If you’re looking to set up a business abroad, Portugal is an excellent option with plenty of advantages over other jurisdictions. Here are just some of the reasons why Portugal can be an excellent choice as the home base for your international business.
The top reasons why Portugal makes a great base for your business
To start with, let’s not forget that as a member of the European Union (EU), and one of its founding countries, Portugal has access to a common market consisting of over 500 million people.
Many countries in Europe are only separated by 1 or 2 hours by air from Lisbon. Doing business in Portugal is pretty cost-effective; salaries and property prices are significantly lower than in many other places around Europe. On top of that, Portuguese legislation encourages startups and entrepreneurship, so you’ll have access to government incentives such as research & development tax credits and income tax breaks.
You can easily open an account at any bank in Lisbon or Porto, where most major international banks have offices. If you want to invest, several investment funds and banks provide options to do so. This is particularly useful if you need access to funding while waiting on your business to take off; and not yet able to generate cash flow from sales.
In addition, both Lisbon and Porto offer easy public transportation systems, great local restaurants and bars, as well as plenty of activities for locals and tourists alike. The friendliness of Portuguese people will welcome you with open arms!
Key factors to consider when setting up your company in Portugal
A well-developed tax system can be an important factor when choosing a jurisdiction. The country’s VAT, corporate tax and personal income tax systems are generally regarded as having high levels of compliance.
Many types of business registration fees include not only filing and recording charges but also annual license renewal fees; which are fixed amounts paid to government agencies on an annual basis.
Filing requirements and administrative procedures should be carefully reviewed to minimise costs when incorporating a business or setting up operations there. For example, it is possible to open accounts in banks remotely without ever stepping foot in Portugal; something that isn’t always possible elsewhere in Europe!
Working with an accountant can help you manage your tax situation, saving you time and money. In fact, many accountants who are familiar with international business structures are able to help companies set up in Portugal; as well as perform regular bookkeeping and accounting services on an ongoing basis.
Finding an accountant that understands both of these areas is key to giving your company’s finances proper oversight. Doing so will increase transparency and enable easier decision-making – something essential in managing any new or existing business.
Will I need a Portuguese bank account?
You will need to open a bank account in Portugal for your business’ operating expenses (i.e., paying your employees, suppliers and contractors).
It is essential to open an account and RHJ Accountants can help you to do this. One of the first steps is to register a Portuguese tax number – otherwise known as a NIF. You’ll also need one of these numbers if you are going to employ people in Portugal.
Once you have all of these documents, you can open your bank account and you’ll be able to operate your business remotely after that and pay for expenses as needed. If you prefer, however, it is possible to open an office in Portugal or rent a room and use it to conduct business activities. This is entirely up to you and what is best suited to your needs.
What are the main taxes in Portugal?
Portugal has a very low tax rate compared to other European countries. There are two main taxes in Portugal: social security and VAT (sales tax). Social security taxes include employer’s contributions, employee’s contributions and their dependents.
Employer’s social security rates vary from 14% to 28%. Employee’s social security varies from 4% to 12%. And employers’ and employees’ pays additional 0.5% income tax per year, up to a maximum of 2%, depending on each household’s situation.
Although business taxes in Portugal are very low compared to other European countries, Portuguese business owners do have to pay additional local taxes like IMT and IMI. Although there is no capital gains tax or inheritance tax, certain estates can be subject to gift taxes.
When it comes to setting up your business in Portugal, there are several things you should keep in mind. First of all, make sure that you choose reliable partners who can assist you with meeting all of your needs in running your business remotely. Besides picking a qualified accountant, such as RHJ Accountants, also consider hiring an attorney or agent as well if necessary.
Common expenses you will have as an entrepreneur in Portugal
There are some common expenses that are relevant to any international business. These include registration, legal advice and banking. As an entrepreneur in Portugal you will have to pay 2 types of taxes: corporate tax and personal income tax on behalf of yourself or as a director. The corporate tax is 21% and can be 5% while personal tax will vary from 14.5% to 48%. A non-resident can reduce these charges by investing into special purpose vehicles.
An entrepreneur in Portugal is likely to face various expenses. As mentioned before, you will have to pay both corporate and personal income tax. However, there are other expenses that are worth mentioning as well. Tax advisors’ fees, accountants’ fees and legal advice in general may vary from country to country; but these charges can be reduced or eliminated altogether through smart planning.
You may also have some travel costs which will depend on your locations of residence, partners and clients in different parts of the world. Plus you will have some general administration costs; including bank charges or hiring professional services.
RHJ Accountants are able to provide you with the resources to carefully monitor your business expenses. Talk to us about this!
Entrepreneur visa requirements in Portugal
Setting up an international business can be complicated and difficult, especially if you’re an expat entrepreneur. Some countries require that expats have to reside in their country in order to do business there. Luckily, Portugal is not one of them.
However, when you establish your Portuguese company with local partners, it’s recommended that one of you live in Portugal for six months to get started. Many business owners take advantage of those six months by visiting multiple times; before they actually move their company headquarters.
Once you do relocate to Portugal and meet certain conditions, you’ll qualify for Portuguese citizenship after five years. This is great news for your business, since it will provide additional stability and future options. As an EU citizen, you’ll be able to travel throughout Europe without border restrictions and take advantage of free trade agreements between member countries.
Expats living in Spain can also apply for citizenship there after just two years of residency; or Italy’s three-year rule applies to entrepreneurs as well. However, becoming a Spanish or Italian citizen means paying back taxes on your worldwide income (since 2014); which could add up over time – another reason that we love our Portuguese passports!
The main licenses needed by your business and how you get them
There are two types of licenses you will need: licences that relate to your business activity and trade licences. In order to provide services or products within Portugal, you will need an active trade licence from Instituto dos Mercados Públicos e Privados (IMP) in order to operate your business.
If you intend to employ workers, even if they’re on a freelance basis, then you will also require employee registration with Segurança Social. Registration at IMP is normally done through their website and is free of charge after filling out their application form. However, it can take up to 3 months to get approved by IMP.
How long does it take to open a company in Portugal?
The time to set up a company in Portugal is from 15 days to 30 days. You need to choose 1 director who will serve as your representative in business affairs. If you are opening an online shop then you may not require a physical address; but still you need at least one Director.
You can hire a virtual assistant from any country and they can serve as your representative (in most cases). You also need a business plan, and accountant and in some cases a solicitor. RHJ Accountants & Associates can aid you with all of this.
How RHJ Accountants Can Help
We recognise more than ever that individuals and businesses from the UK and other countries 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.
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.