You’ve probably already heard of Portugal’s Golden Visa investment scheme. But did you know that the tropical island of Madeira is one of the country’s best destinations for investing in Golden Visa property?
In this detailed insider’s guide, we’ll look at how Portugal’s autonomous region of Madeira will become 2022’s hottest Golden Visa destination – and why you should aim for a Madeira Golden Visa now.
We’ll focus (mainly) on the property investment route here, but if you’re interested in exploring other ways to invest in Portugal, check out our detailed guide.
Portugal is already the best option for people looking to acquire (or regain!) EU citizenship. Portugal offers flexible visa pathways, allows the all-important dual citizenship, has accessible language requirements and a short citizenship timeline of just five years’ residency.
During those five years, there’s no need to physically move to Portugal (although of course you can if you want to). That means you can carry on with your life elsewhere, while your investment spends the time in Portugal on your behalf. In fact, a short annual visit to Portugal (7 to 14 days) is enough to maintain your residency status all the way to citizenship.
Golden Visa Changes in 2022
Since the Golden Visa scheme started, Portugal’s major cities Lisbon and Porto have been prime real estate investment destinations, along with the Algarve region. Foreign investors have snapped up properties in these areas, boosting Portugal’s economy while also causing dramatic price rises.
But now the Portuguese government is about to shake things up. Its goal is to redirect foreign investment to underserved regions of the country. After December 31, 2021, Lisbon, Porto, and some of the Algarve will no longer be eligible for Golden Visa real estate investment.
Other changes are coming to the Golden Visa scheme too, such as higher minimum thresholds for other types of investments, including funds.
Fortunately, there are still plenty of good opportunities to get your Golden Visa by investing in Portuguese real estate.
Madeira is one of the best options available for this – and it’s not going anywhere in 2022.
We’ve done detailed research on the island and spent plenty of time here. Here’s the lowdown on investing in Madeira property to get the Golden Visa.
Madeira Golden Visa: Property Investment Thresholds
When investing in Madeira for the Golden Visa, there are two key investment thresholds you should know about. Let’s look at exactly what each one involves.
€500,000 Golden Visa threshold
This investment threshold allows you to choose any property, anywhere in Madeira. It could be a brand-new development in the center of Funchal, or an old traditional quinta in the middle of a banana plantation. At the €500,000 investment threshold, you’ll get maximum flexibility in your property choices.
€350,000 Golden Visa threshold
If you’re looking for a bargain and don’t mind getting involved in a renovation project, the second threshold could be a good fit for you. The €350,000 threshold allows you to invest in property for rehabilitation/renovation.
Let’s look more closely at exactly what that means.
Property for rehabilitation can fall into one of two categories:
- Over 30 years old
- Located within one of the official rehabilitation zones, as defined by each area’s local council. For example, in Funchal, the rehabilitation zone incorporates a large chunk of the city’s central area – making it a promising option for investment with holiday rentals in mind.
It’s important to note that the 350,000 EUR investment threshold includes both the purchase price of the property and the value of any rehabilitation work required.
What exactly counts as ‘rehabilitation’ – can I just add a few coats of paint?
There are four officially defined levels of rehabilitation.
Level 1 (Light rehabilitation)
This level involves conducting small repairs and improvements to the installations and equipment that already exist in the property. Typically, this is in the bathroom and kitchen.
- Improving indoor lighting, ventilation and exhaustion conditions
- Cleaning and general repair of the roof
- Repair of occasional anomalies in the plaster
- Repair of existing window frames
- General improvement of existing electrical and artificial lighting installations
Level 2 (Medium rehabilitation)
This is in addition to the work identified in Level 1. It includes the following:
- Repair or partial replacement of carpentry elements (such as window frames, staircase, floors or ceilings)
- Repair and possible reinforcement of certain structural elements, such as floor slabs or roof structures
- General repair of coverings on interior and exterior walls and roof
- Introduction of new electrical installation
- Improvement of common parts of the building
- Making slight changes to existing forms of space organization
- In general, improving functional and environmental conditions of spaces
Level 3 (Deep rehabilitation)
This level is in addition to the previous levels and includes the following types of work:
- Developing profound changes in distribution and interior organization of building space, with the possibility of increasing or reducing the total number of dwellings
- Introduction or adaptation of spaces to create missing facilities and equipment, such as the introduction of sanitary facilities or functional reorganization of kitchens
- Changes which involve significant demolition and reconstruction, such as:
- Partial or total replacement of floor slabs and partition walls
- Structural problem solving
- Improvement and restructuring of common areas
- Improvement and restructuring of the vertical and horizontal circulation system
- General replacement of carpentry elements
- Construction of new coatings
At Level 3, the depth of the rehabilitation work justifies the measured application of new materials and constructive solutions, as well as satisfying deeper functional requirements.
