How to start a company in Portugal

There are over 740,000 commercial enterprises registered in the Portuguese Republic. It is equally attractive to large international corporations and start-up entrepreneurs with ambitious ideas. Foreign citizens open companies in Portugal to take advantage of the numerous benefits of this jurisdiction. Even an experienced businessman will need qualified legal support to competently realise all the opportunities offered by Portuguese corporate and tax legislation.

The main advantages of registering a company in Portugal

1. Access to international markets

Thanks to its favourable geographical location and participation in international associations, the Portuguese Republic can be considered an ideal entry point to the European Union’s single market. Portuguese companies also trade successfully with the United Kingdom, the United States, Latin American countries and North African states.

2. Legal protection of the interests of entrepreneurs and investors

Portugal has a stable democratic system backed by a reliable legal framework that protects foreign investment and allows companies to operate in a stable, predictable environment.

3. A favourable environment for innovative businesses

Through subsidies, tax breaks and the gradual development of a business-friendly ecosystem, the Portuguese authorities are encouraging the development of innovative commercial projects. If a foreign entrepreneur’s field of activity in Portugal is related to the technological or digital sector of the economy, they can receive government support under the Portugal 2030 or Startup Voucher programmes.

4. Competitive tax system

Corporate taxation in Portugal provides for reduced income tax rates for start-ups, small and medium-sized businesses, as well as for companies registered in the Azores and the autonomous region of Madeira. Under certain conditions, Portuguese companies owned by foreign entrepreneurs can exclude from taxation that part of their income which constitutes dividends from a subsidiary operating abroad or which was received by them as a result of the sale of such an enterprise.

5. Convenient business registration procedure

Currently, there are several ways to register a business in the Portuguese Republic:

• remotely – on the government website or on the Empresa Online portal;
• in person – by contacting the Commercial Register directly or one of the Empresa na Hora centres, a government service for quick registration called “Company in an Hour”.

Whichever option you choose, starting a new Portuguese company will not take up much of your time or money if you seek advice from the experienced registration agents at Imperial & Legal.

6. Developed business infrastructure

Foreign businesspeople will appreciate Portugal’s well-developed business infrastructure, which includes modern business incubators, large office centres, high-speed data networks, seaports, an extensive road network and international airports.

7. The country’s impeccable business reputation

The Portuguese Republic is considered a prestigious European jurisdiction for registering a business, as this country has never been a tax haven. You will not find Portugal on the blacklists of international organisations specialising in combating money laundering. The transparency of Portuguese companies’ business processes is ensured by European Union directives and the country’s participation in numerous international agreements on the exchange of tax information.

What kind of business is a company registered in Portugal suitable for?

Enterprising foreign investors will find several areas of the Portuguese economy showing steady growth:

• tourism and the hotel business;
• renewable energy sources;
• high technology and IT;
• food industry;
• e-commerce.

Opening a company in Portugal can be a good solution for operational businesses involved in the sale of goods or services, as:

• incorporating a business in this country involves obtaining a tax number and registering for VAT to operate in the European Union;
• the costs of doing business in a Portuguese company are generally significantly lower than in corporations in other Western European jurisdictions;
• Portugal’s reliable banking system, combined with the absence of currency controls, greatly simplifies settlements with customers.

Start-ups will appreciate the government support programmes and numerous tax incentives. Commercial projects related to digital technologies will find not only a developed business ecosystem in Porto and Lisbon, but also a large professional community of expats.

Taxation of companies in Portugal

Corporate tax

Income tax for companies registered in Portugal and representative offices of foreign corporations is calculated on a flat scale. The tax base includes all income of such commercial structures, including those received abroad.

* – if a company registered in Madeira or the Azores does not engage in commercial, industrial or agricultural activities, the corporate income tax rate applicable to its income will be 13.3%.

Additional taxes on profits

The declared profits of companies in some municipalities in Portugal may be subject to an additional tax of 1.5% of the amount stated in the report.

The Portuguese Republic also has a state surtax, which applies when a company’s declared profits exceed €1.5 million. Unlike corporate tax, the surtax is calculated on a progressive scale:

Preferential corporate tax rates

Portuguese small and medium-sized enterprises can apply a reduced corporate tax rate on the first €50,000 of profits:

** – Small and medium-sized enterprises registered in the autonomous regions of Madeira and the Azores may, under certain conditions, benefit from a reduced corporate tax rate of 8.75% on the first €50,000 of profits.

