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By Travis Kliever
Updated April 6, 2024

Doing Business in Portugal

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Thinking of doing business in Portugal? Here’s what you didn’t know about business there!

When you think of Portugal, maybe it’s the beaches that first springs to mind. But, there’s a different side to this country that’s catching the eye of savvy business owners worldwide.

Portugal is rapidly changing into a magnet for international business, especially for those in dealing with HR and payroll outsourcing.

So, why are businesses packing their briefcases and heading to Portugal?

Yes, the favorable climate is one reason, but that’s not all.

In a recent study by PwC, Portugal was ranked as one of the top countries for foreign investment, indicating a significant change in the global business climate.

But what’s driving this trend?

It’s a combination of strategic geographic positioning and a tech-friendly environment that’s too tempting for global businesses to ignore.

Portugal presents an interesting proposition for companies looking to outsource HR and payroll. The nation offers a competitive market for such services and it’s also becoming a hub for top-tier global talent.

But, as with any business, there are factors to consider, and Portugal is no exception. You might think that starting a business here is easy, but there’s more to it.

Doing business in Portugal offers a mix of exciting opportunities and essential homework.

Overview of Portugal’s Economy

Portugal, traditionally seen as a charming southern European nation, has been steadily carving out a new identity in global business. It is fast emerging as a hub for innovation and entrepreneurship. This change has significant implications for businesses looking to invest in Portugal, particularly those in the tech and digital sectors.

Recent data shows a robust and growing economy in Portugal. As per a 2024 report by the European Union, Portugal’s GDP growth outpaces the average in the European Union, with a notable surge in sectors like technology and renewable energy. This growth is a trend backed by increasing foreign investment and government initiatives focused on economic diversification.

But what’s putting Portugal on the map for businesses, especially in tech, is the Portugal Tech Visa. This program streamlines the process of attracting international tech talent. It makes it easier for companies to bring in the expertise they need.

In an industry where agility and innovation are key, this visa program is a breath of fresh air. It removes the usual bureaucratic problems often associated with global talent acquisition.

There’s also something for the digital nomads and remote workers who are reshaping the workforce landscape. Portugal offers enticing tax incentives for these modern professionals, recognizing their unique contribution to the economy and fostering a supportive environment for remote work. These incentives are part of a strategic plan to position Portugal as a leading destination for digital and tech professionals.

Portugal’s Business Regulations

In Portugal, the “Commercial Companies Code” governs corporate entities, outlining company formation and dissolution. This legal backbone ensures clarity and transparency in business operations. Registering a company in Portugal means you’ll need to acquaint yourself with this code thoroughly.

Then, there’s the tax structure to consider. Portugal offers a competitive corporate tax rate, currently at 21% for mainland companies, as reported by PwC in their latest taxation overview. But it gets more interesting with the ‘Participation Exemption Regime,‘ allowing exemption from taxation on dividends received and capital gains from the disposal of shares, under certain conditions.

The Local Workforce

Portuguese workers are known for their skills and adaptability. According to a 2023 Eurostat report, Portugal boasts a high level of education among its younger population, with an increasing number specializing in technology and engineering fields. This talent pool is a significant asset for any company in Portugal, particularly those in the tech and innovation sectors.

Portugal’s labor laws, detailed in the “Labor Code” (Código do Trabalho), emphasize employee rights and protections, which you must understand and respect. These laws cover contract types and termination processes. Compliance is key to maintaining a harmonious workplace and avoiding legal issues.

Starting a Business in Portugal

Choose Your Business Structure

You need to decide on the type of business entity. In Portugal, the most common forms are Sole Trader (Empresário em Nome Individual), Private Limited Company (Sociedade por Quotas, Lda.), and Public Limited Company (Sociedade Anónima, SA). Each has its implications for liability and capital requirements.

For instance, a LDA is ideal for small to medium-sized businesses, requiring a minimum share capital of just €1.

Get Your Paperwork in Order

Before you start, you need to get your paperwork sorted. This includes obtaining a Certificate of Admissibility to ensure your company name is unique and registering with the Portuguese Tax Office (Autoridade Tributária e Aduaneira) to get your tax identification number. Accurate documentation is crucial here.

Open a Corporate Bank Account

You’ll need a Portuguese bank account for your business. This step is fairly straightforward – provide your identification and your business’s registration details to the bank. Don’t overlook this step; a local bank account is essential for smooth financial transactions.

Legal Registration and Publicity

Legally register your company with the National Registry of Legal Entities (Registo Nacional de Pessoas Colectivas). This is where your business becomes official. After registration, you’re required to announce your new business in a national gazette, known as “Diário da República.”

Address the Social Security Aspects

If you’re hiring employees, you must register with the Social Security office within 10 days of your first hire. This ensures that your employees are covered and that you’re compliant with local employment laws.

Meet the Local Accounting Requirements

Accounting in Portugal has its specifics. You need to adhere to local accounting standards and meet the annual filing requirements. It’s wise to consult with a local accountant to ensure you’re on track.

Understand the Labor Laws

Familiarize yourself with Portuguese labor laws to ensure fair and legal employment practices. This includes understanding contracts, and termination procedures. Compliance here is non-negotiable.

Stay Informed About Tax Obligations

Portugal offers various tax incentives, especially for startups and tech companies. But, staying informed about your tax obligations is essential. This includes corporate tax, VAT, and other relevant taxes.

Benefits of Doing Business in Portugal

For entrepreneurs eyeing Portugal, many sectors stand out as particularly lucrative: tourism, technology, renewable energy, and real estate.

Tourism

Tourism has long been one of Portugal’s economic strongholds. In recent years, it has experienced a remarkable resurgence. Data from the National Statistics Institute of Portugal shows a steady increase in international visitors, with tourism revenues contributing significantly to the GDP. This growth reflects a robust and sustainable sector ripe for investment. The key here is innovation – unique hospitality services and cultural experiences that stand out in a competitive market.