Level 4 (Exceptional rehabilitation)
This level of works is less common for typical Golden Visa applicants. It may require the following:
- Occasional use of restoration techniques for interventions in the building’s surroundings, or even parts of its interior.
- Total reconstruction of the building, based on the value of its contribution to the urban image of the surroundings. This may include partial modernization of aspects of construction, installations and equipment.
- Rehabilitation of the buildings to standards much higher than the existing ones.
The new building is to be constructed according to common current knowledge and with contemporary architecture. The rehabilitation process is to be attentive and careful of the context and cultural value of the surroundings.
As you can see from reading about the different levels, rehabilitation for the Madeira Golden Visa doesn’t always have to be a difficult undertaking. There are several types of rehabilitation that can be done with minimum hassle or expense.
In Madeira, you can find many properties that meet the requirements of Level 1, netting you a convenient pathway to Portuguese citizenship at a very accessible price (€350,000) – especially if you’re selling your existing home in high-value markets such as the UK or US.
Our Madeira-based partner Emigre.eu offers specialist property finding and financial advice services for new arrivals. If you’re looking for the perfect Madeira property for your Golden Visa needs, please contact John Mather to arrange a discussion.
Investing in low-density areas
You may have heard about a further 20% discount available on Golden Visa property investment thresholds, for those choosing to invest in low density areas. That means €400,000 for the regular threshold and €280,000 for the rehabilitation threshold.
Madeira is currently not included in the low-density category, but officials here are regularly lobbying the Portuguese government to get that changed. To be updated on the latest developments, please subscribe to our email list.
Alternative 350K EUR Golden Visa Route: Investment Funds
Investing in Portuguese funds is another way to get the Golden Visa in Madeira (and anywhere in Portugal).
It’s important to mention this option here, because there are only a few months left from the time of writing (August 2021) to secure a venture capital fund investment at the 350,000 EUR level. At the end of 2021, Portugal will raise the investment threshold funds Golden Visa to 500,000 EUR.
Many Golden Visa investors prefer the funds route, as it’s faster and more straightforward than property. You can choose your fund and investing it directly, without having to spend valuable time locating the ideal property.
What’s more, to secure a Golden Visa at the same level in property, you’d have to go down the rehabilitation route, rather than buying a brand-new property in Madeira.
Investing in a fund has the following benefits, when compared to property:
- Lower overall transaction costs, mainly due to no need to pay property taxes (see next section for details of the taxes involved in property purchase)
- Better tax efficiency. Investment funds aren’t taxable in Portugal, if you’re not a tax resident. They’re a perfect option for an investor who wants a foothold in the country, but doesn’t want to live there.
- No need to worry about expensive property maintenance issues, or finding a reliable firm to manage the maintenance for you
- No need to find, vet and manage tenants
- Potentially higher return on investment, when compared to property (although Madeira’s property market is very much on the upswing)
Digital Émigré has preferential access to several investment funds, thoroughly vetted and analyzed by our experts. The funds are exclusive and don’t advertise publicly. But we can give you more information and make an introduction to the fund managers.
Of course, investing in a fund to get your Golden Visa still gives you the option of buying property at any point down the line. With your Golden Visa safely secured, you and your family can take up residence in Madeira, or anywhere in Portugal, whenever it suits you.
