How to Start a Business in Portugal
Starting a business in Portugal requires accounting for the country’s unique rules, laws, and business climate. In this post, I aim to demystify the process, by laying out the essential steps and considerations needed to launch and sustain a successful business in Portugal.
There are various key steps to follow when starting a business in Portugal, such as researching the country online—which is what you’re doing now—but you’ll certainly need to go beyond that to understand its local laws, choose a business structure, register with the relevant Portuguese government authorities, and comply with its tax and business licensing laws.
Like most countries, Portugal has its own investment rules, business structures, and incentives for foreign investors, which a Portugal attorney can help you explore.
To help you better understand what is involved in starting a business in Portugal, I’ve answered three of the most frequently asked questions I receive from Americans looking to set up and operate a business in Portugal.Let’s explore these questions.
1. What types of Portugal visas are available to me?
American entrepreneurs intending to start a business in Portugal can choose from several visa options, including the D2 Entrepreneur Visa, the Golden Visa Program, the D7 Passive Income Visa, and the Startup Visa. Each visa type has specific requirements and processing timelines, so it is crucial you select the visa that best aligns with your business plans and investment goals.
2. What is the legal framework for opening a company in Portugal?
In addition to the visa requirements, foreign entrepreneurs must understand the legal framework for starting a business in Portugal. This includes selecting a suitable business structure, registering the business, opening a business bank account, meeting capital requirements, and registering for taxes. It is also vital to obtain necessary licenses and permits, comply with labor laws, and provide competitive employee benefits to attract top talent.
Beyond visa requirements, foreign entrepreneurs must grasp the comprehensive legal framework for establishing a business in Portugal. This framework encompasses choosing an appropriate business structure, registering the business, opening a business bank account, satisfying Portugal’s capital requirements, and registering for taxes. Additionally, it is crucial to secure the necessary licenses and permits, adhere to Portugal’s labor laws, and offer competitive employee benefits to attract and retain top talent. Below, I briefly explore each of these essential steps.
Portugal Business structures
A crucial step in establishing your business in Portugal is choosing the right business structure. Options include sole proprietorships, private limited companies, public limited companies, and branch offices. Each structure carries different levels of liability and regulatory obligations. The most common form of business entity is the limited liability company, commonly referred to by its Portuguese acronym, LDA.
By the way (and this is also an FAQ), LDA stands for “Limitada” in Portuguese, which is an abbreviation for “Sociedade por Quotas de Responsabilidade Limitada.” This translates to “limited liability company” in English, indicating that the owners’ liability is limited to their shares in the company’s capital.
Portugal Company Registration and licensing
To officially establish your company in Portugal, you must follow several key steps. First, secure a Certificate of Company Name Reservation to ensure your chosen business name is not already in use. Next, obtain a Portuguese Tax Identification Number (NIF), crucial for all your tax-related activities and financial transactions in Portugal. Finally, complete the registration process with the Commercial Registry and Social Security. This final step not only legitimizes your business operations within the country but also enables you to legally hire employees.
Opening a business bank account in Portugal
Opening a business bank account in Portugal is essential for managing your company’s finances and meeting its tax obligations. Portugal has specific capital requirements for limited and public companies, with the minimum share capital ranging from €1 to €50,000.
Portuguese IP, tax, and labor laws
IP laws in Portugal protect patents, trademarks, copyrights, and designs, and Portugal’s tax system supports new businesses with incentives like reduced corporate tax rates.
Intellectual Property Protection: Portugal’s IP laws safeguard patents, trademarks, copyrights, and designs, providing a robust framework to protect your innovations.
Tax Incentives and Systems: Portugal’s tax regime supports new businesses with incentives like reduced corporate tax rates. Although the Non-Habitual Resident (NHR) regime ended in January 2024, it has been replaced by the Incentivized Tax Status Program (ITS).
This new regime offers a flat tax rate of 20% on eligible professional income for ten years, excluding pensions. To qualify for the ITS program, individuals must establish tax residency in Portugal, not have been Portugal tax residents for the past five years, and earn income in specific professional categories, including education, science, or certain industries
Business Registration and Compliance: All companies are required to register for taxation, secure a Value-Added Tax (VAT) number if applicable, and register for corporate income tax and social security contributions. Depending on the industry in which your business operates, you may also need to obtain specific licenses and permits related to health and safety or environmental regulations.
Employment Laws: It is essential that your company use comprehensive employment contracts, register its employees with Social Security, and adhere to Portuguese regulations on working hours and minimum wages.
3. How long does it take to open a company in Portugal?
Registering a company in Portugal typically takes 1 to 2 weeks, depending on the business structure and whether all required documentation is in order.
However, obtaining all the necessary documents for registration can take up to a few months.
If your business requires special permits from local municipalities or other relevant authorities, your timeline for opening your Portuguese business could extend by several days to a few weeks, depending on the specific licenses and permits required.
A final note
Understanding Portuguese business culture, selecting the right location, maintaining proper accounting records, and networking with local organizations also can help ensure your company’s success.
Portugal has a vibrant expat community, so don’t let something like nationality or being unable to speak Portuguese–though certainly an advantage–discourage you.
In summary, with a well-thought-out plan, professional assistance, and a local network of supportive individuals, you can navigate the legal complexities and make informed decisions to successfully establish and grow your business in Portugal.
Do you have an idea for a business startup in Portugal? Get in touch—I’d love to hear from you.