If a small or medium-sized enterprise is a start-up and operates and is managed in mainland Portugal, it can benefit from a favourable corporate tax rate of 12.5%.

Capital gains and dividend tax relief

Capital gains

Under Portugal’s participation exemption regime, capital gains arising from the transfer of shares by a Portuguese company may be exempt from taxation, subject to a number of conditions. Here are just a few of the conditions:

• the shares transferred by the taxpayer company have been owned by it for at least one year;
• the Portuguese company directly or indirectly owns at least 10% of the share capital or voting rights in the commercial structure to which it is transferring the shares;
• the company transferring the shares is not subject to tax transparency rules;
• the organisation receiving the shares cannot be a resident of a blacklisted jurisdiction;
• the assets of the company to which the shares are transferred cannot directly or indirectly consist of more than 50% of Portuguese real estate acquired since 1 January 2014 (there are exceptions for industrial, agricultural and commercial properties).

Dividends

The participation exemption regime also allows for the non-taxation of dividends received by a Portuguese parent company from its foreign subsidiary, provided that the following conditions are met:

• the Portuguese company directly or indirectly owns at least 10% of the share capital or voting rights in its subsidiary;
• at the time the dividends are accrued, the shares of the subsidiary have been owned by the parent company for at least one year;
• the taxpayer company cannot benefit from the tax transparency regime;
• the subsidiary is not a resident of a country included in the blacklist;
• the subsidiary pays corporate tax at its place of tax residence at a rate of at least 60% of the standard rate of the same tax in the Portuguese Republic.

VAT

A reduced VAT rate is applied to food products sold in cafes, restaurants and meal delivery services. It also applies to agricultural equipment and musical instruments.

The super-low rate applies to sales of food products from the basic consumer basket, agricultural products, pharmaceuticals, books and periodicals, as well as public transport and the sale and installation of equipment used to generate electricity from so-called alternative sources – wind, geothermal energy, sunlight, etc.

A zero VAT rate is used in export operations, including deliveries of products manufactured in Portugal to EU countries.

Legal framework for doing business in Portugal

The Portuguese Republic operates under the principles of continental law, according to which:

• priority is given to normative legal acts rather than court decisions from previous years on similar cases;
• the laws in force have a clear hierarchy and are divided into public law (the constitution, the administrative code and the criminal code) and private law (the civil code, the family code and labour law);
• Judges are guided solely by existing laws – their decisions do not become sources of law, as is the case with judicial precedents in the Anglo-Saxon legal system.

The commercial activities of Portuguese companies, as well as corporate governance, are clearly regulated by relevant laws and codes, the main purpose of which is to ensure transparency, accountability and responsibility in business.

Transparency

Data on companies registered in the Commercial Register / Conservatória do Registo Comercial is publicly available. In Portugal, any individual or legal entity can obtain legal information about a company, find out who manages it and view its annual report.

Data transparency has made transactions with Portuguese companies more secure. Some of the personal data of beneficiaries of enterprises in the Portuguese Republic is protected under European GDPR standards. Businesspeople also have the right not to make information that constitutes a trade secret publicly available.

Accountability

All commercial structures in Portugal are required to keep accounting records and prepare and submit tax and financial reports on time.

The financial statements of Portuguese public limited companies must be audited. For other types of commercial structures in Portugal, an audit is required if they meet at least two of the following three criteria:

1. The company’s turnover in the reporting period exceeded €3 million.
2. The company’s assets are valued at more than €1.5 million.
3. The company employs more than 50 people.

Liability

A company’s liability in Portugal is largely determined by its legal form. It is obvious that corporations with an effective management structure will have significantly fewer operational risks. Moreover, a firm with effective internal control mechanisms, where all the requirements of the Portuguese supervisory authorities are strictly observed, will find it easier to attract investment.

The directors of a company are responsible for its effective management. Their rash decisions or inaction should not cause damage to the organisation, its founders, creditors or third parties. The management of a Portuguese company bears both personal and criminal liability for the results of its activities.

