A vibrant, enticing country; Portugal is fast becoming an attractive location for individuals looking for a new life in the sun.
Many individuals move from their home country for the Mediterranean lifestyle; while others simply move around the country looking for a fresh start.
However, it isn’t all about leisure – many are now moving to start a company. Here is what you need to know if you’re thinking about setting up a business in Portugal.
The growing economy and security of Portugal as an EU member state are attracting larger international companies, investments and individuals. These are just small reasons about why Portugal is becoming the place to be for entrepreneurs and startup founders.
Getting the right work/life balance
Portugal currently ranks as one of the top five safest countries in the world; with a very high rank in the Human Development Index which measures levels of human development, happiness and standard of living.
Individuals moving to Portugal, will be pleased to find out rent and property prices are very low compared to other countries. It is more affordable to rent or buy in the capital of Portugal (Lisbon), than it is in London.
Putting together the safe environment, levels of happiness and standard of living; why wouldn’t individuals want to live there, let alone open a new business? Another added bonus – the Portuguese are a friendly people, who don’t just speak their native language; many have language skills for speaking clear English, Spanish and French.
Is Portugal a good place to set up a business?
So, now we’re clear Portugal is a great place to live – you ask, is it a good place to set up a new business? Well, yes.
With so many individuals now moving to the sunny shores of Portugal, there is an actively developing startup scene. The capital in particular is attracting specialists in IT, technology, digital data management and so much more. Luckily then, the Portuguese Government views small businesses as the backbone of the economy – great news following almost 2-years of a global pandemic which has seen the worldwide economy take a dive.
If you’re not looking to move to Portugal, there is the opportunity to branch out and form an extension of your mother company; or alternatively, open a virtual office.
Don’t forget – as Portugal is an EU member state, financial security and stability is a definite. There is also the opportunity to establish businesses in other EU states. But for now, let’s stick to Portugal.
Forming a company
There are two main business structures in Portugal which you must consider: LDA and SA.
An LDA is the equivalent of a Limited Company in the UK – LDA stands for Limited Liability Company, or Limitada. With an LDA, there must be at least one shareholder with a capital of at least 1€ (minimum amount of a share) – but for a viable business, you will need a much bigger figure in the bank! There are other options which require a minimum of two partners; while it still has the same rights as an LDA, the profits would be distributed to the partners and the corresponding dividend tax paid.
If you’re a business owner or startup with more capital however, you can start an SA – or Sociedade Anónima. If the minimum share capital is 50,000€ and the minimum number of shareholders is five; then this is the standard format you must follow.
When you have your business plan and name in place, you need to know the requirements for opening the business in Portugal. Take a look at a brief overview:
- All shareholders must provide utility bills (no more than 3-months old) and copies of passports
- The business name must be checked against the National Registry of Collective Entities (otherwise known as the Registo Nacional de Pessoas Colectivas, RNPC)
- If approved, a Certificate of Admissibility will be issued to formally recognize the name and you must apply for a company card and a collective card (the primary business ID) from the Institute of Registries and Notaries
- A notary needs to be appointed in Portugal, to assist with the signing of all company forms. You must also find a registered business address and register the business at the Commercial Registry Office and the Social Security and Tax Office
- A bank account must be opened and signed for within 15-days of the company formation or you risk a fine of over 150€ (which increases to approximately 600€ after a further 14-days)
- The appropriate Portuguese tax correspondence must be checked, so you will need an electronic post box which can be issued via the Portuguese Post Service
One of the most important factors to consider is that an accountant must be appointed prior to incorporating your business, as it is a requirement in Portugal. An experienced accountant, such as the team of experts at RHJ Accountants, are able to take the stress away from opening your new business. For example, we can talk you through everything you need to know, arrange your VAT registration and keep your bookkeeping and records in check ahead of filing your tax return.
Are there any tax advantages in Portugal?
There are many incentives which are proving to be popular with business owners and entrepreneurs from overseas and those already residing in the country.
For anyone paying a higher tax rate in their country of residence, there is the opportunity to take advantage of the 5% corporate tax rate in Portugal; and the Non-habitual Residency which offers a flat tax rate of 20% on certain types of earnings applied.
Plus the opportunity to be tax exempt form dividends, in the UK following the disregarded income rules non-UK tax residents are taxed at 0% and tax exempt in Portugal.
Some of the incentives include:
- Seed programmes to help with investment
- Capital gains from the sale of shares in other enterprises
- Tax schemes for occasional residents
- Tax scheme for ex-residents
At RHJ Accountants, we recognise more than ever that individuals and businesses from the UK may be globally mobile. We aim to make you aware of the tax-efficient opportunities, available tax relief and structure finances for life at home and abroad.
We have seen a massive increase in enquiries from UK companies looking to save on their corporate tax and reduce their Brexit export headaches. Reviewing an organisation’s operational strategy, we can assist in shifting operations to Portugal in a tax compliant and stress free way.
Our international team of specialists operate from offices in the UK and Portugal. We work together synergistically to provide tax efficient solutions to our clients to help them grow their business whilst keeping tax liabilities to a minimum.