From stunning beaches on the Atlantic coast and a mild Mediterranean climate to fabulous food and rich history and culture, Portugal is a popular destination for both tourists and expats. However, the country's growing economy and the security of being an EU member state attract lots of investment from international companies, meaning Portugal is far from being all about leisure. These and other factors make it a somewhat favorable environment for new entrepreneurs and startup founders.
Is Portugal a good place to open a company?
The success of any commercial enterprise depends on a whole range of factors — and where your business is set up is just one of the many things to take into account. However, if you do plan to start a company in Portugal, you may be happy to know that the country has a lot to offer. In fact, in the World Bank's Doing Business Report (2019), Portugal ranked 39th when it came to “the ease of doing business”.
There are several key factors that make Portugal a favorable new business environment.
First, compared to many other European countries, Portugal has a rather low cost of living. This also means that costs associated with setting up a company will be lower — which is a very important consideration for small businesses.
Second, Portugal has an actively developing startup scene. Lisbon, in particular, is emerging as a destination for new companies in the fields of IT, tech, digital data management and more. Portugal is home to a number of startup incubators and accelerators, coworking spaces — as well as groups of angel investors looking for promising projects to invest in.
Third, the Portuguese government sees small businesses in the country as the backbone of the economy. Because of this, there are lots of government initiatives to support new enterprises and promote the startup culture.
Finally, the country's location also makes it a very friendly destination for investors. A member state of the European Union, it offers financial security and stability — but as a growing economy, it also provides new opportunities not available in more established European nations.
How to start a company in Portugal?
Setting up a business in Portugal is not particularly difficult — but you will need to follow a number of steps.
The first thing to do is get your business plan ready and make sure it's clear and economically viable.
Second, you will need to make sure that you have the right credentials and paperwork to start a business. This includes:
- Portuguese residency card;
- Tax ID Number from the Portuguese Tax Office;
- Social Security Number issued by the Portuguese Social Security Office.
Next up, you will need to define your business structure. Are you setting up a limited company, a partnership or a cooperative?
You can then go on to select a business name and decide on the address where your business will be registered.
The next step would be to choose a set-up method. There are three ways to set up a company in Portugal.
You can set up a company online through the Empresa Online 2.0 portal. This only takes a few days and costs about €360. Note that the option is only available for some types of businesses.
You can also set up a company on the spot, registering a sole trader company or a limited company in just an hour. The same fee of €360 applies. To set up a Portuguese company on the spot, you need to be accompanied by all the partners (if there are any) and have all the necessary documentation.
To learn more about setting up a business on the spot, read the Empresa na Hora section of the Justica.gov.pt website.
Finally, if you want to go the traditional route, you can set up your Portuguese company via the Institute of Registries. The process typically takes around two weeks, and these are the steps you will need to take:
- First, you will need to receive a Certificate of Admissibility from the Institute of Registries and Notaries to formally name your Portuguese company;
- File an application for a Company Card and a Collective Card at the Institute of Registries;
- Open a company bank account in Portugal and deposit your starting capital;
- Contact the local Tax Office to announce the start of your business activity;
- Register your new company at the Commercial Registry Office;
- Register as an employer by contacting the local Social Security office;
- Make sure to check if there are any additional permits or steps needed to set up a company in your specific area of business.
Types of companies you can set up in Portugal
There are different business types you can set up in Portugal. Your choice of business structure will most likely depend on the activities you plan to perform and the number of people involved in the business. Here are some of the most popular types of business arrangements in Portugal:
If you are the only one in charge of your company, you will probably be setting up a Sole Trader company, a Single Member Limited Company or an Individual Limited Liability Establishment.
Sole Trader, Empresario em Nome Individual in Portuguese, is the most basic business form and the most typical way to arrange self-employment in Portugal. If you set up a Sole Trader company, you will have full ownership of all company profits (after taxes). With that, you will also have unlimited liability for business debts and other expenses. To set up a Sole Trader company, there is no minimum capital requirement. You also won't need any formal constitution or articles of association.
Single Member Limited Company, Sociedade Unipessoal por Quotas in Portuguese, is also a business that is run by one person. The main difference is that debt liability, in this case, is limited to company assets (and not personal assets of the business owner). There is a minimum capital requirement in the amount of €5,000.
Individual Limited Liability Establishment, Estabelecimento Individual de Responsabilidade Limitada in Portuguese, is operated in much the same way as the Single Member Limited Company. There is a difference in setup requirements, though: the minimum investment of 5,000€ must be made with two-thirds in cash.
Opening a company in Portugal: visa requirements
To start a business in Portugal, you must first have a valid work permit or a visa type that allows you to start a business, as well as having the minimum capital to invest in the new company. In addition to any necessary visas, you will also need a Portuguese residency card, social security number, and tax number.
Who is eligible for the Golden Visa in Portugal?
Non-EU citizens who want to start a business in Portugal may be eligible for the Golden Visa, which is designed to encourage investment in the country. Note that this visa option is only open to third-country nationals who are able to fulfill at least one of the below requirements:
- Creating at least 10 job postings;
- Investing 500,000€ in scientific research activities;
- Investing 250,000€ in arts or in the preservation of local heritage sites;
- Investing 500,000€ in subscription units of mobile investment funds;
- Investing 500,000€ in creating a local company or supporting an existing one, as long as the investment leads to the creation or maintenance of at least 5 job positions for a minimum of 3 years.
Note that more conditions may apply for receiving this type of visa. This is why it is recommended that you check with your local Portuguese embassy or consulate regarding the most up-to-date Golden Visa application requirements and application procedures.
Corporate taxes in Portugal
Companies in Portugal pay taxes (IRC) at a flat rate of 21%. Municipality payments also apply (up to 1.5%). There are also additional charges (at least 3% surcharge) if a business makes over 1.5 million in profits.
As the government in Portugal offers strong support to small and mid-sized companies, they can pay a reduced tax rate (17%) on their first taxable profit of 25,000€. Plus, small businesses (with an annual turnover of under 200,000€) can use a simplified tax scheme and choose to pay taxes on their turnover instead of profit.
Starting a business in Portugal: governmental support initiatives
One of the benefits of starting a business in Portugal is strong government support. As we've mentioned earlier in this article, the Portuguese government has a number of initiatives to support small and medium-sized businesses. There are also a lot of programs aimed at helping startups and new companies. For instance:
- Startup Voucher offers technical and financial tools to help young entrepreneurs set up new innovative companies;
- Portugal 2020 allows local companies to apply for EU funds;
- Vale Incubação provides support for businesses in their first year of operation. Backing by Incubation Valley includes assistance with the management and marketing of the business, consultations and legal services, intellectual property support and more;
- Activar.PT is an internship program that pays for the company's costs when employing a recent graduate for up to 1 year.
This is — by far — not an exclusive list of programs and initiatives offered to businesses in Portugal. For a full list of programs, make sure to check egov.portugal.pt.
We do our best to provide accurate and up to date information. However, if you have noticed any inaccuracies in this article, please let us know in the comments section below.
