Starting Business in Portugal: Legal, Financial, and Tax Insights for Expats and Investors in Madeira

For expatriates living in Madeira and international investors seeking new opportunities within the European Union, starting a business in Portugal, particularly in the Autonomous Region of Madeira, presents a strategic and future-proof choice. This guide offers an expert overview of the legal, financial, and tax dimensions relevant to business setup and ongoing operations on the island.

Why Starting a Business in Portugal Makes Strategic Sense

Portugal is known for its stable political framework, access to EU markets, and attractive quality of life. Within this national context, Madeira stands out as a jurisdiction that offers competitive advantages for internationally oriented businesses. The region operates the International Business Centre of Madeira (MIBC), which enables qualified companies to benefit from a favourable tax environment under the strict supervision of the European Commission.

In addition to its competitive positioning, Madeira offers legal certainty, robust infrastructure, and high levels of regulatory compliance, making it an ideal environment for companies operating in services, consulting, international trade, shipping, or emerging sectors like digital entrepreneurship.

Legal Foundations for Business Incorporation

When starting a business in Portugal, foreign investors commonly establish a private limited liability company (Sociedade por Quotas, or Lda). This structure offers flexibility in management and limits shareholder liability to capital contributions.

• The incorporation process entails:
• Defining the corporate purpose and shareholding structure;
• Drafting and formalising articles of association;
• Registering the entity with the Portuguese Companies Registrar;
• Obtaining tax and social security numbers;
• Designating a registered address and, where applicable, local management.

In Madeira, all company formation steps are executed under the Portuguese Commercial Companies Code and relevant EU regulations, with special procedures available for entities operating within the MIBC framework.

Ongoing Corporate Compliance and Reporting

Once established, Portuguese companies are subject to comprehensive legal and accounting obligations. These include:

• Monthly and annual reporting to the Portuguese Tax and Customs Authority;
• Submission of VAT declarations (when applicable);
• Preparation of financial statements by the Portuguese Accounting Standards (SNC);
• Filing of the corporate income tax return (Modelo 22) and annual corporate disclosure (IES);
• Statistical reporting to Banco de Portugal and Statistics Portugal;
• Maintenance of a Central Register of Beneficial Ownership (RCBE);
• Regular communication of invoices via the certified SAF-T system.
• Employment-related obligations, such as payroll, social security, and withholding tax declarations, are also critical for businesses with staff in Portugal.

Starting Business in Portugal: Tax Considerations and Incentives

Starting a business in Portugal implies adherence to the country’s corporate tax framework. However, businesses licensed under the Madeira International Business Centre may access reduced corporate tax rates on eligible activities, provided economic substance and investment thresholds are met. These tax benefits are granted under European Union-approved rules and are regularly monitored by national and EU authorities.

Portugal also offers extensive treaty relief under its network of double tax agreements and aligns with EU directives on interest, royalties, and dividends. Withholding taxes, VAT exemptions, and other fiscal incentives may be applicable depending on the nature of the business and the investor profile.

Immigration, Residency, and NIF Services

For entrepreneurs relocating to Portugal, several residence options are available, including the D7 passive income visa, the digital nomad visa, and the Golden Visa for investment. Regardless of immigration path, all applicants must obtain a Portuguese Tax Identification Number (NIF), designate a fiscal representative if non-resident, and maintain compliance with local tax and social security rules.

Madeira Corporate Services provides comprehensive assistance for:

• NIF acquisition and fiscal representation;
• Immigration strategy and visa applications;
• Residence permit renewals and address updates;
• Registration with healthcare and social security systems, where required.

Why Madeira Corporate Services when Starting a Business in Portugal?

With over 25 years of experience, Madeira Corporate Services (MCS) is a trusted legal and accounting firm based in Funchal. We serve a global clientele seeking to establish or expand their presence in Portugal. Our team comprises qualified lawyers, chartered accountants, and tax consultants who deliver tailored solutions with precision, confidentiality, and efficiency.

At MCS, we go beyond incorporation. We provide holistic advice to ensure your business is structurally sound, fiscally compliant, and strategically positioned for long-term success.

Take the Next Step to Starting a Business in Portugal

Suppose you are considering starting a business in Portugal and want personalised guidance on company incorporation, tax structuring, immigration, or compliance matters. In that case, we invite you to schedule a consultation with one of our senior advisors.

To book a meeting, visit our website and click the “Book a meeting” button at the top right of the homepage.

Let us help you turn your ambition into an enduring presence in Madeira.

MCS

The founding of Madeira Corporate Services dates back to 1996. MCS started as a corporate service provider in the Madeira International Business Center and rapidly became a leading management company… Read more