Portugal has firmly established itself as a vibrant hub for entrepreneurs, innovators, and global talent. The country offers a unique blend of high quality of life, a burgeoning tech scene, and strategic access to European markets. Building on its reputation, the government has introduced a new tax incentive designed to attract foreign investment and talent: the IFICI (Incentive for Foreign Investment and Company Incorporation), also known as NHR 2.0.
This guide is for entrepreneurs and start-up founders worldwide who are considering relocating to Portugal. We will explore how you can leverage the IFICI by establishing a company and obtaining a start-up certificate. We’ll break down the benefits, the application process, and key considerations to help you make an informed decision.
Understanding the IFICI: a new era for tax incentives
The IFICI replaces the well-known Non-Habitual Resident (NHR) regime, offering a fresh approach to attracting skilled professionals and investment. The programme provides significant tax benefits for individuals who become tax residents in Portugal and work for qualifying entities.
At its core, the IFICI offers a special 20% flat tax rate on employed or self-employed income generated in Portugal – for specific professions. This is a substantial reduction from Portugal’s standard progressive income tax rates, which can go up to 48%. The goal is to stimulate high-value sectors, including technology, research, and innovation, by making it financially attractive for key talent to move to the country.
The IFICI is specifically aimed at individuals who have not been tax residents in Portugal in the preceding five years and who derive their income from specific activities or entities. One of the most promising pathways into this regime is through founding or working for a certified start-up.
The start-up pathway to IFICI benefits
For ambitious entrepreneurs, the IFICI offers a direct and powerful incentive. By setting up a company in Portugal and having it certified as a “start-up”, you can qualify for the beneficial tax regime. This route is designed to foster innovation and attract businesses with high growth potential.
What is a certified start-up in Portugal?
A certified start-up is a company that meets specific criteria defined by the Portuguese government and is recognised by Startup Portugal. Generally, these criteria include:
- Being less than 10 years old
- Having fewer than 250 employees
- Having an annual turnover not exceeding €50 million
- Not being formed through the merger or division of a large company
- Having a business model focused on innovation, technology, or a scalable product/service
Obtaining this certification is a crucial first step. It validates your business as a contributor to Portugal’s innovation ecosystem and unlocks the door to the IFICI tax benefits for its employees and directors.
How to apply for IFICI with a start-up
Navigating the application process requires careful planning and attention to detail. Here is a breakdown of the typical steps needed to follow to benefit from the IFICI through setup of a start-up company in Portugal
Step 1: establish tax residency in Portugal
Before you can apply for the IFICI, you must first become a tax resident in Portugal. This is typically achieved by spending more than 183 days in the country within a 12-month period or by having your primary home in Portugal. You will need to obtain a Portuguese tax identification number (NIF) and register as a resident with the local tax office (Finanças).
Step 2: incorporate your company in Portugal
The next step is to legally establish your business. The process of company incorporation in Portugal is relatively straightforward. You will need to:
- Choose a business structure: the most common form is a private limited company.
- Select a company name: you must get pre-approval for your company name and object.
- Appoint director(s): as the founder, you will likely be the director.
- Draft and sign the articles of association: this is done before a notary.
- Register the company: the final registration is completed at the Commercial Registry Office.
- Open a corporate bank account: this is required for officially starting the company’s activity in Portugal.
Working with RHJ Law as your legal partner can make this process much smoother.
Step 3: obtain your start-up certificate
Once your company is incorporated, you can apply for the official start-up certification through the StartUP Portugal platform. You will need to submit a comprehensive application, including your business plan, financial projections, and details about your innovative product or service. The platform will assess your company’s eligibility based on the criteria mentioned earlier.
Step 4: register for the IFICI regime
With your tax residency established and your certified start-up up and running, the final step is to apply for the IFICI status. This application must be submitted to the Portuguese tax authorities by 15 January of the year following your registration as a tax resident.
For example, if you become a tax resident in 2025, you must apply for the IFICI by March 31, 2026. Once approved, your status is valid for 10 consecutive years, provided you continue to meet the eligibility criteria.
Key considerations for entrepreneurs
While the IFICI programme is highly attractive, there are several important factors to consider before you begin the process.
- Business viability: your primary focus should be on building a sustainable and innovative business. The start-up certification process requires a solid business plan and a clear value proposition. The tax benefit is a result of a successful venture, not the reason for it.
- Compliance and administration: running a company in Portugal involves ongoing administrative and legal obligations. This includes corporate tax filings, social security contributions for employees, and annual reporting. It is essential to have professional support to ensure full compliance.
- Scope of the tax benefit: the 20% flat rate applies to professional income earned in Portugal. Other types of income, such as capital gains or investment income, may be taxed under different rules. Understanding the full scope of your tax liabilities is crucial for effective financial planning.
- Long-term commitment: the IFICI is a 10-year programme. It is designed for individuals who are serious about relocating and contributing to the Portuguese economy over the long term.
How RHJ Accountants can help you succeed
The journey to establishing a business in a new country and navigating its tax incentives can be complex. At RHJ Accountants, we specialise in helping international entrepreneurs and start-ups thrive in Portugal. Our team provides expert guidance at every stage of the process; we can assist you with:
- Company incorporation: we handle all the legal and administrative steps to get your business set up correctly.
- Tax residency: we guide you through the process of becoming a tax resident and obtaining your necessary NIF number.
- IFICI application: our experts will ensure your application is prepared accurately and submitted on time, maximising your chances of approval.
- Ongoing accounting and compliance: we provide comprehensive accounting, payroll, and tax services to keep your business compliant with Portuguese law, allowing you to focus on growth.
Don’t let administrative hurdles slow down your entrepreneurial dream, contact us to discuss how we can help you benefit from the IFICI programme.
Frequently asked questions
What is the difference between the old NHR and the new IFICI?
The IFICI is more targeted than the previous NHR regime. It focuses specifically on attracting high-value professionals, academics, and individuals involved in certified start-ups and specific investment projects, whereas the old NHR had a broader list of eligible professions.
Can I apply for the IFICI if I am already a resident in Portugal?
No, the IFICI is for new tax residents. You cannot have been a tax resident in Portugal in the five years prior to your application.
What happens after the 10-year IFICI period ends?
After 10 years, you will no longer be eligible for the special 20% tax rate. Your income will then be taxed according to the standard progressive tax rates applicable to all Portuguese residents. However, you could look into other tax planning alternatives with our team.
Do I need to speak Portuguese to start a business in Portugal?
While it is not a legal requirement, having a basic understanding of Portuguese is highly beneficial for daily life and business dealings. However, major cities like Lisbon and Porto have large international communities, and English is widely spoken in business circles.
What are the main taxes businesses pay in Portugal?
Companies in Portugal are subject to Corporate Income Tax (IRC), with a standard rate of 20% on the mainland. They are also responsible for Value Added Tax (VAT) and social security contributions for their employees.
Is Portugal a good place to launch a tech start-up?
Absolutely. Portugal, particularly Lisbon, has become one of Europe’s leading tech hubs. It boasts a supportive ecosystem, a deep talent pool, numerous incubators and accelerators, and major international tech events like the Web Summit.
