Starting a Business in Portugal

Since the pandemic, many entrepreneurs have decided to base their businesses in places that give them the benefit of a sunnier climate. Let’s face it, if you can’t go on holiday due to Covid restrictions, then it’s wise to set yourself up in a place that can provide that sunny work/life balance with no travelling involved.

Portugal has become one country that is providing that balance for increasing numbers of expat entrepreneurs, not just because of the weather but also because it offers a range of financial benefits for business people. But equally you don’t have to pack up and move your whole operation to Portugal to reap the rewards of the country’s attractive business environment. Global entrepreneurs who want to simply open a branch or a virtual office can also be accommodated.

Portugal’s Golden Visa & Investor Visa

The Golden Visa is a citizenship scheme that involves making a substantial investment in exchange for residency. Investments can be in capital, property or targeted employment, although the majority of successful applications are for property.

An investment of as little as €350,000 in an area of urban renewal, or €500,000 for property in any location, secures a visa with a guaranteed route to permanent residency. Golden Visa holders only have to reside in Portugal for 7 days in their first year, and 14 days thereafter. They also receive the not-insignificant benefit of free travel within the Schengen zone of 22 countries.

For more or less the regular price of a home, they can secure a spot in one of Europe’s fastest growing and most sought-after vacation spots. Moreover, they’ll gain some of the benefits of EU citizenship without relinquishing their own passports - perfect for British entrepreneurs who are struggling under the new Brexit rules. But if they want to become a Portuguese citizen they can choose to do so after six years.

For entrepreneurs with a little more funds at hand, there is also the possibility of applying for an investor visa. For this type of visa, the applicant must put in a minimum capital investment of €1,000,000 (this also includes investment in shares); create at least 10 jobs with the project; and acquire a property for a minimum of €500,000.

Tax Advantages in Portugal

For entrepreneurs wanting to start a business in Portugal, there are various tax incentives that are proving popular. To encourage the country’s overseas investments and help with growth and job creation, Portugal has spent the last decade coming up with tax exemptions, deductions, and reduced VAT rates to lure foreign investment to its shores. Here are just some of these incentives:

  • Seed programmes to help investment in innovative tech startups or small businesses
  • Capital gains from the sale of shares in micro and small enterprises
  • Tax schemes for occasional residents (non-habitual resident)
  • Tax schemes for ex-residents
  • An investment support tax scheme (RFAI)
  • A research & development tax incentive system (SIFIDE II)
  • Deductions for retained and reinvested profits (DLRR)
  • Help with installation of companies in inland locations

For those who are paying a high tax rate in their current country of residence, Portugal offers a tax category called a “non-habitual resident” where a low flat tax rate of 20% on earnings are applied. This status can be kept for a maximum of 10 years and can be used by anyone in the following professions: actors, architects, artists, auditors, college professors, company managers and directors, computer technology and data processing professionals, dentists, doctors, engineers, musicians and scientists.

Portugal’s work/life balance

Portugal has achieved a very high rank in the Human Development Index (HDI), which is an average measure of human development, happiness, and standards of living. It also ranks in the top five of the safest countries in the world, only surpassed by Iceland, New Zealand and Austria. So the safe environment, coupled with the friendly nature of the Portuguese – many of whom have excellent English, French and Spanish language skills – means Portugal is now among one of the top destinations for expats.

The other plus-point for workers is that rent and property prices in Portugal are very low, allowing many workers to live easily within their budget (and with the added advantage that many properties come furnished with either a private or communal swimming pool.) Although rent prices have increased in recent years due to demand, it is still more affordable to rent or buy in Lisbon than in London.

For entrepreneurs who have elderly parents, there is also an extra incentive. Foreign pensioners who stay in Portugal for at least 183 days per year can enjoy an exemption from paying income tax. This can mean a saving for some retirees of up to €30,000 euros a year. According to the Chamber of Commerce and Franco-Portuguese Industry, over 4000 people are emigrating to Portugal each year to take advantage of this scheme.

Company Formation in Portugal

The two main business structures in Portugal are the LDA and the SA.The equivalent of a Limited Liability Company in Portugal is called a LDA (Limitada). There must be at least one shareholder with a capital of at least 2 euros. (Although you will be required to show you have more than that to actually start a viable business!)

For entrepreneurs with more capital, it’s advised to start a public company which is called a SA (Sociedade Anónima). This is the standard format for large businesses where the minimum share capital is €50,000 and the minimum number of shareholders is five. There is however, stringent accounting and auditing resources are required for this type of structure so a chartered accountant is a necessity for an S.A.

It takes around three weeks to set up a LDA company in Portugal. Below are the requirements needed to open a LDA:

  • All shareholders need to provide utility bills not more than three months old (cellphone bills are not accepted), plus copies of their passports.
  • The name of the company is checked at the National Registry of Collective Entities (Registro Nacional de Pessoas Colectivas, RNPC) or a preapproved name can be chosen from the RNPC information base.
  • A Certificate of Admissibility will be issued to formally recognize your Portuguese company’s name which is done through the Institute of Registries and Notaries (IRN). You must also apply for a Company Card and a Collective Card (the primary business ID) from the IRN
  • A Portuguese notary needs to be appointed in order to help in the signing of all the company forms. Company formation experts with links to the Portuguese business community can help with this as well as helping to find you a registered business address and register the company at the Commerical Registry Office and the Social Security and Tax Office.
  • Any employees must be enrolled at the Centros de Formalidades das Empresas.
  • The forms for the bank account must be signed within 15 days of the company formation. A business plan will be required by the bank manager to show the company has good collateral and a solid business future
  • An electronic post box is required in order to receive the Portuguese tax correspondence. These are issued through the Portuguese Post Service (CTT) with a specific ID code and password. The account must be checked on a regular basis
  • An accountant should be appointed prior to incorporation as VAT registration or the filing of tax returns without the intervention of a chartered accountant is not permitted. (Company formation experts can also help with sourcing a suitable bilingual accountant.)

Wherever you decide to go in Portugal and whatever type of business you decide to start, you can take a look at our articles on Portugal below for more information. And don’t hesitate to get in touch with our company formation agents who can help you with registering your business, VAT services, accountants or bank accounts, on 0033 (0)1 53 57 49 10. Alternatively, you can email from our contact page and we’ll be happy to help.

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