Madeira Golden Visa: Property Taxes
Back to property…
Here’s the full lowdown on the taxes payable when buying property in Portugal.
When purchasing property anywhere in Portugal, including Madeira, you’ll need to pay several taxes. There are three taxes for property: the municipal property tax (IMI), the municipal real estate transfer tax (IMT), and stamp duty (IS).
In the section we’ll examine these taxes one by one. Also, we’ll provide a simulation of how much you can expect to pay in taxes at the time of purchase, for both levels of Madeira Golden Visa investment.
Municipal Property Transfer Tax (IMT)
This tax is imposed on the real estate transaction itself, every time a property is purchased in Portugal. IMT (Imposto Municipal sober as Transmissões Onerosas de Imóveis) is calculated either on the tax value of the property or the value declared in the deed of sale, whichever is higher.
IMT is payable before buying a property. Three key factors are involved in calculating it:
- Type of property, either rural or urban
- Location of the property, either mainland Portugal or the autonomous regions (like Madeira)
- Purpose of the property, either main residence or secondary
Certain IMT exemptions are available, but they won’t apply to Madeira Golden Visa applicants, as the Golden Visa investment value is too high.
Stamp Duty on Purchase
This tax is imposed on the purchase and sale of property. The buyer of the house pays this tax when they sign the deed. Stamp duty for purchase and sale is 0.8% of the total property value. There’s also stamp duty on mortgages, but that won’t apply to you as a Golden Visa investor.
Several reductions may be available, depending on your specific situation. We recommend consulting a Portuguese accountant to discuss this in more detail.
Municipal Real Estate Tax (IMI)
There’s one more property related tax to be aware of, but unlike the other two, it’s not payable at the moment of purchase. It’s called IMI (Imposto Municipal sobre Imóveis). IMI is calculated on the value of the property, and must be paid every year starting from the moment you acquire the property. It’s the equivalent of council tax in the UK.
IMI levels vary according to whether the property is classed as urban or rural. For urban properties, IMI ranges from 0.3 to 0.5, and for rural properties it’s 0.8 %.
In the next section, we’ll give you an example of how stamp duty and IMT would look for the two Golden Visa property investment levels available in Madeira.
Madeira Golden Visa: Example taxes and fees
350,000 EUR investment threshold (300,000 for building + 50,000 for rehabilitation works)
|VAT on works||€3,000|
500,000 EUR investment threshold
These taxes and fees are payable at the moment of purchasing your property, so you’ll need to budget for them when making your Madeira Golden Visa investment plans.
Madeira Golden Visa: Best locations for property
Two factors play a key role in location decisions in Madeira: 1) hills, and 2) whether to own a car.
Thousands of years ago, Madeira was part of a volcano. As a result, the island has no shortage of (extremely steep) hills and many areas are accessible only by car. Driving on Madeira can be challenging, with many sheer drops and steep curves.
Luckily, it’s possible to avoid this by sticking to the highway network and the flat areas near the sea. If you live in central Funchal, you can skip car ownership altogether, as everything is on the doorstep.
What’s more, the further up the mountainside you go, the cheaper properties tend to become. But the trade-off is that they’re also less accessible and have less potential for holiday rentals.
Prices in Madeira are generally lower than Lisbon, Porto or popular areas of the Algarve. Funchal is the priciest area of the island, followed by Ponta do Sol. The north coast is more affordable, but weather is less stable and can be colder.
However, if you like a quieter life then it could be worth exploring. If you have a car, everywhere in Madeira is accessible within around 90 minutes of driving.
Funchal is still the top destination on the island for buying a property to rent out for tourism purposes.
We recommend targeting the following locations, to find the best combination of value for money and convenience. Keep in mind that most tourists don’t want to tackle steep hills; instead they prefer to be as close to the seafront as possible.
Sé. Named after the cathedral at its center, this is downtown Funchal and it’s as central as you can get. Sé is a perfect area for holiday rental potential, as well as everyday living and being close to everything without needing a car.
If you’re aiming for a €350,000 Golden Visa investment, certain parts of Sé are included in the municipal rehabilitation zone, so you could pick up a good bargain.