Technology

Portugal’s tech sector is accelerating at an impressive pace. Supported by initiatives like the Portugal Tech Visa, the government has made it simpler for tech companies to bring in international talent. This and the country’s growing reputation as a tech hub, offers fertile ground for startups and established tech firms alike. The sector’s growth shows a vibrant system encouraging innovation and entrepreneurship in Portugal.

Renewable Energy

With Portugal’s commitment to sustainability, it’s a leader in renewable energy. According to a report by the International Energy Agency, Portugal aims for 80% renewable energy consumption by 2030. There are many opportunities in this sector, from wind and solar energy projects to innovative green technology solutions.

Real Estate

The new Golden Visa regulations have shifted the focus from urban to interior and low-density areas. This is creating new opportunities for savvy investors. Investing in real estate here requires a keen understanding of local regulations and market trends.

For businesses looking to enter these sectors, the key is thorough research and a clear understanding of the legal requirements. For instance, engaging in the tourism sector might require adhering to specific local laws like the Alojamento Local for short-term rentals. Similarly, in the tech sector, Portugal’s business-friendly yet regulatory-compliant environment calls for expert guidance.

Portugal Business Guides

Downsides of Doing Business in Portugal

Starting a business in Portugal, like in any country, has its hurdles. While the Portuguese business environment is inviting, some aspects require your attention and strategic approach.

Dealing with Bureaucracy

Bureaucracy is a universal challenge in business, and Portugal is no exception. You might find yourself dealing with many administrative processes, which can be time-consuming. For instance, the “Código do Registo Comercial” Commercial Registration Code governs business registration in Portugal. It’s thorough, but it can be complex for newcomers.

To manage this efficiently:

Seek local legal expertise. Professionals familiar with Portuguese laws can help streamline processes.
Plan for extra time. Factor in potential delays to avoid impacting your business plans.
Use government resources. Portugal offers various online portals, such as “ePortugal,” which consolidate information and services to assist businesses.

Language Barriers

Portugal’s official language is Portuguese, and while English is widely spoken in business circles, not all local partners or authorities may be proficient. This can lead to misunderstandings or delays.

Effective ways to overcome this include:

Employing bilingual staff or translators. Ensuring clear communication is vital for smooth operations.
Learning key Portuguese business terms. Even basic proficiency can greatly aid in interactions.
Leveraging technology. Use translation apps or services for essential communications.

While these challenges might seem daunting, remember that many businesses have successfully dealt with them and thrived in Portugal. By preparing ahead and seeking the right support, you can too.

International Expansion into Portugal

Portugal’s membership in the European Union and Eurozone provides a stable economic and regulatory environment, and this is critical for businesses aiming for sustainable growth.

This strategic positioning is bolstered by a skilled and multilingual workforce. Portugal boasts a high rate of English proficiency among its population, easing communication challenges often faced in international business. Also, Portugal presents itself as a smart choice for businesses looking to expand their operations because of the competitive labor costs and a strong emphasis on education and training.

Subsidiary Incorporation and Branch Registration

When you’re considering setting up a subsidiary or a branch in Portugal, understanding the legal requirements is crucial. For incorporating a subsidiary, businesses must comply with Portuguese corporate laws, which include registering with the Commercial Registry, and adhering to the Corporate Income Tax Code. The process, while straightforward, requires attention to detail and an understanding of local corporate norms.

On the other hand, registering a branch might be a suitable alternative for some businesses. This process involves fewer formalities compared to a subsidiary. A branch, being an extension of the parent company, doesn’t enjoy the same level of autonomy as a subsidiary but offers a quicker setup process and less administrative overhead.

Streamlining Operations with PEOs and EORs

For businesses looking to simplify their entry into the Portuguese market, partnering with a Professional Employer Organization (PEO) or an Employer of Record (EOR) can be helpful. PEOs and EORs specialize in handling various aspects of HR, payroll, and compliance with local employment laws, allowing you to focus on your core business activities.

Using a PEO or EOR in Portugal means you benefit from their in-depth knowledge of local labor laws and tax regulations, including compliance with the Portuguese Labor Code and Social Security System. This partnership can significantly reduce the risks associated with non-compliance and streamline your operational processes, making your expansion into Portugal easier and more efficient.

How to Register a Company

Registering a company in Portugal involves a series of steps, including obtaining a company tax number, registering with the Portuguese Commercial Register, and declaring the start of activity with the Portuguese Tax Authorities. The entire process is relatively straightforward and supported by various government initiatives to encourage entrepreneurship.

Frequently Asked Questions

Should I Expand My Business Into Portugal?

Considering Portugal’s growing reputation as a hub for technology, and international business, expanding your business there is a good move. With its access to skilled and multilingual talent and favorable business environment, Portugal offers many opportunities for growth and expansion. Also, the country provides advantageous tax incentives, particularly for tech and digital sectors, and has streamlined visa processes for international talent. But you should carefully assess your business model, and consider the legal and regulatory requirements before making a decision.

Should I Register a Company in Portugal?

Yes, registering a company in Portugal is a smart move. The process of registering a company is simple, with clear legal requirements. Also, Portugal’s supportive policies for foreign businesses make it an attractive destination for business expansion. However, you should consider the specific needs of your business and seek professional advice to handle the legal and administrative processes effectively.

Article By

Travis is a global business development advisor. He has spent the last 14 years supporting business establishment and development in North America, Southeast Asia, and throughout the world. With multiple degrees from the University of Oregon, Travis currently splits his time between the US, and Bali, Indonesia. At RemotePad, Travis writes about remote work, hiring internationally and PEO/EOR business models.

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