Expanding your company into Portugal is more than an administrative step; it is a strategic move into one of Europe’s most promising business environments. The country offers political stability, competitive costs, and a well-developed legal system that supports foreign investment. Whether you are part of a multinational group or an entrepreneur establishing a European base, setting up a subsidiary in Portugal can position your business for sustainable growth.
From Opportunity to Planning
Before taking any legal step, it is essential to understand the structure that best fits your group’s strategy. Portugal allows several options, but subsidiaries are most commonly established as a Private Limited Company (Sociedade por Quotas or Lda.) or a Public Limited Company (Sociedade Anónima or S.A.).The LDA. offers flexibility and simplicity, making it ideal for small and medium operations. By contrast, the S.A. provides a robust governance model, suitable for larger groups that plan to attract external investors. Choosing between these forms is not merely a legal matter; it significantly impacts your decision-making process, capital structure, and reporting obligations.
Moving from Structure to Documentation
Once the corporate form is defined, preparation of documentation follows naturally. The parent company must formally approve the investment and provide certified records, including its certificate of incorporation, articles of association, and board resolution authorising the creation of the subsidiary. Each director and shareholder will also need a Portuguese tax number (NIF), while non-resident representatives often require a power of attorney to act on their behalf locally.
Because Portuguese authorities require documents in specific formats, all foreign paperwork must bear a Hague Apostille and, when not in Portuguese, a certified translation. These steps may seem procedural, yet they are vital to avoid registration delays and ensure that every submission is legally valid.
From Preparation to Incorporation
With documents ready, incorporation can proceed. Portugal offers two practical paths. The first is the “Company in an Hour” service, which is ideal when time is critical and standard statutes are sufficient. The second, a custom incorporation by private deed, allows for bespoke governance clauses tailored to the group’s policies.
After signing, the subsidiary receives its corporate number (NIPC), is entered into the Commercial Registry, and is automatically registered with the Portuguese Tax Authority and Social Security. These registrations create the company’s legal personality and mark the start of its fiscal obligations.
From Registration to Banking
Once the company is legally established, attention turns to opening a corporate bank account. This step links your new entity to Portugal’s financial system and allows the deposit of share capital. Banks will conduct Know-Your-Customer (KYC) and anti-money-laundering (AML) checks, reviewing the group’s structure, beneficial owners, and intended activities.
For non-resident parent companies, early preparation is key. Providing clear ownership charts and audited accounts usually expedites compliance reviews, enabling faster account activation and operational readiness.
From Setup to Tax and Accounting Compliance
After incorporation and banking, focus naturally shifts to taxation. Subsidiaries in Portugal are subject to a 20% corporate income tax (IRC), plus modest municipal surcharges. Nonetheless, Portugal’s double tax treaty network and EU directives often eliminate withholding taxes on intra-group dividends, interest, and royalties.
Equally important, transfer pricing documentation must be maintained to substantiate intercompany charges. A Certified Accountant (Contabilista Certificado) will ensure compliance with accounting standards, VAT returns, and annual reporting deadlines. Building good tax governance from the start not only avoids penalties but also strengthens your subsidiary’s reputation with banks and regulators.
From Tax to People and Operations
Once fiscal compliance is secured, the next layer involves your team. Subsidiaries employing staff or transferring executives must register with Social Security and the Labour Authority (ACT). Contracts must comply with the Portuguese Labour Code, which outlines working hours, probation periods, and dismissal procedures.
At the same time, companies that process client or employee information must comply with the GDPR. This may require appointing a Data Protection Officer (DPO) and adopting written privacy and cybersecurity policies. Together, these measures demonstrate your subsidiary’s commitment to responsible management and ethical business conduct.
From Internal Setup to Market Presence
Protecting your intellectual property and brand identity comes next. Registering trademarks and trade names with the National Institute of Industrial Property (INPI) safeguards your assets before entering the market. Depending on your industry, specific licences may also be required, for instance, from the Bank of Portugal, CMVM, or ASAE. Addressing these regulatory details early allows your subsidiary to operate confidently from day one.
From National Scope to Regional Advantage
Although the legal framework is uniform across the country, many international groups choose Madeira as their operational base. The archipelago offers complete access to the EU market but benefits from a distinctive fiscal framework under the Madeira International Business Centre (MIBC). Qualifying subsidiaries enjoy a 5% corporate tax rate, exemption from withholding tax on outbound dividends, and recognition under EU state-aid rules.
This combination of compliance, competitiveness, and strategic location makes Madeira a natural gateway for European and global operations.
Key Takeaways on Setting Up a Subsidiary in Portugal
Ultimately, setting up a subsidiary in Portugal is about building more than just a legal entity; it’s about establishing a lasting presence within a stable, investor-friendly jurisdiction. Each phase, from planning to daily compliance, connects to the next and builds a foundation for long-term success.
By working with an experienced local team in Madeira, foreign groups can coordinate all these elements seamlessly, from incorporation and banking to tax, governance, and labour compliance. The process becomes structured, predictable, and tailored to your group’s needs.
If you are considering expansion into Portugal, careful preparation today can translate into efficiency and resilience tomorrow.
This article is provided for informational purposes only and does not constitute legal, tax, or accounting advice. It summarises general requirements for setting up a subsidiary in Portugal and may not address specific corporate or sectoral circumstances. Before acting on this information, seek professional guidance from qualified advisers familiar with Portuguese law and the regulations of the Madeira International Business Centre (MIBC).
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
