If you’re looking for new European terrain to trade in, consider setting up a business in Portugal. You’ll be welcomed with open arms by a national government keen to expand the country’s business interests, and you may be surprised by how quickly Portugal adapts to new technology.
Throw in favourable tax rates, trading relationships with a range of former colonies in Africa, and a talented and desirable local labour force, and you have the makings of a great location in which to open a new business interest.
Does Portugal welcome overseas businesses?
This Iberian nation does not have a reputation as a financial dynamo. Still, the national authorities are keen to change this – making Portugal extremely welcoming to overseas traders capable of bringing new opportunities to the country and its citizens.
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What industries are most popular in Portugal?
Portugal’s economy is widely regarded to be dominated by tourism and hospitality, but there are a range of industries that offer impressive investment opportunities for overseas entrepreneurs. Some of the biggest industries in Portugal include:
- Agriculture and fishing
- Automobile manufacture
- Clothing and textiles
- Biotechnology
- Construction
- Engineering, especially aeronautical
- Food and wine
- ICT services
- Petrol and chemicals
- Renewable energy
Is it easy to set up a business in Portugal?
It’s comparatively simple to set up a new business interest in Portugal. The process is as follows.
How to set up a business in Portugal
- Apply for a Certificado de Registo – a residence card – if you live in Portugal
Or enlist the services of a professional agent to act in your stead if you plan to remain overseas
- Apply for a nine-digit Número de Identificação Fiscal (FIN)
also known as a Número de Contribuinte (contribution number) from your local Finanças (tax office). This number acts as your tax identification number in Portugal
- Apply for a Número de Identificação de Segurança Social (NISS)
From the Instituto da Solidariedade e da Segurança Social (Social Security Office)
- Name your company and register it
With the Serviços Registo Comercial (National Registry of Companies)
- Register to make social security payments
To the Instituto da Solidariedade e da Segurança Social on behalf of your future employees
- Open a local bank account
You’ll need a domestic business bank account to trade in Portugal.
That’s it! Once you have followed these steps, you should be ready to start trading in Portugal. You could be up and running in as little as two weeks, especially if you employ the services of a professional agency to act on your behalf.
Can I run a business in Portugal while living overseas?
Yes, you do not need to live in Portugal to open and run a business in the country. However, a non-EU national will need to enlist the services of a local agent to represent your financial affairs.
This company will start your company for you, manage and run your payroll, and take care of your tax and recruitment responsibilities to ensure your business remains legally compliant.
Cultural considerations when running a business in Portugal
If you’re going to do business in Portugal, ensure you understand some of the business norms that you’ll encounter. These include:
- Portugal operates a formal business culture, so dress formally and initially address people by their surname and title.
- Potential trading partners in Portugal will likely ask you some personal questions. This is not an attempt to “catch you out” – in Portugal, building a personal relationship is a cornerstone of successful business arrangements.
- Portuguese people have a curious relationship with punctuality. As a foreigner, you will be expected to be on time, but you may find that your Portuguese associates are a little laxer with timekeeping.
- Most Portuguese people will have an idea of what they want from a negotiation, so you should walk away with an idea of where you stand after a meeting, but be prepared to wait for your associates to show their cards.
- If you come to a meeting with written documents and handouts, this will stand you in good stead to reach an agreement – Portuguese businesspeople like to take away information, not just be dazzled by an oral sales pitch.
What business structures are supported in Portugal?
The most popular business structures for a new venture in Portugal are as follows:
| Type of Portuguese business entity | What is it? |
|---|---|
| Recibos verdes | A sole trader or freelancer. If this is your structure, it’s best to live outside of Portugal unless you qualify for the non-habitual tax regime, or you’ll pay up to twice as much income tax. |
| Sociedad por Quotas (LDA) | A limited liability company that keeps your business affairs separate from your personal finances and legal status. An LDA needs at least two founding directors. |
| Sociedade Unipessoal por Quotas | A limited liability company with just one director. This is a more tax-efficient way to trade as a sole trader if you meet the threshold. |
| Sociedade Anonima (SA) | A public company that is traded on the stock exchange. An SA must have at least five founding shareholders. |
You could set up a branch of your UK business if you prefer, but this involves just as much paperwork as setting up a subsidiary business, and you will not enjoy any separation of your legal and financial affairs.
Taxation in Portugal
If you want to do business in Portugal, you must understand the taxation rules and regulations that will impact your bottom line.
What is the corporate tax rate in Portugal?
Portugal’s default corporate tax rate is 21% on all trading profits.
What are the employee income tax brackets in Portugal?
All employees in Portugal must pay income tax. The contributions are as follows:
| Annual salary | Income tax |
|---|---|
| €7,115 or lower | 14.5% |
| €7,116 – €10,735 | 23% |
| €10,736 – €15,215 | 26.5% |
| €15,216 – €19,695 | 26.5% |
| €19,696 – €25,075 | 35% |
| €25,076 – €36,756 | 375% |
| €36,757 – €48,033 | 43.5% |
| €48,034 – €75,098 | 45% |
| €75,099 or higher | 48% |
Non-residents that generate income from Portugal are charged a flat rate of 25%, while anybody that lives in Portugal but qualifies for the non-habitual tax regime will pay 20% for 10 years.
Income tax must be withheld from an employee’s salary at payroll, alongside 11% of a wage paid to the Instituto da Solidariedade e da Segurança Social as social security contributions.
How are taxes paid in Portugal?
The tax year in Portugal follows the same pattern as the calendar year, January 1st to December 31st. Tax returns can be filed between April 1st and June 30th of the following year, alongside any payments due.
