Starting A Business in Portugal: Everything You Should Know

Opening your own company in Portugal can be relatively straightforward. If you're an EU citizen, you'll need to register for taxes and obtain a business registration certificate. Meanwhile, if you're a non-EU resident, you'll need to apply for a visa before you start a business. If you're considering starting a business in Portugal or working as a self-employed foreign resident, this article will guide you through the business opportunities available in Portugal and all of the steps required for opening a company in Portugal as well as the different types of registered companies you can form.

 

Why choose Portugal for business?

According to the 2021 Census, almost 1.3 million companies have a base in Portugal. Portugal is a fantastic place to start a business, particularly because of the following factors:

• It has a high-quality public schooling system meaning you can hire a well-educated team to help run your business.
• The Portuguese government has a variety of incentives to boost businesses, such as tax breaks.
• Portugal is very safe, ranking seventh in the 2023 Global Peace Index, with a low rate of crime and a stable political environment.
• Portugal has a booming tourism industry, supported by substantial venture capital.
• Portugal is a European Union member, granting Portuguese companies convenient access to the Schengen Area and the European market.

 

How do I open a company in Portugal?

Before opening a company in Portugal, consider the following:

• Do I have a strong business plan? 

The first step should take is to conduct thorough market research, which entails researching your competitors and the Portuguese market to produce a strong business plan. Even if you have previous experience of successfully founding a company abroad, even in other European countries, knowledge of the Portuguese market will be critical to your success.

• Determine local industry associations and networks you can connect with

Local and regional chambers of commerce offering networking events and resources targeted to your industry could be especially useful to work with. Portugal also has a thriving startup ecosystem, which you can tap into by joining startup hubs and incubators.

• Do I have the required documents?

Before founding a new company, you'll need essential documents such as a Portuguese taxpayer identification number (NIF), a Portuguese residence permit or CRUE (Certificado do Registo de Cidadão da UE), and a social security number (NISS).

• Consider the legal framework that best describes your project.

Consider the type of corporation you are creating and what legal entity your proposed business fits into. The four most popular business types are sole proprietorship
(Empresário em Nome Individual) partnerships, small and self-employed corporations, and S corporations.

• Decide on the company name and its location

These details are necessary for the official registration of your company.

• What process of starting a business do you want to follow?

There are different methods to start a business in Portugal. We'll outline three in the section below.

 

Different Methods for Starting A Business

​​Online business formation (empresa online)

This model involves the creation of an online business. This process can be completed within a few days in Portugal at a typical cost of about €360.

This method may be ideal for entrepreneurs with digital or remote business models, such as e-commerce or digital consulting. It provides the convenience of initiating the business from anywhere, as long as there is internet connectivity.

Instant business setup (empresa na hora)

This method necessitates the immediate establishment of a business, requiring you to have all the necessary paperwork ready for submission. If desired, you can enlist the services of a legal representative to assist with the document submission process. This model is often suited to well-prepared entrepreneurs looking to begin their business operations swiftly.

Traditional business creation (criação de uma empresa)

This method, often known as the traditional way, involves several steps. Firstly, you must apply for a company card and obtain a Certificate of Admissibility.

Next, you must open a business bank account and deposit the initial capital. This is followed by declaring your business activity at the local tax office.

Then, you'll need to register your Portuguese business at a Commercial Registry Office (Registo Comercial) and register as an employer at your local Social Security office.

Once these steps have been completed — a process that usually takes at most 15 days — you can commence your business operations in Portugal. It's important to bear in mind that starting a business in Portugal without official residency status is prohibited. Meanwhile, some industries may have additional requirements, such as needing specific licenses or qualifications. For instance, businesses related to healthcare or financial services may require special permits or certifications.

When launching a business in Portugal, the process can be simplified by hiring qualified service providers. These professionals can provide comprehensive support and advice, helping you navigate through the complex business setup processes and potential pitfalls, ensuring a smooth start and financial support to your business endeavor.

Starting up a non-profit company in Portugal

In Portugal, there are two types of non-profits: association and cooperative. An association (associação) is linked to a social activity, while a cooperative (cooperativa) can have a commercial purpose. You can register for either at a local notary office.

