What are the requirements to start a business in Portugal in 2023?

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What are the requirements to start a business in Portugal in 2023?

by | Thursday, 22 June 2023 | Corporate Income Tax, Investment

requirement to start a business

What are the requirements to start a business in Portugal in 2023? Portugal has become an attractive destination for international investors due to its favourable business climate, strategic location, and competitive taxation system. In this comprehensive guide, we will explore the requirements and essential information you need to know when starting a business in Portugal in 2023.

1. Understanding the Taxation System in Portugal

A critical factor that makes Portugal an appealing destination for starting a business is its favourable taxation system. Portugal offers different tax rates depending on the region where the company is incorporated and domiciled. The Autonomous Region of Madeira stands out as the most tax-efficient region in Portugal for companies and investors.

In the Autonomous Region of Madeira, companies can benefit from a general corporate tax rate of only 14.7%. This is significantly lower than mainland Portugal’s 21% corporate tax rate. For small and medium enterprises (SMEs) based in Madeira, the first EUR 25,000 of taxable profit is subject to a reduced corporate tax rate of 11.7%.

Moreover, companies operating within the Madeira International Business Centre (MIBC) can enjoy the lowest corporate tax rate in the European Union – just 5% on all profits derived from non-resident entities. This makes Madeira an attractive location for companies providing international tradable services.

2. Standard Requirements to Start a Business

The process of incorporating a company in Portugal is relatively straightforward. However, there are standard requirements to start a business that apply to all businesses, and the Portuguese government has implemented measures to reduce bureaucracy for investors. Whether you choose to start a business in mainland Portugal or the Autonomous Region of Madeira, there are certain documents that you will need to provide.

You will need a Portuguese Taxpayer Identification Number (NIF) and a Portuguese Social Security Identification Number (NISS) to begin the incorporation process. These identification numbers are mandatory for all companies operating in Portugal.

3. Advantages of Starting a Business on Madeira Island

While starting a business in mainland Portugal offers its advantages, the Autonomous Region of Madeira stands out as an exceptional location for entrepreneurs. In addition to the favourable tax rates mentioned earlier, Madeira offers several other benefits for businesses.

IT Infrastructure and Workforce

Madeira boasts excellent IT infrastructure, including the Madeira Datacenter, which operates international optical submarine cables, providing reliable and fast connectivity. This infrastructure is crucial for businesses that rely on digital operations and require efficient communication networks.

Furthermore, Madeira has a skilled and qualified workforce, particularly in the IT sector. Many companies, including Connecting Software, have successfully found and retained top-quality engineers for their software development activities. The University of Madeira and LARSyS offer programs and courses in various fields, producing graduates with expertise in areas such as IT, biology, chemistry, and engineering.

Quality of Life and Tourism

Madeira is known as the Pearl of the Atlantic and offers residents and expats a high quality of life. Madeira attracts tourists worldwide with its subtropical climate, stunning landscapes, and cultural offerings. The island has a secure and pleasant environment, making it an ideal place to live and work.

Moreover, Madeira has been recognized for its excellence in tourism and was awarded the title of “Best Island” at the World Travel Awards. The island offers a unique blend of island life and city vibes, making it an attractive destination for those seeking a slower pace of life without sacrificing access to nature and outdoor activities.

4. The Madeira International Business Centre (MIBC)

The Madeira International Business Centre (MIBC) is a critical component of the business ecosystem in Madeira. It offers a range of tax benefits and incentives for companies operating within its jurisdiction. Companies registered in the MIBC can benefit from the lowest corporate tax rate in the European Union, making it an attractive option for international investors.

In addition to the favourable tax rates, companies within the MIBC enjoy exemptions from withholding tax on dividend remittances to non-resident shareholders, provided they are not residents in jurisdictions included in Portugal’s “blacklist.” Portuguese corporate shareholders may also be exempt from withholding tax if they hold a participation of at least 10% for 12 consecutive months.

The MIBC provides a supportive environment for businesses, offering access to modern infrastructure, skilled professionals, and a range of services to facilitate company formation and operation.

5. The Non-Habitual Resident (NHR) Regime

Portugal’s Non-Habitual Resident (NHR) regime is an attractive tax regime for individuals who become tax residents in Portugal. Under this regime, qualified individuals can benefit from a flat personal income tax rate of 20% on certain types of income, including employment income obtained in Portugal.

The NHR regime aims to attract highly skilled professionals, retirees, and digital nomads to Portugal. Madeira, with its advantageous tax rates and high quality of life, is an ideal location for individuals looking to benefit from the NHR regime while enjoying the benefits of living on the island.

6. Business Opportunities in Portugal

Portugal offers a range of business opportunities across various sectors. The country has seen significant growth in tourism, technology, renewable energy, and real estate industries. The government has implemented measures to attract foreign investment and promote entrepreneurship, making it a favourable environment for starting and expanding businesses.

Investors considering starting a business in Portugal should conduct thorough market research to identify the most promising sectors and opportunities. Collaborating with local professionals and consulting firms can provide valuable insights and guidance to navigate the Portuguese business landscape.

7. Legal and Regulatory Framework

Understanding the legal and regulatory framework is essential when starting a business in Portugal. Companies must comply with Portuguese laws and regulations concerning company formation, labour, taxation, and intellectual property rights.

Engaging the services of experienced professionals and consulting firms specializing in corporate services can help ensure compliance with regulations and avoid any legal pitfalls. These professionals can assist with drafting contracts, navigating licensing requirements, and providing ongoing legal support for businesses operating in Portugal.

8. Access to European and International Markets

Portugal’s strategic location in Europe provides businesses with access to both European and international markets. The country benefits from its membership in the European Union and offers a gateway for companies looking to expand their operations within Europe.

Additionally, Portugal has developed strong trade relationships with countries in Africa, South America, and Asia. These relationships, combined with Portugal’s historical ties to former colonies, create opportunities for businesses seeking to enter emerging markets.

9. Conclusion

Starting a business in Portugal in 2023 offers numerous advantages for international investors. Whether you choose to establish your company in mainland Portugal or the Autonomous Region of Madeira, you can benefit from a favourable taxation system, access to European and international markets, a skilled workforce, and a high quality of life.

Understanding the requirements to start a business, namely, the legal framework and available incentives, is crucial for a successful business venture in Portugal. Collaborating with experienced professionals, such as legal advisors and consulting firms specializing in corporate services, can provide valuable guidance and support throughout the process.

Consider Portugal’s unique opportunities and advantages, and embark on your entrepreneurial journey in this dynamic and promising country.

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