Starting a Business in Portugal (or Madeira Island) as a foreigner but with the proper knowledge and preparation can also be a rewarding and profitable venture. With its vibrant economy and favourable business environment, Portugal is an attractive destination for entrepreneurs looking to expand their horizons. In this ultimate guide, we will explore the ins and outs of starting a business in Portugal as a foreigner, from the advantages of doing business in the country to the legal requirements and practical considerations.
Advantages of starting a business in Portugal
Portugal offers several advantages to foreign entrepreneurs looking to establish a business there. Firstly, the cost of living and doing business in Portugal is relatively low compared to other European countries. This means that your startup capital can go a long way, allowing you to invest more in your business and increase your chances of success. Additionally, Portugal has a strategic location, acting as a gateway to European and international markets. This makes it an ideal base for companies looking to expand their reach and access a broader customer base.
Another advantage of doing business in Portugal is the country’s favourable tax regime. Portugal offers a range of tax incentives and exemptions for foreign firms, including a reduced corporate tax rate for certain types of companies. This can significantly lower your tax burden and increase your profitability. Furthermore, Portugal has a skilled and multilingual workforce, making recruiting talented employees who can help drive your business forward easier.
Legal requirements for starting a business in Portugal as a foreigner
Before starting a business in Portugal, it is crucial to be aware of the legal requirements and procedures involved. The first step is to obtain a Portuguese fiscal number, also known as a Número de Identificação Fiscal (NIF). This number is required for any business or financial transactions in Portugal. To obtain a NIF, you must provide your passport or identification document, proof of address, and other relevant documents.
Next, you will need to choose the legal structure for your business. Portugal offers several options: sole proprietorship, limited liability company (Lda-type companies), and joint stock company (SA-type companies). Each structure has its advantages and disadvantages, so it is essential to carefully consider your business goals and needs before making a decision. Once you have chosen a legal structure, you will need to draft the company’s articles of association and register it with the Commercial Registry Office.
Choosing the proper business structure in Portugal
Choosing the proper business structure is crucial for the success of your venture in Portugal. The most common options for foreign entrepreneurs are sole proprietorship limited liability company (Unipessoal Lda-type company) and joint stock company (SA-type company). A sole proprietorship is the simplest and most cost-effective option, as it involves operating the business as an individual. However, this structure offers no personal asset protection, meaning your assets can be at risk in the event of business liabilities.
A Lda-type company, on the other hand, provides limited liability protection, separating your assets from those of the business. This structure is ideal for small to medium-sized companies and offers flexibility in management and tax planning. Finally, a joint stock company is recommended for larger businesses that plan to raise capital through public offerings. This structure offers the most extensive liability protection but also comes with more complex legal requirements and reporting obligations.
Registering your business in Portugal
Once you have chosen the proper business structure, the next step is registering your business in Portugal. This involves several steps and procedures, including obtaining a unique company name, preparing the necessary documentation, and submitting the application to the Commercial Registry Office. The required documents may vary depending on the legal structure of your business but typically include the articles of association, identification documents of the shareholders and directors, and proof of address.
After applying, it will be reviewed by the Commercial Registry Office, which will issue a certificate of incorporation once all requirements are met. This certificate proves that your business is registered and legally recognized in Portugal. You will also need to register with the Portuguese Tax Authority and the Social Security System and obtain any necessary licenses or permits for your specific business activity.
Finding the right location for your business in Portugal
Choosing the right location for your business in Portugal is essential for its success. Portugal offers a range of options, from major cities like Funchal and Lisbon to smaller towns and coastal areas. Each location has its advantages and disadvantages, so it is essential to consider factors such as proximity to customers and suppliers, availability of skilled labour, transportation infrastructure, and cost of living.
Significant cities like Lisbon and Porto are popular business choices due to their vibrant economies, access to international markets, and excellent infrastructure. However, Funchal offers the country’s most competitive corporate tax rate, and like Lisbon and Porto, it offers various business support services, networking opportunities, and a diverse talent pool. However, they also tend to have higher living and operating costs. If you are looking for a more affordable option, consider Funchal, which offers lower overheads and a more relaxed lifestyle.
Hiring employees in Portugal
Once your business is up and running, you may need to hire employees to help you grow and expand. Portugal has a skilled and educated workforce with a high level of English proficiency, making it easier to recruit talented individuals. When hiring employees in Portugal, it is vital to be aware of the labour laws and regulations in the country. These laws govern aspects such as working hours, minimum wage, vacation entitlements, and employment contracts.
You must register with the Social Security System to hire employees in Portugal and obtain an employer identification number. You will also need to draft an employment contract that complies with Portuguese labour laws and includes all relevant terms and conditions. It is advisable to seek legal advice or consult with a local HR professional to ensure compliance with all legal requirements and to navigate the complexities of the Portuguese labour market.
Networking and building connections in the Portuguese business community
Networking and building connections in the Portuguese business community are crucial for the success of your business in Portugal. The Portuguese business community is known for its warmth, openness, and willingness to help newcomers. There are several ways to network and connect with other business professionals in Portugal, including attending industry events, joining business associations and chambers of commerce, and participating in trade fairs and exhibitions.
Building relationships with local suppliers, customers, and government officials is also essential. Establishing a solid network of contacts can help you gain valuable insights into the local market, identify potential business opportunities, and navigate any bureaucratic hurdles. Additionally, networking can lead to partnerships, collaborations, and referrals, which can significantly contribute to the growth and success of your business in Portugal.
Conclusion
Starting a business in Portugal as a foreigner can be rewarding and profitable. The country offers several advantages, including a favourable business environment, strategic location, a favourable tax regime, and a skilled workforce. However, knowing the legal requirements is crucial, as choosing the proper business structure and navigating the registration process. By following this ultimate guide and taking advantage of the opportunities and support available, you can set yourself up for success in the Portuguese business landscape. Good luck!
If you’re considering starting a business in Portugal as a foreigner, don’t hesitate to reach out to us for personalized advice and support. We have years of experience helping entrepreneurs navigate the complexities of the Portuguese business environment and can provide tailored solutions to meet your needs. Contact us today to get started on your journey to success in Portugal.
Miguel Pinto-Correia holds a Master Degree in International Economics and European Studies from ISEG – Lisbon School of Economics & Management and a Bachelor Degree in Economics from Nova School of Business and Economics. He is a permanent member of the Order of the Economists (Ordem dos Economistas)… Read more
