Company Formation in Portugal & Madeira Island

Under Portuguese law, the main forms of commercial company are:

a private limited liability company (sociedade por quotas or Lda.);

a single-member private limited liability company (sociedade unipessoal por quotas);

a joint-stock company (sociedade anónima or S.A.);

a general partnership (sociedade em nome coletivo);

a simple limited partnership (sociedade em comandita simples); and

a partnership limited by shares (sociedade em comandita por ações).

The most commonly used forms for smaller businesses are the Lda. and the single-member Lda. Their share capital is freely determined in the articles of association, subject to a minimum nominal value of €1 per quota. By contrast, an S.A. requires minimum share capital of €50,000.

A holding company may also be established as a sociedade gestora de participações sociais (SGPS). An SGPS is not a separate basic corporate form: it must be incorporated either as an S.A. or as an Lda. and must have as its exclusive corporate purpose the management of shareholdings in other companies.

There is no statutory minimum total share capital for a Portuguese private limited liability company (sociedade por quotas, or Lda.) or a single-member private limited liability company (sociedade unipessoal por quotas). The share capital is freely determined in the articles of association, although each quota must have a nominal value of at least €1. This means that a single-member company may be incorporated with share capital of €1.

In practice, MCS generally recommends a higher amount, such as €1,000, depending on the company’s intended activities, expected costs and financing needs. This is a practical recommendation, not a statutory requirement.

Other forms have different requirements. In particular, a joint-stock company (sociedade anónima, or S.A.) requires minimum share capital of €50,000.

Portuguese companies are generally subject to Corporate Income Tax (Imposto sobre o Rendimento das Pessoas Coletivas, or IRC) on their taxable profits.

For tax periods beginning on or after 1 January 2025, the general IRC rate in mainland Portugal is 19%. Companies resident in the Autonomous Region of Madeira may generally benefit from Madeira’s regional IRC rate of 13.3%, subject to the applicable regional conditions. Certain qualifying SMEs and start-ups may benefit from lower rates on the first €50,000 of taxable income.

Companies licensed to operate within the Madeira International Business Centre (MIBC) may qualify for a 5% IRC rate on eligible income. This rate is not automatic and does not apply merely because a company has non-Portuguese customers. The company must carry out a qualifying activity, satisfy the applicable employment and/or investment requirements, comply with the relevant annual limits, and ensure that the activity is effectively and materially conducted in Madeira. Income falling outside the MIBC regime may be taxed at the applicable ordinary rate.

The applicable rate will therefore depend on the company’s tax residence or permanent establishment, the location and substance of its activities, the nature and source of its income, and whether it qualifies for a regional or MIBC regime.

Under the current legislation, MIBC licences for entities seeking to benefit from the 5% IRC rate may be granted only until 31 December 2026. Companies licensed by that date may, subject to compliance with the applicable eligibility requirements and benefit limits, benefit from the 5% rate until 31 December 2033.

The relevant legal deadline concerns the MIBC licence, not simply the incorporation of the company. As the licensing process may require time for incorporation, registration and submission of supporting documentation, MCS recommends starting the process well before the end of 2026, ideally by the second week of December, to allow a margin for administrative processing.

The legal and tax regime applicable after 31 December 2026 remains subject to future legislative and European Union developments and should not be presented as settled.

For a standard incorporation, you will generally need documents proving the identity, legal capacity and authority of the shareholders and members of the management team, together with any required powers of attorney or special authorisations. You should also prepare the company’s proposed name, registered office, corporate object and activities, shareholder and management structure, share capital and contributions, and beneficial ownership information.

Depending on the incorporation procedure and the shareholders’ circumstances, additional documents may be requested for due diligence or non-resident onboarding, such as certified identification documents, proof of address and evidence of a foreign tax identification number. If you are requesting a certificate of admissibility for the company name, it is advisable to prepare up to three proposed names in order of preference.

Additional documentation may be required where the share capital includes contributions in kind, particularly real estate or other assets.

Yes. Portugal offers simplified incorporation procedures, including Empresa na Hora and Empresa Online. Empresa na Hora is generally based on a pre-approved company name and standard articles of association, while Empresa Online may also be used where the shareholders require tailor-made articles.

The online procedure is generally processed within five business days when an approved model of articles is used and no special authorisation is required. Other applications, including those involving bespoke constitutional documents or additional authorisations, may take longer.

We recommend obtaining advice from a corporate lawyer before selecting the procedure, particularly if you require customised articles of association, have non-resident or corporate shareholders, intend to make contributions in kind, or wish to assess eligibility for specific Portuguese tax regimes.

In the Autonomous Region of Madeira the normal VAT rate is 22%, compared with 23% on the Portuguese mainland. The intermediate rate, applied to food and beverage services, is 12% in Madeira against 13% on the mainland, and the reduced rate, for food and essential goods, is 5% in Madeira against 6% on the mainland.

In addition to the 5% IRC rate, a company licensed under the Madeira International Business Centre regime may benefit from certain tax exemptions and reductions, depending on the nature of the income, the recipient, the company’s activities and compliance with the applicable MIBC conditions.

Qualifying non-resident shareholders may benefit from an exemption on certain dividends and interest relating to shareholder financing. Specific exemptions may also apply to certain royalties, technical assistance and services supplied by non-resident entities to MIBC companies. These exemptions are subject to statutory conditions and do not apply universally to all payments or recipients.

MIBC companies may also benefit from reductions or exemptions relating to stamp duty, IMI, IMT, regional and municipal surcharges, and certain fees. These benefits are subject to an 80% limitation for each relevant tax and act or period, as well as the other conditions of the MIBC regime.

The tax treatment of capital gains must be assessed separately, based on the asset, the transaction and the residence of the parties.