Starting business in Portugal

Living on the coast of the Atlantic Ocean, eating bourgeois seafood for breakfast, lunch, and dinner. Rest in between important work and meetings on the beautiful Blue flag beaches (Praia de Sao Rafael, Falésia) and sip wine simultaneously.

Sounds good? And yes, it’s all Portugal.

So, if you’re ready for an overseas bourgeois experience, you need to know that Portugal is one of the few countries that successfully survived the economic crisis in 2008 and also gained economic growth, especially in recent years.

In turn, our compatriots, having already visited Portugal, made a conclusion for themselves: Why should I not start my own business here? Here we go☺

Portugal is open and welcoming to non-residents and their businesses if these entrepreneurs don’t steal their customers ☺ For foreigners, both small and medium-sized businesses would fit perfectly. Our neighbors from the CIS countries are very active in the tourism and industrial fields. And for a good reason, because a successful business will allow you to get a residence permit in Portugal and even a permanent one after a successful and productive six years of residence.

Let’s take a look at why Portugal is cool ☺

The advantages of doing business in Portugal

• The lowest in the EU minimum share capital to obtain a residence permit
• The founder and owner of the company can be a foreigner, even in the absence of a residence permit
• Express registration. 2 days, and it’s done
• Tax rates are among the lowest in Europe
• It is possible to do business in free economic zones: Madeira, Azores
• Free movement in Europe
• No bribery. That is, it simply does not exist. In the latest list of countries on the Corruption Perception Index, Portugal ranked 29th, ahead of Spain, Italy, Israel, and China
• Among the top 10 safest countries
• Prices are of the same quality. This is true for services and goods

Residence permit and citizenship in Portugal

Most likely, you’ve heard about the Golden Visa program. Well, in Portugal, it is also valid. In just five years, the program participant can obtain a passport as an EU citizen (compared to other countries—10-12 years). In this case, in contrast to other countries, Portugal does not require mandatory residence in the country 183 days a year, and the minimum level of investment starts from 500 thousand euros.

• Initially, the Portuguese “Golden Visa” is issued for one year and can be renewed every two years.
• Starting in 2019, Portugal has a new option, “Green Visa,” you can read about it below, in the subsection “Green Visa. Who is it for and who can get it?”.

However, as in any country in the world, in Portugal, there are certain requirements for obtaining a residence permit. The main ones are:

The age of the investor is 18+.

1. Clearly, you must be in the country legally and have a passport
2. Investment period of at least 5 years or until you get a permanent residence permit
3. There are rules for staying in Portugal (minimum limit):

• first year—7 days
• second and third years: 14 days
• fourth and fifth years: 14 days

1. After 5 years, you can apply for a residence permit or citizenship.
2. Do not forget about health insurance!

Everything seems clear, and the list is not scary ☺

Green Visa. Who is it for, and who can get it?

If you are a fighter for nature, profess an environmental approach to everything, and care about the environment as much as the Portuguese Parliament, the “Green Visa” is available to you. It is aimed at investing precisely in environmental projects in such areas:

• organic farming
• conservation projects
• eco-tourism
• renewable energy sources

So if your project is on this list, you have a good chance of getting a green light, a green business, and your green visa. And in general, eat green fruits and vegetables, and you’ll be fine 🙂 

Company registration in Portugal

Company registration for foreigners wishing to open a business in Portugal has several advantages compared to other European countries. The main ones are quick registration and a lack of bureaucracy.

In Portugal, if you do not have problems with the law and are not a resident, you can still register your business and obtain a residence permit.

Legal forms of doing business in Portugal

The most common form of business in Portugal is a private limited company (Sociedade por Quotas, LDA). It differs from the reduced amount of the authorized capital from 5k euros to 1k and the presence of all the advantages of a legal person like our LTD.