Business Structures in Portugal

Portugal offers a spectrum of regulatory frameworks and legal structures for diverse businesses, ranging from self-employed individuals to large-scale companies. The Portuguese Companies Code defines and governs the various legal business and the types of legal form used. Here's a detailed look:

Businesses owned by an individual

If you plan on operating independently, you have a few options:

• Sole Trader: A business owned and managed by one person, providing the simplest setup but leaving the owner personally liable for business debts.
• Single-Member Limited Liability Company: This allows one person to own the company but with the advantage of limiting personal liability.
• Individual Limited Liability Establishment: This legal structure protects your assets by separating personal and business assets, limiting the potential risks associated with business debts.

Businesses owned by multiple individuals

If you intend to collaborate with partners, there are several possibilities:

• Limited Company (Sociedade por Quotas): This entity requires at least two partners and a minimum capital investment of €5,000. Shareholders' liability is limited to their respective shares, as described in the Articles of Association, and they must pay a minimum of €100 per share. They are responsible for any debts that surpass the value of the company's assets.
• Public Limited Company (Sociedade Anomina, SA): This business model mandates a minimum of five partners, each owning company stock, and €50,000 in starting capital. Shareholders' liability is confined to the value of their shares, with their exposure limited to the company's assets.
• Partnership (Sociedade em Nome Colectivo): This Portuguese company requires at least two partners. All partners can leverage their assets to settle company debts, meaning their liability is unlimited.
• Limited Liability Partnership (Sociedade em Comandita): This limited partnership structure involves at least two partners: general partners who manage the company and bear the unlimited liability and investing partners who provide capital but have liability limited to the amount they invested. With unlimited liability, general partners are personally responsible for the debts and liabilities of the business.
• Cooperative (Cooperativa): These organizations are not-for-profits based on member cooperation and mutual assistance principles. Cooperatives are independent legal entities with variable capital and membership. Portuguese cooperatives are regulated by the Antonio Sergio Cooperative Sector Institute (CASES). These organizations may be suited to industries such as agriculture, retail, or services where members can work together to achieve common goals.

 

Freelancers in Portugal

The same rules apply to sole traders apply to freelancers in Portugal.

As long as you have the following documents, you can operate as a freelancer in Portugal.

• A residence and work permit
• A tax identification number (NIF)
• A social security number (NISS)
• A Portuguese bank account

Becoming a freelancer in Portugal is usually for people providing trade or service rather than conducting business from a permanent premise (for example, a hairdresser).

You are responsible for deducting income taxes and paying social security contributions using your social security number.

Residence and work permit

A legal residence permit and a work permit are prerequisites for freelancing in Portugal. EU, EEA, and Swiss citizens are exempt from visa requirements for living and working in Portugal. For non-EU citizens, acquiring a visa may be necessary.

If you're a non-resident, consider obtaining a visa that grants legal residence and work permissions in Portugal. If you're freelancing for a company outside Portugal, Portugal's Digital Nomad Visa would be ideal. This visa supports remote work for extended periods and comes with a residence permit.

For entrepreneurs, the D2 Visa provides the flexibility to work remotely as a freelancer while setting up a business in Portugal. Finally, the Portugal Golden Visa program is a residency-by-investment program, which, in return for investing in Portugal's real estate market or cultural sector, provides residency and work permissions.

To apply for these visas, contact your local Portuguese Embassy, Portuguese Consulate, or the Portuguese Immigration and Border Services (SEF) if you're already in Portugal.

Portuguese tax identification number (NIF)

The NIF, or Número de Identificação Fiscal, is a nine-digit number necessary for any financial activity in Portugal. To kickstart your freelancing career, you'll need a NIF to obtain a Social Security Number (NISS) and open a bank account. You can get a NIF by visiting a tax office (Finanças) with a valid ID and proof of residence.

We can also get a NIF for you online. Just fill out the application form.

Social security identification number (NISS)

The NISS (Número de Identificação da Segurança Social) is crucial for social security contributions based on your monthly income. You can apply for a NISS at a social security office, known as Centro Nacional de Pensões, or at a Loja do Cidadão. The NISS enables you to access social security benefits like healthcare, unemployment, and your pension.

Portuguese bank account

To register as a freelancer in Portugal, having a Portuguese account and IBAN to share with Finanças is vital. You will need a NIF, proof of address, proof of income or employment, and a deposit to open a bank account.

We can help you open up a Portuguese bank account. Simply apply online through our website to open a bank account with one of Portugal's leading banks from the comfort of your own home.

Register your business activity with Finanças

Once you've met the above prerequisites, you can register your business activity with Finanças, the Portuguese tax authority. During this process, you'll provide information about your services, estimated activity start date, and projected annual income.

