Company Formation Procedure in Portugal in 2022: A Simple Guide

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Company Formation Procedure in Portugal in 2022: A Simple Guide

by | Saturday, 12 September 2020 | Corporate Income Tax, Investment, Personal Income Tax

company formation procedure in portugal

Get to know the company formation procedure in Portugal and Madeira Island.

“Portugal’s history includes discoveries, entrepreneurship, creativity and permanent innovation. Portugal is a modern, sophisticated, and future-oriented country. Capable of combining tradition and innovation in what we do, surprisingly. A welcoming country filled with sunshine, breathtaking landscapes, and unique gastronomy. Open and multicultural, the country can gather the best of its experience and knowledge to originate solutions that push forward global businesses. Portugal, a country that will surprise you.”

One thing that surprises all investors in Portugal is its corporate tax system, more specifically, the one available in the Autonomous Region of Madeira, where corporate tax rates can vary between 5% and 14,7%, depending on one’s company activity and employees.

Company formation procedure in Portugal

Generally speaking, for one to incorporate a company in Portugal, the following steps need to be followed:

  1. Verify the business name and make a reservation with the Portuguese Commercial Register.
  2. Appoint a legal representative for the company in Portugal.
  3. Draft the Articles of Association with information about the owners, business activities, etc.
  4. Open a bank account for depositing the share capital.
  5. Apply for licenses and permits per the company’s activities.
  6. Register for tax purposes and social contributions in Portugal.

Those looking into incorporating a company within the MIBC – Madeira International Business Center must apply for a MIBC license. The license’s application (to be submitted in the Portuguese language) must be filed to Sociedade de Desenvolvimento da Madeira, the official concessionaire of the MIBC, in two copies, addressed to the Cabinet of the Vice-President of the Regional Government of Madeira in the name of an existing company, in Portugal or abroad, or of a company to be incorporated. Branches of existing companies may also be licensed.

All relevant information concerning the activity to be performed by the company must be included in the license application, namely:

  1. Company name and address.
  2. Activity to be undertaken and respective NACE code (European nomenclature of the Economic Activity).
  3. The total value of the investment.
  4. Indication of the number of jobs to be created.

In the case of a successful application, the license is deemed to be granted in favour of the company once the applicant furnishes proof of the formation and registration of a such company. All documents in support of the license application must be duly translated into Portuguese and legalized.

Types of companies

Most investors opt for a private limited company (Sociedade por quotas – LDA) where the contribution limits liability to the capital. LDA-type companies must be established by at least two founders with a minimum share capital of EUR 2, although it is recommended to be at least EUR 1000. All the shareholders must contribute to the capital, and their liability is limited to that contribution. Management of the company is assured by a director appointed by the general meeting of the shareholders.

Sole investors, lacking a business partner, can opt to incorporate a sole shareholder company (Sociedade unipessoal por quotas – Uni. LDA). Under this type of company, the minimum share capital is EUR 1, although it is recommended to be at least EUR 1000. The contribution limits LDA’s liability to the capital.

SA companies and at least five shareholders. Like LDAs, their liability is limited to their contribution to the capital. On the other hand, if investors opt to incorporate a public company (Sociedade anónima – SA) which requires a minimum share capital of EUR 50 000. The management of this type of company is assured by a board of directors monitored by a supervisory board, both appointed by the general meeting of the shareholders. In addition, by law, SA companies are required to appoint a certified public accountant.

Other types of companies can be incorporated under the Portuguese Commercial Code, such as limited partnerships and general partnerships. Nevertheless, these are seldomly chosen by investors and their partners.

This article is provided for general information purposes only and is not intended to be, nor should it be construed as, legal or professional advice of any kind. Should you wish to incorporate a company in Madeira Island, please do not hesitate to contact us.

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