How to set up a business in Portugal in 5 simple steps (for Expats)

By October 25, 2020 November 2nd, 2020 Blog, expat business, UK, US
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Before we explain how to start a business in Portugal – let’s look at some of the reasons why we think Portugal is a great place to set up a business. 

There are many reasons, but we’ve picked the top 3.

3 Reasons why you should start a business in Portugal?

  •  Portugal’s start-up scene 

The Lisbon start-up ecosystem is booming and isn’t showing any signs of slowing down. Lisbon’s state of the art start-up hubs &  co-working spaces are occupied by world class tech talent from local facilities and abroad.  If you wanted to build your startup here you will get high end, cutting edge tech talent at a third of what it would cost in other major cities – London, Berlin & San Francisco. 

And now Porto, the city of bridges, is popping up out of the trenches and onto Europe’s startup map with an eclectic mix of hyper growth tech start-ups.

  • Fiscal Incentives

Another attraction for international entrepreneurs and developers looking to set up a business in Portugal is the government’s fiscal incentives.  The Non Habitual Residence Scheme encourages foreigners working in specific industries, tech being one of them, to set up shop here.  For the first 10 years, after obtaining NHR, individuals are tax exempt on income earned outside of Portugal and receive a flat 20% tax on any income inside of Portugal. 

  • Property prices 

Much cheaper than most major cities for residential and commercial properties. Lisbon’s thriving city centre office spaces cost around 228 euro per m2 per month.  Try comparing that to London or San Francisco!

It’s a no brainer.

Rentals & purchase prices of residential properties have risen dramatically the last 5 years, especially in the now ‘gentrified’ city centre and some exclusive suburbs.   But they are still cheaper than London and a fraction of the cost of New York or San Francisco. 

COVID-19 has pushed prices down slightly and anyone negotiating rental contracts should be paying 10-20% less now than at the start of the pandemic. 

The city of Porto has its own hub of eclectic entrepreneurs, nomads and vibrant art scene.

Now you know why you need to set up a business in Portugal. 

Let’s look at how to set up a business in Portugal. 

 

We will now outline in 5 simple steps how to set up a business in Portugal and get it up and running in no time at all!

How to set up a business in Portugal as an expat in 5 steps.

Step 1: Get Legal 

Understand the legal residency requirements.  

Before you set up a business in Portugal it’s essential you meet the legal requirements to trade in Portugal.

Tax & Social Security Number – Portugal 

Everyone, whether EU or Non-EU has to have a tax number (numero fiscal de contribuinte) even if the actual process of setting up the business has not yet begun.  

YOU MUST APPLY FOR THIS FIRST.

It’s almost impossible to get anything else done without this number.   So this should be your first point of call.   

Our legal team at RHJ can apply for this via proxy on your behalf.   

Due to COVID-19 restrictions individuals can only obtain the NIF via appointment and it is increasingly difficult to get an appointment via the telephone service.   

You will also need a social security number from the Portuguese social security office. 

We recommend doing this as soon as possible. 

Non-EU/EFTA National

You will need to apply for a Portuguese work visa and residence permit.  You can find more information on how to apply through the Portuguese Immigration Offices website. 

If you are coming to Portugal as a business owner in your home country and need to build out a European operation, you could qualify for the Golden Visa program.

EU/EFTA National 

As an EU/EFTA national you can travel and work freely in Portugal.  But, if you want to set up a business you will need a certificate of registration from your local city council office. 

Once you have your legal residency requirements in place you will need to choose a business name and register your company.

Step 2: Register your business

When choosing your business name you have 2 options:

  1. Choose from a list of pre-approved business names
  2. Register a new name with a denomination approval certificate

 

Tip: If you want to set up an internet business, many co-working spaces in Lisbon & Porto will allow you to use their address as your business address. 

Now you have your company name and address,  you need to register your business with the Portuguese government.

Step 3: Decide on the business legal structure 

You can structure your business as any of the following:

  • Sole proprietorship, wherein you will be personally responsible for business debts
  • Single shareholder limited liability company
  • Individual limited liability establishment

What are the types of companies in Portugal? 

If you choose to run the business with other individuals, the following options are available:

  • Partnership, where the partners are each personally responsible for business debts
  • Limited partnership
  • Limited company
  • Public limited company
  • A cooperative

If you have not done this already, now might be a good time to seek the advice of an accountant.   

An accountant can help you identify tax breaks that you are eligible for and a  lawyer, especially if you are not Portuguese, can help you with the bureaucratic process of registering the business. 

Preferably, a lawyer and accountant that can work together to help you decide on the most tax efficient  legal structure

Step 4: Setting up your business

How long does it take to set up your business in Portugal?

  1. Setting up online (Empresa Online)This allows certain types of Portuguese businesses to be set up and  registered online for around €360. You will receive your registration and your business will be set up in Portugal in  1-2 business days. You can do this on the Portal de Empresa website here.

How much does it cost to set up business / business set up costs? 

  1. Establish on-the-spot (Empresa de Hora) – This allows sole traders and limited companies to be created in an hour.  This will cost the same as setting up online:   €360.   All partners (where applicable) should be present with all necessary documentation and any legal representatives.   Details of how to set up using Empresa de Hora can be found here.

Note:   There is also a symbolic initial capital requirement of €10 for limited companies (called a “Limitada” or “LDA”). 

  1. Empresa Online or Empresa de Hora, you can set up using the traditional method (Criacao da Empresa) by following the steps below:
  1. Obtain a Certificate of Admissibility to formally identify your Portuguese company name. As outlined in no. 2 above.
  2. Apply for a Company Card and a Collective Card (the main business ID) from the IRN
  3. Open a business bank account and deposit the initial capital
  4. Tell the local tax office you have commenced activity.
  5. Register your Portuguese business at a Commercial Registry Office
  6. Register as an employer at the local Social Security office

Registering your Foreign Company in Portugal 

If you have a company in your home country and want to expand to open a branch or subsidiary in Portugal you will need to register the  branch with the IRN and the Commercial Registry Office

If you own a business that has been operating in at least two EU countries for the last two years you can create a European Company. This allows you to easily expand into Portugal as well as other EU countries. 

 

Step 5: Pay Your Taxes

When you start a business in Portugal, it is now a requirement that all invoices are produced by an authorised accounting software product that is linked digitally to the tax authority. 

The two most start-up-friendly products are Sage One and Toc- online (this one is preferred by the Portuguese tax authority)  – we would advise you to use one of these.

Using this software saves you time and money, providing constant visibility on your business so you can instantly analyse your company’s financial performance. 

How much tax do you pay to start/ run a business in Portugal?

The Portuguese tax year runs from the 1st January until 31st December. Seek the advice of your accountant and lawyers if you have applied for NHR or any other tax incentives for an accurate assessment of your tax liabilities. 

Once a company  becomes profitable corporation tax will be charged at  21%, one of the lowest in Europe. If you have a very large company,  your profit will be taxed progressively up to slightly above 30%. 

The importance of a good  English speaking accountant with cross border taxation experience and an English speaking lawyer knowledgeable in Portuguese business law for start up entrepreneurs cannot be underestimated.  

 RHJ accountants services include accounting, legal, tax advice and wealth management.   

It’s Time to Set up Your Business in Portugal 

If you follow these steps you can have your company open for business in 15 days.  Then you can focus on building your business for success.  

Just don’t forget to enjoy the sun and explore all this beautiful  country has to offer

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