Setting Up a Business in Portugal: A Comprehensive Guide

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Setting Up a Business in Portugal: A Comprehensive Guide

by | Monday, 4 December 2023 | Corporate Income Tax, Investment, Taxes

setting up a business in portugal

Are you considering setting up a business in Portugal? Look no further. This comprehensive guide will walk you through all the essential steps, legal requirements, and cultural nuances you need to know to establish your company in this vibrant European country successfully.

Understanding Portuguese Business Culture

Before diving into the legal aspects of setting up a business in Portugal, you must familiarize yourself with the country’s unique business culture. Building relationships is a cornerstone of Portuguese business culture, and decisions are often made after several meetings. Punctuality and deadlines may not be as strictly adhered to as in other countries.

Formal titles are commonly used in written communication and face-to-face meetings. Portuguese business professionals prefer discussing matters in person rather than over the phone or via email. While English is widely spoken in most cities, learning Portuguese can be beneficial when dealing with local suppliers.

Market Research and Top Industries in Portugal

Conducting thorough market research is essential before starting a business in Portugal. Identifying your niche within the Portuguese market is crucial to ensure your company’s success. Some of the top industries in the country include food and agriculture, construction, textiles, and tourism.

According to the latest census, Portugal is home to over one million companies, with the most common sectors being wholesale and retail. Agriculture also plays a significant role in the market, followed closely by the hospitality industry. In 2020, Portugal hosted 9,101 foreign branches, while the number of self-employed workers reached 704,200 in 2021.

Who Can Start a Business in Portugal?

Setting up a company in Portugal is relatively straightforward. As an investor, you must provide a NIF (tax identification number), a social security number, and a registration certificate. However, individuals outside the EU must apply for a Portuguese visa before starting a business or finding employment there. We at MCS can assist international entrepreneurs in obtaining an NIF efficiently.

Registering your company can be done through Power of Attorney or in person, and our team of professionals is ready to assist you through the entire process. The initial capital required depends on the legal structure of your business.

Legal Structures for Businesses in Portugal

Portugal offers a variety of legal structures for companies. Consider whether you wish to run your business alone or as a partnership when choosing a legal form. Starting as an individual entrepreneur may be easier, as fewer financial requirements are involved. Here’s a brief explanation of the different legal forms:

Individual Companies

  • Individual Entrepreneur (Empresário em Nome Individual): An individual entrepreneur can sell services and products without minimum capital requirements. However, personal and business assets are not separate, leading to unlimited liability.
  • Individual Limited Liability Establishment (Estabelecimento Individual de Responsabilidade Limitada): This structure requires a minimum share capital of €5,000, and there is a clear separation between personal and business assets. Only the assets associated with the economic activity are liable for debts.
  • Sole Proprietorship by Shares (Sociedade Unipessoal por Quotas): A single shareholder owns the entire capital in this legal form. The minimum investment is €1, or €2 if there are two partners. Opening a separate bank account and hiring an accountant are necessary.

Collective Companies

  • General Partnership (Sociedade em Nome Coletivo): No minimum share capital is required for a general partnership. Each partner is unlimitedly liable for the company’s social obligations.
  • Private Limited Company (Sociedade por Quotas): This type of company requires a minimum of two partners who share quotes. The liability of each partner is limited to the shared capital, protecting personal assets in case of debt.
  • Public Limited Company (Sociedade Anónima): A public limited company is more complex, with at least five partners owning company stock. The minimum capital required is €50,000.
  • Limited Partnership (Sociedade em Comandita): This structure also requires a minimum investment of €50,000. It includes two types of partners: managing partners with unlimited liability and limited partners with limited liability.

Starting a Business in Portugal as an Expat

Starting a business in Portugal as an expat follows a similar process, with a few additional requirements. To open a company, expats must have a residence permit or visa. EU, EEA, and Swiss citizens can request a Registration Certificate from their nearest city hall within 30 days after their first three months in the country.

Non-EU citizens planning to live in Portugal must apply for a visa, such as the D2 visa for entrepreneurs. Opening a company alone does not automatically grant a residence permit. Applicants must provide a solid business plan, evidence of economic viability, and relevant experience in the area. Alternatively, the Startup Visa program allows entrepreneurs to join a startup incubator, providing time to adapt to the local market. The Golden Visa program requires a minimum investment of €500,000.

