When buying a business in Portugal, investors must consider legal, tax, and residency aspects. Because Portugal combines robust laws with attractive residency programs, preparation is essential. Therefore, this guide outlines key legal steps, tax implications, and residency opportunities for foreign investors.
1. Legal Due Diligence: The First Essential Step
The first step when buying a business in Portugal is a full due diligence review. This audit examines legal, financial, tax, labour, and operational aspects. Moreover, due diligence helps buyers identify risks, contingencies, and opportunities before negotiating terms and pricing.
Portuguese law requires sellers to provide accurate information and deliver goods without hidden defects. However, buyers must consult legal, financial, and auditing professionals diligently. Failure to conduct due diligence may limit compensation rights. Due diligence serves several purposes. It informs decisions, reveals hidden liabilities, helps determine fair pricing, and documents exchanges between parties.
2. Legal Structure of the Transaction
Next, buyers must choose between an asset deal or a share deal. Each option carries distinct consequences when buying a business in Portugal.
An asset deal transfers selected assets, allowing exclusion of unwanted liabilities. In contrast, a share deal transfers company shares, including all assets and liabilities.
Additionally, purchase contracts usually include business warranties. These contractual protections safeguard buyers against risks that due diligence may not uncover.
3. Tax Implications: VAT, IMT and Other Taxes
Tax issues are central when buying a business in Portugal. The transfer of company shares is usually exempt from VAT under Article 9 of the VAT Code. However, due diligence and consulting services may be exempt only when linked to regulated investment fund management.
Conversely, real estate services, valuations, or brokerage often fall outside this VAT exemption. Therefore, contracts must be reviewed to confirm correct treatment.
Regarding property transfer tax (IMT), acquiring real estate through share deals can sometimes avoid direct IMT liability. This depends on transaction structure and requires specialist advice.
4. Residency and Golden Visa Opportunities
Foreign investors also benefit from Portugal’s residency programs. Specifically, the Golden Visa allows residency through significant investment, including buying a business in Portugal. Careful structuring ensures compliance with Golden Visa requirements and maximises tax benefits.
5. Pre-Contractual Liability and Negotiation Breakdowns
Another consideration is pre-contractual liability. Portuguese law recognises justified negotiation breakdowns. Significantly, compensation is limited to negative damages, restoring the injured party to their pre-negotiation position.
6. Checklist for Buying a Business in Portugal
When preparing to buy a business in Portugal, investors should follow this checklist:
- Define whether acquiring assets or shares.
- Conduct full legal, tax, financial, and labour due diligence.
- Negotiate warranties and purchase price structures.
- Draft a detailed purchase agreement with legal experts.
- Assess VAT, IMT, Stamp Duty, and other tax implications.
- Consider residency benefits like the Golden Visa.
- Fulfill registration duties with commercial and tax authorities.
Conclusion
Buying a business in Portugal requires diligence, careful structuring, and professional support. Due diligence, strong contracts, and tax planning are essential. Residency opportunities like the Golden Visa further enhance the country’s investment appeal.
Before finalising acquisitions, investors should always engage experienced Portuguese lawyers and tax consultants for safety and efficiency.
This article is for informational purposes only. Always seek specialised advice for specific cases.
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