To register an LDA in Portugal, you need the following:

• A standard package of documents (we have indicated a list of documents in previous articles)
• A unique company name
• Description of the future activities of the company
• Director: minimum one
• Founder: minimum two
• The founders are financially responsible in proportion to the amount of shares in the capital
• No minimum share capital requirement
• The value of each of the shares must be no less than 1 euro
• Only registered shares can be issued

The most suitable company to run a large business in Portugal is the public limited company (Sociedade Anónima, SA).

To register an SA in Portugal, you need the following:

• standard package of documents
• unique company name
• description of the future activity of the company
• founders: minimum five
• minimum registered capital: 50k euros. Contribution of part of the capital is made at the moment of registration (30%). The rest of the money may be proportionally split up into contributions
• management is performed by the Board of Directors
• you can issue shares

Also quite common is the form of individual enterprise with limited liability (Estabelecimento Individual de Responsabilidade Limitada, EIRL). There is only 1 founder who can replace a director in the same position. The owner of the company can be a non-resident from any country.

In Portugal, a private entrepreneur is called Empresário em Nome Individual. The registration of such a business goes only under one’s own name. The advantage of this form: it does not require a statute or registered capital. Disadvantages: the individual entrepreneur is responsible for the debts of their company.

What form to choose is up to you, but it is better to seek help from the experts because there can be pitfalls. 

Business registration procedure in Portugal

You have made your decision and got a thorough consultation. Now there are only 10 steps to start your business in Portugal:

• Choose a unique company name
• Get a registered address, or office location (may be even virtual)
• Choose the type of property

Next comes the business registration procedure in Portugal, which consists of several steps:

• Open a bank account (by yourself or through an intermediary) with an initial authorized capital based on the selected type of company
• Register the company name in the National Register of Legal Entities (Registo Nacional de Pessoas Colectivas)
• Register the company at the Commercial Registry (Conservatórias do Registo Comercial)
• Register at the tax office ☺
• Don’t forget to register at the insurance office
• Visit a notary and register the incorporation deed (it can also be done by an attorney)
• Submit the documents for registration to the Portuguese Ministry of Economy or the General Directorate of Enterprises on time

That is all! The company is registered. The consultation is received. Now you can start paying taxes.

Business taxes in Portugal

Like everywhere else, there are taxes in Portugal, for example:

Income Tax

Corporate income tax is levied on the worldwide profits of resident companies. Income tax is levied at a rate of 21%. In addition, municipal (1.5%) and state tax surcharges are added to this rate. The latter is levied at a progressive rate. See below:

Euro income Rate

• First 1.5 million 0%
• Next 6 million 3%
• The rest 5%

Together with all supplements, the final rate may reach 31.5%(!) if the profit exceeds 7.5 million euros. So, consider these nuances in the pursuit of earnings and get a person who will control this issue in advance.

Tax deductions

For the tax period, there is currently a limit on the ability to deduct the % of taxable income of 30%.

Capital Gains Tax

There is no capital gains tax in Portugal. But there are nuances ☺ Interested? Ask us.

Tax period and VAT reporting in Portugal

The tax year is the same as the calendar year, but if a non-resident is in dire need of a different time frame, they can request an “exception” from the state.

Keep this in mind! If your annual turnover (company turnover) exceeds 650 thousand euros, the VAT tax period will be 1 month. The payment period can be extended to a quarter if it does not reach this amount.

Remember the rule or give it to your accountant! You file a tax return = you pay the tax. VAT must be paid by the 10th day of each month following the reporting month. The quarterly return is due by the 15th day of the month inclusive.

Dividends on business in Portugal

Here it’s simple: your resident company has received dividends from another resident company—exempt yourself from tax ☺ But provided that you do not conduct false activity and don’t hold directly at least 10% of the company’s capital for 1 year.

Write to us if you have any questions about opening a business in Portugal. Our working hours are 9:00-19:00 from Monday to Friday. Send a request through the form below or a message on Telegram/Viber, Whatsapp for consultations.