Registering Your Business in Portugal

The registration process for your business can be completed online or in person. Freelancers can register via the Portal das Finanças or their local finance office. Sole proprietorships, limited liability companies, and public limited companies should apply through the Empresa Online service, which requires a citizen card or a digital certificate.

The steps to registering your company include obtaining a NIF, choosing a legal form, naming the company (with options from a pre-approved list or through a Denomination Approval Certificate), opening a bank account and depositing the initial capital, drafting the Articles of Association, acquiring the Commercial Registration, and registering with social security.

After establishing your company, finding a certified accountant and registering the beneficial owner with the Registo Central de Beneficário Efetivo is essential within 30 days.

Licenses and Permits

To operate your business in Portugal, you must apply to the Directorate-General for Economic Activities (DGAE) through the Balcão do Empreendedor (BDE). Each economic sector has specific licensing requirements, so it’s crucial to consult the list of licenses provided by the Portuguese government.

Starting an Online Business in Portugal

If you plan to start an online business in Portugal, you’ll follow the regular registration process with a few additional considerations. Ensure that your company complies with Portuguese laws, including the Price, Consumer, Data Protection, Copyright, and Publicity Law. Familiarize yourself with e-commerce Laws if you have an online shop.

Foreign Companies Opening a Portuguese Branch or Subsidiary

Foreign companies seeking to enter the Portuguese market can establish a branch office or subsidiary. A branch office is an extension of the company abroad, with no legal personality. To register a branch in Portugal, visit a local registry office with the required documents, including identification, updated documentation from the Commercial Registry in your home country, and the Memorandum and Articles of Association.

On the other hand, a subsidiary has a separate legal personality from the parent company. Opening a subsidiary follows the same process as starting a regular company in Portugal, subject to corporate income tax and other local taxes.

Starting a Non-Profit Company in Portugal

Non-profit companies in Portugal can take the form of an association or cooperative. Associations are tied to social activities, while cooperatives can have a commercial purpose. The registration process for both types of non-profits can be completed at a local notary office.

Administering Your Business in Portugal

After setting up your company, staying on top of your tax obligations is crucial. Portuguese companies are subject to corporate income tax (IRC), VAT (IVA), customs duties, and other taxes. Opening a separate bank account for your business ensures clear financial records.

Additional administrative requirements include signing up for social security and registering your employees. Employers are responsible for deducting social contributions from employee salaries and paying them between the 1st and 15th of the following month. Monthly remuneration statements and public inspection measures may vary according to the business sector.

Employing Staff When Starting a Business in Portugal

When hiring staff, you can utilize recruitment companies or seek assistance from the Instituto do Emprego e Formação Profissional (Employment and Vocational Training Institute), which offers free recruitment and selection services and hiring incentives. Familiarize yourself with Portuguese labour laws to ensure compliance.

Portuguese Business Insurance

As a business owner in Portugal, it’s essential to consider insurance. Workplace accident insurance (seguro de acidentes de trabalho) is mandatory for all companies. Credit insurance is optional but worth considering for added protection.

Support and Advice for Starting a Business in Portugal

Madeira Corporate Services offers a comprehensive range of services to assist individuals and companies in establishing a business in Portugal, mainly focusing on the Madeira International Business Centre (MIBC). Firstly, they provide expert guidance on Portugal’s legal and fiscal framework, ensuring that clients understand the regulatory environment and compliance requirements. This includes advice on the most appropriate corporate structure for the business, whether a limited liability company, a sole proprietorship, or another form. Additionally, they offer assistance in the registration process, including obtaining a tax identification number, registering with Social Security, and completing other necessary formalities. Their deep understanding of the Portuguese legal system and the specific advantages of the MIBC, such as reduced corporate tax rates and other tax incentives, makes them an invaluable resource for new businesses.

Beyond the initial setup, Madeira Corporate Services also provides ongoing support to ensure the smooth operation of businesses in Portugal. This includes handling accounting and tax reporting requirements, advising on labour laws and employment contracts, and providing payroll services. For international clients, they can be accommodating in navigating the complexities of cross-border transactions and international tax planning. Their services extend to offering guidance on obtaining residence permits and work visas for foreign employees, which is crucial for businesses looking to bring in international talent. Overall, Madeira Corporate Services acts as a vital partner for businesses at every stage of their development in Portugal, combining local expertise with an understanding of the needs of international clients.

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