Payroll and hiring employees in Portugal
Hiring the right talent can make or break a company. Ensure your Portuguese business interests are staffed by the best possible talent.
Does Portugal welcome overseas talent?
Portugal is extremely welcoming of overseas talent. The country’s authorities are keen to plug skills gaps, especially in industries considered “high value added activities.”
Acting as owner or director of a company falls under this remit, so you will be welcome if you start a business in Portugal that employs local talent. Equally, it should not be too difficult to import employees from outside Portugal if you cannot use the local labour force.
Who needs a visa or work permit to work in Portugal?
Unless you hold a passport issued by Portugal, Switzerland, or another EU or EEA nation, you will need a visa or work permit to trade in Portugal. If you are not a Portuguese citizen, you will also need a Certificado de Registo to remain in the county for more than 90 days.
If you have the funds available, consider applying for a golden visa before opening your business. This is open to anybody that invests a minimum of €250,000 (£220,000) in a Portuguese business, property, or investment fund.
This visa is valid for five years, after which you will be eligible for Portuguese citizenship. Spouses and dependents can live in Portugal alongside the holder of a golden visa.
What employee benefits are compulsory in Portugal?
All employees of a Portuguese business are entitled to the following mandatory benefits.
- No less than 22 days of personal holiday, plus up to 13 public holidays. Holiday days can be rolled over to the following calendar year and taken any time before April 30th.
- Two subsidiary wage payments, released in June and December.
- 4 days of sick pay per year.
- 23.75% of an employee’s salary paid to the Instituto da Solidariedade e da Segurança Social.
- Workers compensation insurance policies against injury, illness or death in the workplace – these could be up 11% of a salary.
- 1% of employee salary paid to the Fundo de Compensação do Trabalho (Working Compensation Fund), which ensures an employee receives your wages if you fail to issue payroll.
- 102 days of maternity leave on full pay, of which no less than 42 days are taken.
- 20 days of paternity leave on full pay.
Employment law considerations in Portugal
The minimum wage in Portugal is €822 per month.
The working week is inscribed in law, so expect resistance if you ask employees to work longer than 8 hours in a single day without a written agreement.
With over 80% of the Portuguese population being active and practising Roman Catholics, working on Sundays is considered a cultural no-no, albeit not outright illegal.
Cultural considerations when hiring employees in Portugal
If you wish to run a business in Portugal that relies upon the local labour force, ensure you understand some of the nuances you will encounter. These include:
- Family time is valued in Portugal. It will be greatly appreciated if you offer flexibility in employee working hours.
- Portuguese employers and employees alike dislike and avoid conflict. If personal problems impact somebody’s workplace performance, you will be expected to act with compassion, not rebuke them.
- You will likely find that your employees are reluctant to leave the office before you. In Portugal, presenteeism in the workplace is part of the culture – employees fear being considered lazy if they leave at their scheduled finishing time or before their manager.
- Portuguese employees will be perfectly civil with each other but unlikely to socialise outside work. As a nation, Portugal likes to keep work and personal lives separate, with a great emphasis placed on family and friends.
FAQs about setting up a business in Portugal
Still have questions or are seeking a swift answer to a basic query? Here are some of the most frequently asked questions about establishing a business in Portugal.
The NHR is a tax regime intended to bring top talent into Portugal from overseas. The NHR is open to foreign holders of an EU, EEA, or Swiss passport, or those with a golden visa, that have an address in Portugal and work within a high value industry. The biggest perk of the NHR is that all income tax will be capped at 20% for 10 years, regardless of your annual earnings.
To qualify for NHR in Portugal, your employment must revolve around “high value added activities.” The director of a business will automatically qualify for NHR. Other lines of work that will be accepted include STEM specialists, medical professionals (including dentists,) creative artists and performers, authors and journalists, installers and operators of machinery, qualified construction workers and craftspeople, higher education lecturers, ICT specialists, and agricultural workers.
Thanks to a refreshing lack of needless bureaucracy and red tape, you could have your business up and running in as little as two weeks in Portugal.
As you need to pay 23.75% of an employee’s salary into a social security fund and potentially an additional 11% in insurance payments, you should budget for at least 1.3 times an employee’s salary when weighing up annual costs.
If you plan to open an LDA in Portugal, you’ll need a minimum share capital of €5,000 (£4,400.) This rises tenfold to £50,000 (£44,000) if you wish to form an SA.
Yes, you’ll need a local business account if you plan to trade in Portugal.
A typical working week in Portugal is 40 hours, split over five 8-hour working days.
Private healthcare is the most eye-catching supplementary benefit you can offer an employee in Portugal. The public healthcare service in Portugal does not have the best reputation, so many people prefer a private policy for themselves and their families.
No, Portuguese employment law does not recognise “at will” termination. Unless you have a good reason to terminate a contract on the spot, you’ll need to give written notice and/or severance pay.
In addition to a Certificado de Registo, non-EU/EEA/Swiss nationals will need a visa to work in Portugal. The likeliest visas for entrepreneurs and business owners are a tech visa or work visa for self-employment – or, if you can afford the €250,000 investment required, a golden visa.
Employees in Portugal are entitled to a minimum of 22 holiday days each calendar year, which can be carried over to April 30th of the following year. Employees must take these holidays – exchanging them for payment bonuses is verboten by law.
Yes, provided your overseas business is in good standing, and you can provide all necessary documentation. It is not necessarily faster to set up a branch than a business, so you may be better served operating a subsidiary company.
To run a payroll in Portugal, you can manage this yourself from your Portuguese business, arrange payments for employees of a Portuguese branch from your UK head office, or team up with a Portuguese payroll and HR business that manages this process.