Legal forms for registering a business in Portugal

Limited liability company / Sociedade por Quotas / Lda

The most common type of corporate structure in the Portuguese Republic. There may be one or more founders. Both individuals and legal entities are allowed to participate.

If there is only one founder, such a structure will be called a private limited liability company with a single shareholder. The corresponding indication of the legal form “Sociedade Unipessoal” or the word “Unipessoal” is given at the end of the name instead of “Limitada” or the abbreviation “Lda”.

The liability of the company’s owners is limited to the amount of its authorised capital. The personal liability of an Lda shareholder is equal to the amount of their contribution to the authorised capital made during the process of establishing the organisation.

The minimum authorised capital of a private limited liability company is €2. The minimum share capital of a Sociedade Unipessoal is €1. The authorised capital of the company is divided into shares with a par value of €1.

Open joint-stock company / Sociedade Anónima / SA

A more complex structure used by medium and large businesses to register a branch in Portugal. The high costs of maintaining such a company are offset by the possibility of attracting additional investment in the business by placing bearer shares on the securities market.

A Sociedade Anónima must have at least 5 founders – natural or legal persons. An exception is made for IBCM – the International Business Centre in Madeira, where an entrepreneur can register a public joint stock company with a single founder.

The liability of shareholders for the debts of such a company is limited to the market value of the shares they own. The minimum authorised capital of a Portuguese public limited company is €50,000.

The name of such a Portuguese public limited company must end with an indication of its legal form – the abbreviation “SA” or the word “Anónima”.

SAs registered in Portugal must conduct an audit and hold a general meeting of shareholders every year. Such companies are managed by a board of directors and a supervisory board of shareholders.

Comparison of Portuguese limited liability companies

Sole proprietor / Empresário em Nome Individual / ENI

Independent specialists – consultants, freelancers and owners of small retail outlets – prefer to work as sole traders in Portugal. The advantages of Empresário em Nome Individual are: simplicity of registration, no articles of association or share capital, and the possibility of quick legalisation of the business.

The features of the Portuguese ENI are:

• Full liability of the entrepreneur for all debts of his business.
• In their name, individual entrepreneurs use a name that indicates their legal form.
• A feature of Empresário em Nome Individual taxation in Portugal is that the entrepreneur pays tax on income received under a simplified scheme until their income exceeds €200,000. After that, they switch to an organised taxation regime, in which they cannot do without a qualified financial advisor or accountant, as the income tax rate will be recalculated every month.

If you have decided to operate as a sole trader but are having difficulty choosing a tax regime and preparing reports, contact our company’s consultants as soon as possible!

Branch / Sucursal em Portugal

A branch without separate legal personality is registered when a foreign company plans to conduct its commercial activities in the Portuguese Republic in this way.

Since a Portuguese branch does not have separate legal personality, the head office located abroad is responsible for all its financial obligations and debts.

A similar logic applies to representative offices of foreign companies in Portugal. The main difference between a representative office and a branch is that the former is registered to conduct market research and advertise the products or services of the foreign parent company. A representative office cannot sell anything on its own behalf or on behalf of a foreign company.

Company registration in Portugal – requirements and procedure

Requirements for founders

Both individuals and legal entities can establish a company in Portugal. The law does not impose any restrictions on the citizenship or tax residence of the future entrepreneur. The future entrepreneur must be of legal age and have no significant criminal record.

Does a foreign businessman need to be physically present in the country?

The actual registration of the company can be done remotely. However, if you plan to do business through the new company or expect to receive tax benefits, you will need to open an office in the Portuguese Republic, obtain a tax number and move to the country on a long-term visa, or appoint an authorised representative.

Procedure for registering a Portuguese company

Starting a business in Portugal will not take much time or money if you use the services of Imperial & Legal consultants. We provide our clients with a comprehensive turnkey solution for registering a new company:

Additional services provided by Imperial & Legal

The list of tasks that our company’s employees in Portugal successfully perform is not limited to assistance with company registration, opening a bank account or tax optimisation.

As already emphasised, in order to fully realise all the opportunities of a registered company, a foreign entrepreneur will need to move to the Portuguese Republic. By contacting Imperial & Legal’s immigration consultants, you can obtain a residence permit in Portugal under a Startup, Digital Nomad or Entrepreneur visa within a reasonable timeframe.