When you buy a Portuguese company’s shares, you buy its history, tax debts, social-security arrears, employment liabilities and litigation included, whether or not they appear in the accounts. The two protections are structural (choosing between a share deal and an asset deal) and forensic (due diligence on the tax, labour and contractual position before the price is fixed). Foreign buyers who skip either step buy problems at par. Here is the framework.
Share deal vs asset deal: the first decision
A share deal (buying the quotas/shares) transfers the entity with everything in it: licences and contracts continue, but so do hidden liabilities, and the price should reflect a tax and labour history you have verified, not one you have been assured of. An asset deal (buying the business’s assets, the trespasse of an establishment, equipment, brand, client contracts) lets the buyer select what transfers and leave the corporate history behind, at the cost of re-papering contracts and licences, VAT/IMT considerations on specific assets, and one crucial exception: employees attached to the transferred establishment follow it by law, with their seniority and terms intact. Neither structure dominates in the abstract; the liabilities map decides.
What Portuguese due diligence must cover
Tax: certidões of no-debt from the AT and Social Security (necessary but not sufficient, they show declared positions, not undeclared risk), open inspection or enforcement procedures, the VAT position, and the quality of the accounting behind the last three years’ returns. Labour: headcount versus declared payroll, contract types, accrued holidays and subsidies, and any recharacterisation exposure from ‘freelancers’ who work like employees. Legal: litigation search, key contracts’ change-of-control clauses, licences (decisive in regulated activities: AL, food service, transport), lease terms, and RCBE/ownership cleanliness. Commercial reality: revenue concentration and whether what you are really buying, the client relationships, survives the founder’s exit. For businesses in Madeira with MIBC licences, add the regime position: eligibility, substance compliance, and what the transaction does to both.
The tax mechanics of the purchase itself
Share purchases: generally no VAT, no IMT, except that acquiring control of property-rich companies can trigger IMT under the specific rules, a trap in real-estate-heavy targets. Asset purchases: VAT treatment depends on whether the transfer qualifies as a going-concern transfer (outside VAT scope when it does), and property elements attract IMT and stamp duty. The seller’s side (their capital gains) shapes their structural preference and therefore your negotiation. Price mechanisms, escrow against verified liabilities, earn-outs tied to client retention, and warranties with real survival periods and caps, are how due diligence findings become contractual protection: the report is worthless if the SPA does not encode it.
How the engagement works at MCS
We run the tax, accounting and social-security diligence and coordinate the legal diligence and transaction documents with our in-house registered lawyers, one team, correctly divided by regulated competence. The typical sequence: scoping and data-room review, red-flag report within an agreed window, structuring memo (share vs asset, and the buyer vehicle, a Portuguese HoldCo or acquisition company is often right for foreign buyers, occasionally within the MIBC where activities qualify), SPA support, and the post-completion pack: accounting takeover, registrations, and the first-100-days compliance calendar. Buying the business is the start; our C1 package is usually how the relationship continues.
Frequently asked questions
Do the company’s tax debts really become mine in a share deal?
They remain the company’s, which you now own. Economically, yes: they are yours. Price them, escrow them, or structure around them.
Can I just buy the assets and leave the debts behind?
Largely yes, with two limits: employees of a transferred establishment follow it by law, and specific transfer taxes apply to specific assets. Fraud-of-creditors scenarios are also policed, asset deals structure risk, they don’t launder it.
What are the no-debt certificates and are they enough?
AT and Social Security certidões showing no registered debt, obtain them always, rely on them never in isolation: they capture the declared past, not the undeclared or the pending.
How long does due diligence take?
For an SME with an organised data room: two to four weeks to a red-flag report. Disorganised books extend it, and are themselves a finding about price.
Should I buy personally or through a company?
Foreign buyers usually benefit from a Portuguese acquisition vehicle, liability containment, financing structure, exit flexibility, and coherent Portuguese compliance. The memo answers it for your facts.
The target has an MIBC licence, asset or advantage?
Potentially both: the regime is valuable, but its conditions (jobs, substance, eligible activity) must survive the transaction. We verify the position and the transfer mechanics as part of diligence.
Found a business worth buying in Madeira or the mainland? MCS runs the tax and accounting due diligence, our lawyers handle the legal side, and the structuring memo tells you share-or-asset before you commit. Book the scoping consultation online; the fee is credited to the engagement.
This article is provided for general informational purposes only and reflects our understanding of the legal and tax framework in force on the date of writing or last review indicated above. It does not constitute legal, tax, accounting or investment advice, does not cover all rules that may apply to your specific circumstances, and does not create any client relationship with Madeira Corporate Services. Legislation and administrative practice change frequently, and their application depends on the facts of each case. Before acting on any information contained in this article, you should obtain professional advice tailored to your situation. Madeira Corporate Services accepts no liability for decisions taken on the basis of this article. Services reserved by law to lawyers are provided by duly registered legal professionals, identified as such.
Rosana Rodrigues is a co-founder and partner of TFRA Law Firm. Her work mainly involves advising foreign investors in Portugal, particularly in areas of Corporate and Tax law. She has also worked extensively in Shipping law… Read more
