Setting up a business in Portugal

business in Portugal
Shutterstock.com
Updated 2021-09-23 14:22

Portugal is a vibrant country with a lot to offer to its new residents. From stunning beaches on the Atlantic coast and a mild Mediterranean climate to wonderful food and rich history and culture, it's a popular destination for both tourists and expats.

With that, Portugal is not all about leisure. The country's growing economy and the security of the EU member state attract lots of investment from large international companies. These and other factors also make it a favorable environment for new entrepreneurs and startup founders.

If you are thinking about setting up a company in Portugal, here's what you need to know.

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 going for it. In fact, in the World Bank's Doing Business Report (2018), Portugal appeared in the 29th spot 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 a lot of 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 open 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:
  1. A Portuguese residency card

  2. A Tax Number from the Portuguese Tax Office

  3. And a Social Security Number issued by the Portuguese Social Security Office

  • Next, you will need to define your business structure. Are you setting up a limited company, a partnership, a cooperative, etc.?
  • 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. This only takes a few days and costs about €360. Note that the option is available for only some types of businesses. You can register your business online on Portugal's Public Services website. 

You can also set up a company on the spot. Under this plan, you should be able to register 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 will have all the partners of your company (if there are any) present and all the necessary documents ready.

To learn more about setting 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 here 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 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.

Being a freelancer in Portugal

If you want to work freelance in Portugal, you will have a very similar setup to that of a Sole Trader. All you will need to organize your activities as a freelancer are a residence permit, a tax number, and a social security number. It will be your responsibility to pay taxes and make social security contributions.

If there is more than one person involved in running a company, you can set up a Private Limited Company, a Public Limited Company, a Partnership, a Limited Liability Partnership or a Cooperative.

A Private Limited Company, Sociedade por Quotas in Portuguese, is a company set up by at least two partners with the minimum initial capital requirement of €5,000. Company shareholders are responsible for business debts within the limits of business assets.

To set up a Public Limited Company, Sociedade Anomina in Portuguese, you will need at least five shareholders and an initial capital investment in the amount of €50,000. Shareholders are liable for company debts within the limits of the value of their shares.

A Partnership, Sociedade em Nome Colectivo in Portuguese, is a company with at least two partners. The liability of each partner includes personal assets — and these assets can be used to cover company debts.

A Limited Liability Partnership, Sociedade em Comandita in Portuguese, is a company with at least two partners. This type of company typically includes general and filament partners. General partners are directly involved in running the business and have unlimited liability that extends to their personal assets. Sleeping partners, on the other hand, are only involved by providing capital and their liabilities are limited to the invested amounts.

A Cooperative, Cooperativo in Portuguese, is typically a business setup used by non-profit organizations.

Registering a foreign company in Portugal

If a foreign company wants to open a branch in Portugal, the proceedings are quite similar. The branch office will need to be registered with the IRN and the Commercial Registry Office.

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. Non-EU residents may qualify for the Golden Visa, which is designed to bring innovation and new business into the country. 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:

  • You have purchased estate property valued at €500,000 or above.
  • You have purchased real estate property valued at at least €350,000 with the purpose of refurbishing it (there are also specific requirements regarding the age and location of the property).
  • You've transferred capital in the amount of at least €1 million or greater towards the country.
  • You've created 10 or more new jobs in the country.
  • You've made an investment in the amount of at least €350,000 or more into research activities
  • performed by public or private scientific research institutions in the country.
  • You've made an investment of €250,000 or more with the purpose of supporting the country's arts or national heritage sector.
  • You've invested a minimal amount of €500,000 into purchasing shares in investment funds intended to sponsor small and medium companies in Portugal.

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.

Opening a company in Portugal: taxes

The income you receive from running a business or being self-employed in Portugal is classified as Category B income — and is taxed under a simplified regime. Portugal uses a progressive rate of income tax and the standard VAT rate (Value Added Tax) in Portugal currently stands at 23%.

The tax year in Portugal runs from January 1 to December 31 and all residents self-employed in Portugal need to submit tax returns annually. See our guide to taxes in Portugal for more information.

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.
  • Momentum programme offers aid to recent higher education graduates as well as final year students who have been awarded social action grants during their years of study and are now planning to bring a business idea to life.
  • Incubation Valley provides support for businesses in their first-year operation. Backing by Incubation Valley includes assistance with management and marketing of the business, consultations and legal services, intellectual property support and more.

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 Portugal's Public Services website.

Starting a business in any country takes a lot of planning and research. This is especially true when it comes to realizing a business idea in a new country. Make sure you are fully away of all legal and other aspects of starting and running a company in Portugal — and feel free to explore the rest of our Portugal Guide for more insights on life in the country.

Useful links: 

IAPMEI - Information for entrepreneurs and small business owners

Registo Nacional De Pessaos Colectivas - VAT Registration

Portugal Industrial Association

Empresa Na Hora (Online business registration)

Portal of Finance

Banco de Portugal

Portugal's Public Services website

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.