Finanças will categorize your work through activity codes (código de atividade) and determine your personal income tax, potential value-added tax (VAT, known in Portugal as IVA - Imposto sobre o Valor Acrescentado), and the exact amount. There may be VAT exemptions or limits depending on your work category. For example, Category B self-employed workers don't pay VAT on incomes under €12,500.

You'll also choose between two accounting regimes: simplified (regime simplificado) and organized (contabilidade organizada). If you earn more than €200,000 annually, you must select the organized regime and hire an accountant.

Upon successful registration with Finanças, you'll be ready to start issuing official invoices (recibo verdes) through the website, signifying your official registration as a freelancer in Portugal.

 

Foreign Companies Registered in Portugal

Setting up a branch office or a subsidiary in Portugal for a foreign business involves a few crucial steps.

Firstly, the branch office's name must be registered with the Institute of Registrars and Notaries (IRN). Secondly, the branch needs to be established with the Commercial Registry Office. To complete this process, the following documents are required:

• The parent company's incorporation documents
• Approval from the parent company's board of directors for launching the branch
• A power of attorney

For businesses that have been operational in at least two EU countries for a minimum of two years, the establishment of a European Company (Sociedade Europeia) is an available option. This facilitates business investments and expansion into other EU nations.

 

What is the Portuguese Trade Register?

Every business operating in Portugal must register with the Portuguese Trade Register regardless of its structural type.

This registration process includes the acceptance of the company's incorporation by a representative through a power of attorney. Additionally, the company's Articles of Association must be provided. The registration process can be conveniently completed online if all required documents are prepared.

How can a company register with the Portuguese Trade Register?

For in-person registration, businesses can approach the business registry offices licensed by the Institute of Registrars and Notaries (IRN), found nationwide. It is crucial to check the National Registry of Companies' database to confirm the accuracy of the company's name before proceeding. A validation certificate and a business ID card will be provided upon verification. The company's legal representative can facilitate this process.

Alternatively, all required tasks can be completed online via Empresa Online, ensuring a swift process if everything is in order.

 

Necessary Documents for Company Formation in Portugal

Upon preparing the Articles of Incorporation and submitting the registration form to the Commercial Register, you will receive:

• A Certificate of Association
• An enterprise card
• An access code for a permanent Certificate of Commercial Registration
• An electronic access code
• A social enterprise security number

 

Hiring Employees in Portugal

When hiring employees, there are a couple of recruitment (recrutamento) strategies that you can apply to make the process simpler. You can go through a recruitment company or approach the Profissional Employment and Vocational Training Institute (Instituto do Emprego e Formação), which can help you to recruit employees, and they offer incentives for hiring.

In Portugal, there are strict labor laws (leis laborais) that you must adhere to. For example, you can hire employees on either a permanent or a temporary basis for more than six months provided that they have valid employment contracts (contratos de trabalho). If a temporary contract is renewed multiple times, it will be considered permanent. On average, the workweek in Portugal is 40 hours, with an eight-hour workday including a mandatory break.

Portuguese law mandates employers not to pay their employees less than the minimum wage. This stands even for a probation period.

See: A Guide To Working in Portugal As An Expat.

 

Corporate Social Responsibility and Ethical Business Practices in Portugal

In Portugal, ethical practices and social responsibility aren't just good PR; they're becoming the norm. This trend is reflected by Portugal ranking 18th in the Global Sustainable Development Report in 2023. As the trend develops, consumers increasingly expect transparency, environmental awareness, and community engagement. While not legally mandated, aligning your business with these values can enhance reputation, attract talent, and contribute to long-term success.

Challenges such as varied industry commitment and transparency gaps exist, but Portugal's evolving CSR landscape presents a valuable opportunity to be part of a responsible business movement, building a more sustainable and equitable future.

 

Paying Taxes and Accounting when Starting a Business in Portugal

Understanding Portugal's accounting and tax regulations is crucial when starting a business. In Portugal's income tax system, business activities or self-employed income fall under category B, subject to accounts-based taxation or a "simplified regime." If you're employing people in your business, you'll be required to make social security contributions on your employees' behalf; the typical rate is 23.75 percent of an employee's gross salary.

Portugal enforces a progressive income tax and a 23 percent VAT on all commodities, excluding food, drink, and other essentials. All self-employed residents in Portugal are required to file annual tax returns; the tax year extends from 1 January to 31 December.

