Are you considering starting a company in Portugal? With its favourable business environment and strategic location, Portugal has become an attractive jurisdiction for entrepreneurs and investors. Establishing a company in Portugal can be straightforward if you follow the proper steps. This comprehensive guide will walk you through setting up a company in Portugal, from choosing the right business type to registering your company and initiating your business activities.
1. Choosing the Right Business Type
One of the first steps in starting a company in Portugal is determining the type of business entity you want to establish. Portugal offers various options, including limited liability companies (sociedade por quotas), stock companies (sociedade anónima), and holding companies (SGPS). Each type of company has specific requirements that need to be met.
Limited Liability Companies: Limited liability companies are famous for entrepreneurs in Portugal. They offer a flexible structure and limited liability protection for shareholders. In this type of company, the liability of shareholders is limited to the amount of their respective contributions.
Stock Companies: Stock companies, also known as public limited companies, are often chosen by businesses with more extensive capital requirements. More stringent regulations govern these companies, and they are subject to additional reporting and disclosure requirements.
Holding Companies: Holding companies, known as SGPS in Portugal, primarily manage shares held in other companies. They can be incorporated as a limited liability or stock company. Holding companies can provide strategic advantages for businesses with multiple subsidiaries or investments.
2. Determining Share Capital and Shareholders
In Portugal, no minimum share capital is required to incorporate a company. You can establish a company with a share capital of just EUR 1. However, if you set up a stock company, the minimum share capital is EUR 50,000. It’s essential to determine the amount of share capital you want to invest in your company and identify the shareholders who will contribute to the capital.
Portugal allows for sole shareholder companies, but a sole shareholder cannot be another sole shareholder company. It’s essential to carefully consider the ownership structure of your company and ensure compliance with the legal requirements.
3. Applying for the Certificate of Name Approval
Before incorporating your company, you must apply for a certificate of name approval. This process involves applying the Registro Nacional de Pessoas Coletivas (RNPC), the National Company Registrar in Portugal. The application should include the proposed name for your company, a detailed list of activities (social object), and the corresponding economic activity codes (CAEs). Additionally, you should indicate the municipality where your company’s registered office will be located.
The certificate of name approval application can be done online through the RNPC website. It is recommended to have a Portuguese tax number if you are an individual from a foreign country. For corporate shareholders, a commercial certificate will also be required. Once you receive the approval, the certificate will be valid for three months.
4. Preparing and Formalising the Incorporation Act Document
Once you have obtained the certificate of name approval, you can prepare and formalise the Incorporation Act document. This document serves as the legal basis for incorporating your company. The shareholders or their appointed attorneys should organise and formalise the private document, which includes the company’s articles of association and the appointment of corporate bodies, such as directors.
In the Incorporation Act, you should provide details about the directors, including their full name, marital status, Portuguese tax number, and residence. Specifying whether the directors will be remunerated for their role is advisable. If remuneration is expected, monthly contributions must be paid to the Portuguese social security system. The Incorporation Act should also state the date by which the company’s share capital will be fully subscribed.
5. Registering the Company
After preparing the necessary documents, you are ready to register your company. This involves submitting the required documents to the commercial registry office. Alongside the certificate of name approval and the Incorporation Act, you will need to provide a declaration accepting the director’s office and confirming the absence of any circumstances that may hinder the occupation of the position.
You will also need to submit a list indicating the ultimate beneficiary or beneficiaries of the company, as required by anti-money laundering regulations. If you are setting up a stock company, you must include an acceptance declaration from the statutory auditor and substitute auditor, if applicable. Once you have submitted all the required documents, your company will be officially registered.
6. Initiating Business Activities
Once your company is registered, you can initiate your business activities in Portugal. It is important to note that there is a deadline of 15 days to start your business activities, register your company with the tax services, and enrol the director(s) with the social security system. Compliance with these requirements is crucial for legal operations and smooth business processes in Portugal.
7. Opening a Bank Account
To facilitate your business operations, opening a bank account for your company is essential. A dedicated business bank account lets you receive and make payments, manage your finances, and comply with financial reporting obligations. You can choose to open an account with a Portuguese bank or with a foreign EU bank. It is advisable to consult with a financial advisor or banking professional to determine the best banking options for your company’s needs.
8. Additional Services and Assistance
Opening a business in Portugal involves various legal, financial, and administrative aspects. To ensure a smooth and successful incorporation process, you may seek the assistance of professional service providers. These providers offer integrated corporate services, including accounting, tax, and administrative support. Their experienced team can analyse your business plan, optimise it from a corporate and tax perspective, and provide guidance throughout the incorporation process and beyond.
9. Taxation
The Benefits of incorporating a Portuguese company on Madeira Island
Advantages of Madeira Company Registration
Despite being situated approximately 900 kilometres southwest of Lisbon, the capital of Madeira, Funchal, is a cosmopolitan metropolis that actively promotes foreign investment. Although English is the predominant tongue in the archipelago consisting of Madeira and Porto Santo inhabited islands, Portuguese serves as the official language.
Reduced Rates of Corporate Taxation – The Madeira International Business Centre
As per the prevailing tax regulations, establishing a corporate entity in Madeira benefiting from a 5% corporate tax rate is permitted until the conclusion of 2023 (a deadline expected to be extended until the end of 2024 with the approval of the FY2024 Portuguese State Budget Law).
Concerning international services activities, profits generated solely through non-resident clients or other companies operating within Madeira are subject to this reduced rate of 5%. However, pursuing business activities with Portuguese enterprises is unrestricted, subject to a 14,7% tax.
Double Taxation Agreements
The extensive international treaties that Portugal has negotiated with nations like the United States, Canada, and Britain to prevent double taxation benefits any businesses authorised to conduct business in Madeira.
Withholding tax
As long as they do not reside in a jurisdiction that Portugal has deemed as a tax haven, non-resident single and corporate shareholders of a Madeira-based firm are entirely immune from withholding tax on dividend transfers from other Madeira-based enterprises. Portuguese business shareholders are further excluded if they maintain a minimum of 10% involvement for a continuous 12-month period under the participation exemption scheme.
10. Conclusion
Starting a company in Portugal can be a rewarding endeavour, given the country’s favourable business environment and strategic advantages. By following the steps outlined in this guide, you can confidently navigate the process of setting up a company in Portugal. Remember to choose the right business type, determine your share capital and shareholders, apply for the certificate of name approval, prepare and formalise the Incorporation Act document, register your company, and initiate your business activities within the specified timeframe. Seeking professional assistance from reputable corporate service providers can also ensure a smooth and successful incorporation process. Embark on your entrepreneurial journey by starting a company in Portugal (or Madeira Island) and unlock the opportunities that this dynamic and vibrant country has to offer.
This article provides general information on starting a company in Portugal and should not be construed as legal or professional advice. Consult with a qualified professional for personalised guidance tailored to your specific situation.
Miguel Pinto-Correia holds a Master Degree in International Economics and European Studies from ISEG – Lisbon School of Economics & Management and a Bachelor Degree in Economics from Nova School of Business and Economics. He is a permanent member of the Order of the Economists (Ordem dos Economistas)… Read more
