If you plan to start a business in Europe, Portugal is an excellent choice for registering your company. The Manimama team has conducted in-depth research, analyzed the main subtleties of incorporating in Portugal, and is ready to share its results and help you choose the right jurisdiction. 

What are the main advantages of incorporating a company (business) in Portugal?

1. Promising location

Portugal’s advantageous location in Western Europe allows businesses to operate seamlessly across the European market. This is especially appealing for companies looking to reach European and international customers, thanks to its proximity to other key markets.

2. Simple registration process

The process of incorporation in Portugal is straightforward and convenient. The country provides various tools to simplify administrative procedures, enabling entrepreneurs to establish their companies quickly and without unnecessary difficulties.

3. Stable economy and legal system

Portugal boasts a reliable economy and a sound legal framework, making it an attractive destination for investors and entrepreneurs. The transparency of regulations, business-friendly legislation, and efficient judicial system make Portugal a trustworthy partner for conducting any business activity.

4. Support for startups and innovative projects

Portugal actively supports startups and innovative projects. The government offers funding programs, tax incentives, and other initiatives for entrepreneurs looking to implement new technologies or develop innovative businesses within the country.

5. Favorable business climate for international companies

Portugal actively attracts foreign entrepreneurs and investors by creating a favorable environment for business operations. The country appeals with its economic stability and high quality of life, making it an ideal place for the growth of international companies and startups.

How to register a company in Portugal and what are the main requirements for such registration?

Step 1. Initial setup

• Initiating a preliminary project assessment, assessing risks, choosing the type of company, preparing the necessary documents and obtaining the necessary permits, determining the time frame, budget, and resources required to complete the process.
• Preparation and filing of the package of documents.

Step 2. Company registration

• Verification and reservation of the company name at the National Registry of Companies.
• Open a corporate bank account.
• Incorporating the company’s data into the National Registry of Companies.
• Obtain a Portuguese tax identification number (NIF).

Requirements for registering a company in Portugal on the example of a Limited Liability Company (LLC) / Sociedade por Quotas (Limitada – Lda):

• Shareholders: at least one shareholder (there are no legal restrictions on nationality or place of residence).
• Director: at least one director (there are no legal restrictions on nationality or place of residence).
• Minimum Share Capital: €1.
• Liability: liabilities are limited to the amount invested.
• Accounting: annual financial statements must be filed with the Finance Ministry.

What do you have to know about taxes when registering a company in Portugal?

Corporate income tax (CIT):

All companies earning income in Portugal are subject to CIT.

CIT rates:

• 21% in mainland Portugal;
• 20% in the Autonomous Region of Madeira;
• 16.8% in the Autonomous Region of the Azores.

The reduced CIT rate of 12.5% applies to companies meeting standards, like:

• carrying out business for a period of less than ten years;
• employing less than 250 employees;
• having an annual turnover not exceeding € 50 million;
• the company should not result from a corporate reorganization of a non-qualifying company;
• the company should not be held, in more than 50%, by a non-qualifying company.

The following requirements also must be met:

• new start-ups are innovative companies with a high growth potential; or the National Agency of Innovation recognized that they develop competent R&D activities or certification of the process of recognition of companies in the technology sector;
• have completed at least one round of venture capital financing or have had contributions of equity or quasi-equity from business angels;
• have been granted funds from the Portuguese Development Bank, or funds managed by this entity, or by its subsidiaries, or from one of its equity or quasi-equity instruments.

For small or medium-sized enterprises which have an agricultural, commercial or industrial economic activity as their main activity, a rate of 17% applies to the first € 25 000, and the standard rate to the remainder.

Companies with no registered office or permanent establishment in Portugal are subject to a rate of 25%, except for the following income where the rate is 35%:

• prizes from draws, lotteries, lottery games, or in any draw or competition;
• income paid or made available in accounts opened in the name of one or more holders but on behalf of unidentified third parties;
• income earned by companies established in a country, territory or region subject to a significantly more favorable tax scheme.

Personal income tax (PIT):

Personal income tax applies to the income of citizens resident in Portuguese territory and non-residents who earn income in Portugal.

PIT rates for residents:

• up to €7,703 – 13.25%;
• €7,703 – €11,623 – 18%;
• €11,623 – €16,472 – 23%;
• €16,472 – €21,321 – 26%;
• €21,321 – €27,146 – 32.75%;
• €27,146 – €39,791 – 37%;
• €39,791 – €51,997 – 43.5%;
• €51,997 – €81,199 – 45%;
• over €81,199 – 48%.

Non-residents are taxed at a flat rate of 25% on their taxable remuneration (e.g. employment, self-employment, and pension income).

Value-added tax (VAT):

VAT in Portugal is payable by all businesses with a turnover of more than €14,500 on taxable goods and services.

In Portugal, there are three rates of VAT:

• a reduced rate of 6% in mainland Portugal, 4% in the Autonomous Region of the Azores and 5% in the Autonomous Region of Madeira for goods and services in List I of the Value Added Tax Code;
• an intermediate rate of 13% in mainland Portugal, 9% in the Autonomous Region of the Azores and 12% in the Autonomous Region of Madeira for goods and services in List II of the Value Added Tax Code;
• a standard rate of 23% in mainland Portugal, 16% in the Autonomous Region of the Azores and 22% in the Autonomous Region of Madeira for all remaining goods and services.

For readers 

Manimama provides assistance in choosing the right jurisdiction for company incorporation and in registering a business specifically in Portugal. We have a good understanding of the tax and legal peculiarities of specific jurisdictions, which helps our clients make an informed choice based on their unique needs and development strategies. In our work, we take into account factors affecting the business environment, such as the level of competition, access to financial and human resources, as well as opportunities for further growth and development in different jurisdictions. 

By choosing our company formation service in Portugal, you are working with a law firm that values integrity, competence, and client satisfaction. Let us help you set up a company in Portugal and pave the way for your business success!

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The content of this article is intended to provide a general guide to the subject matter, not to be considered as a legal consultation.