Set Up Your Business in Portugal with Confidence
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Starting a Business in Portugal
If you’re considering launching a business in Portugal, understanding your specific goals, the nature of your business, and your liability preferences is essential. These factors will ultimately determine the most suitable business structure for your company.
Portugal has become an increasingly attractive destination for entrepreneurs and business owners from around the world. Its strategic location within the European Union, welcoming business environment, and favorable tax policies make it a top choice for launching a new venture. Whether you’re looking to establish a small startup or expand an existing enterprise, Portugal offers an array of opportunities.
Starting a business in Portugal involves three steps: choose a unique legal name verified through the Institute of Registries and Notary (IRN), prepare incorporation documents like articles of association and any required foreign entrepreneur paperwork, and register the business with the Commercial Registry Office to ensure legal operation.
Type of Business Structures in Portugal
Portugal offers various business structures to accommodate the needs of entrepreneurs and companies. Here are the main types:
1. Freelancer
You can operate as a self-employed individual or freelancer without requiring formal business registration, making it an ideal choice for service providers and independent professionals.
2. Sole Proprietorship (Empresário em Nome Individual)
A simple structure for individuals running a business alone. The owner is personally liable for all debts and obligations.
3. Limited Liability Individual Entrepreneur (EIRL)
A variation of the sole proprietorship that limits personal liability by separating business assets from personal assets.
4. Single-Member Limited Company (Sociedade Unipessoal por Quotas)
A limited liability company owned by a single shareholder. The owner’s liability is limited to the capital invested.
1. Private Limited Company (Sociedade por Quotas or Lda)
LLC is a popular choice for small to medium-sized businesses, requiring at least two shareholders and a €5,000 capital investment. Liability is limited to the capital contributed.
2. Public Limited Company (Sociedade Anónima or SA)
PLC is designed for larger companies with significant capital. Shares can be publicly traded, and liability is limited to the value of the shares. A minimum capital investment required of €50,000.
3. Partnership (Sociedade em Nome Coletivo)
Formed by two or more individuals who share joint and unlimited liability for the company’s obligations.
4. Cooperative (Cooperativa)
A collective business owned and operated by its members for mutual benefit, often found in agriculture and services.
5. Branch Office (Sucursal)
A business extension of a foreign company operating in Portugal. The parent company assumes full liability.
Branch vs. Subsidiary in Portugal
Branch
- A branch is an extension of the parent company, not a separate legal entity.
- It operates under the parent company’s name and legal structure.
- The parent company holds full liability for the branch’s debts and obligations.
- Taxation follows the same regime as the parent company.
- Ideal for companies seeking to expand operations into Portugal without forming a new legal entity.
Subsidiary
- A subsidiary is a distinct legal entity, incorporated under Portuguese law.
- It operates under its own name, management, and legal framework.
- The parent company’s liability is limited to its investment in the subsidiary’s shares.
- Taxation is governed by Portuguese laws and regulations.
- Suitable for foreign companies aiming to establish a permanent and legally independent presence in Portugal.
How to Open a Business in Portugal
Frequently Asked Questions About OPENING A BUSINESS IN PORTUGAL
Who can open a company in Portugal?
Both local and foreign entrepreneurs over the age of 18 can start a business in Portugal, provided they have sufficient funds to meet the minimum share capital requirements. Our consultants are available to assist in simplifying the incorporation process.
What types of companies can I open in Portugal?
You can establish various business structures in Portugal, including private and public limited liability companies, general and limited partnerships, joint stock companies, and sole proprietorships.
What is the most popular business structure in Portugal?
The Portuguese LDA (Limited Liability Company) is the most preferred structure among international investors due to its flexibility and global familiarity.
How do I register an LDA in Portugal?
The process begins at the Commercial Registry, where the Articles of Association, detailing the owners and planned activities, are submitted. This marks the start of the incorporation process.
What is the minimum share capital for an LDA in Portugal?
To open an LDA, a minimum share capital of €5,000 must be deposited in a Portuguese bank account. Our consultants can assist with drafting documents and setting up the necessary bank account.
What is the corporate income tax rate?
The standard corporate income tax (CIT) rate in mainland Portugal is 21%. In the Autonomous Regions of Madeira and the Azores, the rate is reduced to 14.7%, including for Permanent Establishments (PEs) of foreign entities. For small or medium-sized companies, the first €50,000 of taxable income is taxed at 17% in mainland Portugal and 11.9% in Madeira and the Azores.
What are the current VAT rates in Portugal, and how is VAT applied?
Portugal applies three main VAT rates:
- Standard Rate: 23% for most goods and services.
- Intermediate Rate: 13% for certain items like some food products, accommodations, and agricultural supplies.
- Reduced Rate: 6% for essential goods and services, including basic foodstuffs, books, and pharmaceuticals.
In Madeira, the rates are 22%, 12%, and 5%. In the Azores, they are 16%, 9%, and 4%. VAT is added to the price of goods and services, and businesses must collect and remit VAT to the government through regular filings.
Is physical presence in Portugal required for company registration, or can it be done through power of attorney?
Physical presence in Portugal is not required for company registration. The process can be completed remotely by granting power of attorney to a legal representative in Portugal, such as a lawyer or legal firm. The representative will handle all formalities, including document submission and registration. It is crucial to ensure that the power of attorney includes specific authorization for all steps involved in the registration process.
What are the current minimum monthly salary in Portugal?
As of January 1, 2024, Portugal’s national minimum wage increased to €820 per month, marking a €60 rise from the previous €760—the largest annual increase to date. This adjustment aims to enhance workers’ income and aligns with the government’s commitment to improving wages and competitiveness. Looking ahead, the government has announced a further increase to €870 per month, effective from 2025.
Can I establish a subsidiary or branch in Portugal?
Yes, foreign companies can open subsidiaries or branches in Portugal under the same legal rights as domestic entrepreneurs, in compliance with local legislation.
Can I access accounting services for my company in Portugal?
Absolutely. Foreign investors can utilize accounting services for payroll, bookkeeping, tax management, financial statements, and more, ensuring compliance and efficient operations.
Can I buy a shelf company in Portugal?
Yes, purchasing a shelf company is an option. These ready-made companies can start operating immediately after ownership transfer and have no prior financial activity or liabilities.
Do I need special licenses or permits for my business?
Certain activities, such as gambling or financial services, require specific licenses or permits. We can provide guidance on obtaining the necessary authorizations.
How quickly can I open a company in Portugal?
The incorporation process in Portugal is straightforward and not time-intensive, enabling international investors to set up and commence business activities efficiently.
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