Portugal offers several legal structures for businesses. Understanding the various types of companies in Portugal is essential before investing. Each company type has different requirements, liability rules, and tax implications. Therefore, expats and investors must carefully evaluate their options.
Portugal’s standard corporate tax rate is 20%. In Madeira, companies benefit from a reduced 14% rate. Furthermore, under the Madeira International Business Centre (MIBC), qualifying companies may enjoy a 5% corporate tax rate until 2027. This makes Madeira highly attractive for international investors.
Private Limited Company (Lda)
Portugal’s most common business form is the Private Limited Company, or Lda. It requires at least two shareholders. Liability is limited to each partner’s capital contribution. The minimum capital is €1 per shareholder, although higher is recommended. This structure suits small and medium-sized enterprises.
Public Limited Company (SA)
Large businesses often choose the Public Limited Company, or SA. It requires at least five shareholders. Liability is limited to capital invested. The minimum capital is €50,000, of which 30% must be paid on incorporation. SAs are commonly used for companies seeking external investment or listing on markets.
Sole Trader (Empresário em Nome Individual)
A sole trader is the simplest form of business. It has no minimum capital requirement. However, liability is unlimited, meaning the entrepreneur’s personal assets are exposed. This form suits small businesses and freelancers, though it offers no protection from risk.
General Partnership (Sociedade em Nome Coletivo)
In a general partnership, all partners share unlimited liability. There is no required minimum capital. Partners are jointly responsible for obligations. This model is rare among foreign investors due to liability risks.
Limited Partnership (Sociedade em Comandita)
This structure has two types of partners: general and limited. General partners have unlimited liability. Limited partners are only liable for their contributions. The minimum capital depends on the agreed-upon statutes. This form is less common but may fit specific ventures.
Holding Company (SGPS)
A holding company, or SGPS, manages shares in other companies. It benefits from Portugal’s participation exemption regime. Minimum capital is €50,000. Tax advantages include exemption from dividends and capital gains from qualifying participations. Many investors use SGPS companies in Madeira for group structuring.
Branch of a Foreign Company (Sucursal)
Foreign businesses may open a branch in Portugal. No minimum capital is required. However, liability remains with the parent company abroad. Branches are suitable for companies testing the Portuguese market without creating a new legal entity.
Tax Benefits in Madeira
Madeira offers significant corporate tax reductions compared to mainland Portugal. The standard Portuguese rate is 20%. In Madeira, the reduced rate is 14%. However, under the MIBC, companies that meet substance requirements may qualify for a 5% corporate tax rate until 2028. This regime applies to specific international activities, including trading, services, and shipping.
Conclusion
Choosing among the various types of companies in Portugal requires careful analysis of liability, capital, and tax exposure. Madeira, particularly through the MIBC, provides outstanding advantages for international investors. For expats and entrepreneurs considering Madeira, working with a trusted local partner ensures compliance and maximises benefits. Professional advisors in Madeira can assist with structuring, licensing, and long-term tax planning.
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