See: Taxes in Portugal for Foreigners: Navigating the Tax System

 

Company Lawyers for Startups

It's recommended to consult an English-speaking lawyer who is well-versed in Portuguese business laws before starting a business in Portugal. This can provide essential guidance in navigating the business creation process and assist in identifying potential tax benefits and tax breaks.

 

Government Agencies and Company Support

The following resources can provide information about starting a business in Portugal:

• Portuguese Ministry of the Economy
• Program of Support for Local Employment Initiatives
• Portugal Global - support for businesses and self-employed
• Portugal Ventures - help startups and entrepreneurs
• Information on Portuguese Business Centres - setting up your company on the spot and getting business advice

 

How can GetNIFPortugal help you?

If you have just moved to Portugal and want to start working or conducting business here, one of the first things you will need to sort out is getting a tax number or NIF.

You will need your tax number (NIF) to enter any legal activity or conduct business in Portugal. Working with GetNIFPortugal is the perfect way to get a NIF. Our process is simple, convenient, and hassle-free.

Contact us, and our experts will get your NIF or open a bank account in Portugal.

The following blog posts are packed with useful information if you're considering starting a business in Portugal:

• Navigating the Income Tax Rate in Portugal: A Complete Guide
• A Guide to Non-Habitual Tax Residency (NHR Portugal 2023)
• Portugal Permanent Residence Permits: Requirements and More
• Portugal Immigration Guide – Your Visa Options

 

Frequently Asked Questions about Starting a Business in Portugal

What is the difference between a private limited company and a public limited company?

In Portugal, a private limited company (known as "Sociedade por Quotas" or "Lda") and a public limited company (known as "Sociedade Anónima" or "SA") have significant differences, particularly in relation to the minimum capital, personal assets, business assets, and company structure.

An Lda is a business structure where the company's capital is divided into quotas. The minimum capital required to establish an Lda in Portugal is €1. The shareholders' liability is limited to the capital they have invested, meaning personal assets are generally protected if the business incurs liabilities it cannot pay. The management structure is generally simpler and less formal than that of a public limited company.

Meanwhile, a public limited company has its capital divided into shares, which can be publicly traded if the company decides to go public. The minimum authorized capital for an SA is €50,000. Shareholders' personal assets are also protected; their liability is limited to the value of the shares they own. This type of company has a more complex management and supervisory structure, often comprising a board of directors and a supervisory board.

Does the Portuguese government have any incentives for establishing a business in Portugal?

Yes, the Portuguese government offers a variety of financial benefits to stimulate corporate and entrepreneurial innovation. This includes tax benefits, grants, and other incentives depending on the nature of the business and its location. The Portugal Golden Visa program is an additional incentive, providing a route to residency and potential citizenship for substantial investors. This program has been particularly attractive to foreign investors and entrepreneurs.

How do I register my business with the Portuguese tax office?

Registering your business with the Portuguese tax office is an integral part of the process of starting a business in Portugal. You can complete most of the process of registering your company online through the 'Empresa Online' portal.

After establishing your company structure (be it a sole proprietorship, private limited company, or public limited company), you'll need to obtain a Portuguese tax number (NIF) and register your business with the tax authorities. You will also have to choose a favorable tax regime for your company, depending on its size and turnover.

Once you've completed these steps, your company will be officially registered, and you'll be ready to begin operating and pay taxes in Portugal. It's essential to ensure you keep up-to-date with your tax obligations to avoid unlimited liability and the potential seizure of business assets.

Can I start a business in Portugal as a foreigner?

Yes, foreigners are allowed to start a business in Portugal. The country welcomes foreign investment and provides opportunities for entrepreneurs worldwide to establish and operate businesses as long as they have a valid residence permit.

How much does it cost to form a company in Portugal?

The cost of forming a company in Portugal can vary depending on various factors such as the type and size of the company, legal fees, and administrative expenses. Generally, the cost ranges from a few hundred euros to a few thousand euros.

Can a US citizen open a business in Portugal?

Yes, a US citizen can open a business in Portugal. Portugal has favorable regulations for foreign entrepreneurs, and US citizens can establish and operate businesses in the country as long as they have a valid residence permit.

Is it easy to set up a company in Portugal?

Setting up a company in Portugal can be relatively straightforward, especially with the assistance of local legal and business professionals. The process generally involves registering the company with the Portuguese authorities, fulfilling legal requirements, and obtaining the necessary permits and licenses.

How much tax does a company pay in Portugal?