Ultra-rich weigh Portugal Residency, jumbo covers to forget Covid

A sunny Portugal, jumbo insurance covers running into millions of dollars, and a Plan-B are among the options that many rich Indians are weighing as they look back at the dark months of the pandemic when they felt powerless and frightened.

At least 50 ultra-high net worth individuals have forked out between Euro 350,000 and Euro 600,000 in the past 18 months to invest in apartments in Lisbon suburbs or in less expensive locations to obtain residency permits. After spending a week or a fortnight every year for the next five years to fulfil the residency norm, they would be eligible to apply for citizenship. Will they eventually give up their Indian passports?

They don’t know, but what they do know is they need an alternative strategy and have the money to plan it --- not to run away from law enforcement agencies or creditors, but to migrate if circumstances require.

"The recent interest in Portugal residency is not driven by regulatory reasons or the urgency to relocate. The motive is often for ultra HNIs to have an option to relocate in a situation where they need to for health care, particularly, post Covid. Portugal has got a good healthcare and education system, and hence it’s a good place to put in place a contingency plan. Post a threshold, such families can opt for residency or citizenship. But unlike Greece or Montenegro, which are other options, monetary investment for Portugal residency is higher," said Bijal Ajinkya, partner at the law firm Khaitan & Co.

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Funds for the property investment (to obtain Portugal’s ‘Golden Visa’) are sent in a few tranches under the Reserve Bank of India’s liberalised remittance scheme (LRS) which permits a resident Indian to invest up to $250,000 a year abroad in stocks and properties.

“Though Portugal is a better choice, some are considering countries like Greece and Montenegro where properties are cheaper. Also, they are betting that Montenegro, which is offering a good deal, would become a part of the EU a few years down the line,” said one of the service providers.

One gets the visa only after the investment is complete, and this would take two years. “Some of these HNIs believe a Portugal visa and residency permit has more strength compared to some of the other European countries. The residency requirement is easy and one can freely travel across Europe. There seems to be a lot of interest,” said Rajesh Shah, partner at Jayantilal Thakkar & Company, a Mumbai-based chartered accountant firm.

According to data shared by The Portuguese Immigration and Borders Service, an arm of the internal affairs ministry, applicants from India were among the top five to have received residency permits in April 2021, November 2020, May 2020, and January 2020. The state department has not updated the information after November 2021. The largest number of applicants are from China.

LIFE, TERM COVERS FROM FOREIGN COS
According to sources in the wealth management industry, the pandemic has also fuelled the demand for ‘jumbo life and term’ insurance covers of $20 million and above sold by overseas insurers. Under the insurance and foreign currency regulations, a resident Indian can buy such a policy by transferring the premium amount using the LRS window, but only after receiving the RBI’s permission.

"RBI has been giving permission for purchase of such covers under LRS. Interestingly, the regulator is not couching such approvals with conditions regarding remittance of funds or timing,” said Ajinkya. Earlier, the regulator used to typically insist that the funds had to be brought back to India once the policy matures and the insurance company makes the payout.

“The interest in jumbo covers has been there for at least ten years now. But people used to do it surreptitiously by transferring money to relatives who then purchased the policy on their behalf. A few were also pulled up under the Black Money Act when it later surfaced that they were owning undisclosed life policies issued by foreign insurers. But the regulator has become more liberal in the last two years. It's clearing applications (for purchase of such policies). Maybe, there is a rise in demand post Covid,” said a senior banker. On maturity the insurance company would deposit the money in a designated overseas bank account where family members are named as nominees.

Some few years ago, when the Income Tax and Enforcement department turned the heat on tax evaders and banks began issuing look out circulars on suspected wilful defaulters, many rushed to flee the country by taking citizenship of countries like Dominica, St, Lucia, Antigua, Grenada, St.Kitts, Malta or Cyprus. “The Portugal residency applicants are largely a different set of people. For them, it’s like applying for a residency in the UAE. But Portugal has other advantages. One need not apply for citizenship or renew residency after 10 years, but can continue as a permanent resident as long as he wants,” said another lawyer.