Santa Maria Maior. Incorporating the tourist-friendly old town area, this is a good bet for Airbnb and short-term rentals. For everyday living, it could get too noisy in high season, but if you go a little higher up the mountain you can easily avoid the tourist buzz.
São Pedro. This is the neighboring area to Sé, incorporating some parts of the prime central area. You can find a more residential feel in Sao Pedro, while still being in easy walking distance of everything without too many major hills.
São Martinho/Lido. The large district of Sao Martinho incorporates the seaside zone called Lido, which includes many hotels, restaurants, and beach clubs. Lido is another popular spot for visitors and has great rental potential, with lots of new developments both already available and under construction.
Praia Formosa. A little farther out of Funchal, Praia Formosa is still an easy ten min drive from the town center. There are frequent buses and a flat seaside walking route into town, although it takes around an hour on foot.
You can get a quieter lifestyle here with easy access to the Lido area and a major shopping center. Praia Formosa also has a black sand beach, great for seaside walks, and you can find apartments with excellent ocean views.
Camara de Lobos
This up-and-coming area just outside Funchal has plenty of bargains, but you’ll want to stick near the seafront area for the best rental potential, and to avoid any large hills. That’s why for everyday living in this area, it makes sense to have a car.
Ponta do Sol (PDS)
This small village got itself on the map earlier in 2021 by playing host to the Digital Nomad Village initiative. It’s one of the warmest spots on the island and has some amazing sea and mountain views. Located around 20 minutes’ drive from Funchal, PDS is a good bet for those wanting a quieter lifestyle.
However, the village itself is rather limited, with two restaurants, one coffee shop, and a bar. It also lacks a proper supermarket, so you’ll probably find yourself driving into Funchal on a regular basis. Nevertheless, you’ll find some stunning properties in the area.
Heading back towards the east of the island, we find Garajau, a close neighbor to Funchal. Still within easy reach of the center (by car), Garajau has seafront views and some good property bargains can be had there. It’s also on the right side of Funchal for the airport, useful if you need to travel regularly.
This town on the east side of the island has affordable property prices, a lively international community and is conveniently located for the airport. You’ll need to drive for easy reach of Funchal and other towns, but Machico has plenty of its own facilities, even a small golden sand beach.
To see what different places around the island look like in real time, check out Madeira’s live webcams.
Portugal Golden Visa Changes 2022: Why choose Madeira?
The planned 2022 Golden Visa changes will create the biggest shake up since the scheme began. Here is a summary of why we think Madeira is a top choice for Golden Visa property investment in 2022 and beyond.
- No planned change in Madeira property investment thresholds (normal: 500,000 EUR and rehabilitation: 350,000 EUR)
- Good investment opportunities available, including an interesting rehabilitation zone covering some of central Funchal (best rental income ROI potential)
- Likelihood of property prices rising in 2022 – get in quick!
- Madeira has really got onto the map in 2021, thanks to widespread press coverage of the island as part of the digital nomad village initiative.
- People in Madeira speak good English, thanks to a combination of a strong tourism environment, plus compulsory English education from primary school level onwards.
- Madeira is generally less bureaucratic than the mainland, especially compared to major cities. This is important in general, but especially when it comes to making your citizenship application after five years of Golden Visa residency.
- After 2022, new Golden Visa property investors will be left with a choice of central Portugal, Madeira, and the Azores. Central Portugal is a large area, but, in general, weather and travel connections can be varied. The Azores are far-flung, have fewer facilities and worse weather conditions. Madeira is a clear winner on this list.
Lifestyle benefits of Madeira
- Direct flights to key European capitals (including London, Frankfurt, Amsterdam, Helsinki, Prague and Madrid)
- International flight connections to many more destinations via Lisbon
- Discounts for residents on mainland flights and Porto Santo ferry
- Year-round warm weather
- High levels of safety and tolerance
- Diverse environment and stunning natural beauty
- Remote worker friendly (fastest internet in Portugal)
- Affordable cost of living (lower than Lisbon, Porto or the Algarve)
For a more detailed exploration, here’s our article on living in Madeira