy, special advisor at the Portugal Future Fund, said:

“We have hundreds of U.S. investors who have invested in the Golden Visa or are considering it, and it is really important that they have the QEF-compliant reporting for their U.S. tax returns.

“This is really important to us, and we pride ourselves on ensuring we meet all the requirements to ensure that progressive tax rates are not applied to their Golden Visa investment.

“This creates extra work for the fund managers, but we feel we have a duty to make sure that we make it an easy process for U.S.-connected investors and their families wanting to secure EU dual citizenship and an EU passport after five years through Portugal’s Golden Visa.”

That said, it is important for U.S. investors to approach this option with caution. Engaging with experienced cross-border advisers and immigration lawyers from the outset can help ensure compliance and efficiency throughout the application process.

It is also wise to plan ahead for the eventual exit from the fund investment. Doing so can reduce potential tax consequences upon redemption. Investors must also ensure that the investment is maintained until citizenship is granted; exiting early could lead to the invalidation of their Golden Visa status.

Credits: Supplied Image; Author: Client; Portugal's Golden Visa continues to be an attractive proposition for U.S.-connected citizens.

For U.S.-connected individuals, Portugal’s Golden Visa continues to offer a practical pathway to European residency.

However, success depends on careful navigation of international tax obligations, appropriate fund selection, and a coordinated legal and financial strategy. With the right professional support, this opportunity can be accessed in a well-structured and compliant manner.

To explore your options and connect with the appropriate advisers, Portugal Pathways offers consultations for those considering this residency-by-investment route.

About Portugal Pathways

Portugal Pathways has supported hundreds of Golden Visa residency-by-investment applications and provides expert guidance through its professional supply chain network on luxury property, wealth management, and tax optimisation, including post-NHR tax regime planning, as well as private healthcare, IFICI tax incentive applications, money transfers and bespoke relocation solutions to enhance life and investments in Portugal.

About Portugal Future Fund

The Portugal Future Fund strategically invests in key sectors, driving growth and innovation across Portugal. Approved for Portugal’s Golden Visa residency-by-investment, it offers a unique opportunity for impactful and rewarding participation.

About Portugal Investment Owners Club

The Portugal Investment Owners Club, or P Club for short, is a unique investor membership community designed for discerning individuals, families, and organisations committed to exploring and capitalising on life in Portugal and enjoying money-can't-buy experiences and exclusive events.