Setting Up a Business in Portugal: Basic Steps

Starting a business in another country requires attention to detail and preparation. Because of Portugal's strategic location and access to European markets, it is increasingly attractive to entrepreneurs in 2024.

In this article we will cover the key stages of setting up a business, such as choosing a legal form, registering a company and obtaining licenses. We will also discuss taxation, insurance, and trademark registration.

Forms of activity: individual entrepreneur and types of legal entities

The first step is choosing the form of business. You can work as an individual entrepreneur or register a legal entity.

Individual Entrepreneurs

This is an easy and popular way to start a business. Registration through the tax service does not require an authorized capital. However, the entrepreneur is personally responsible for the debts of the business.

Types of legal entities

Limited Liability Company (Lda.)

This is the most common choice for small and medium-sized businesses. Authorized capital starts from 1 euro. The liability of the participants is limited to their investments.

Joint Stock Company (S.A.)

Suitable for large companies. The minimum authorized capital is 50,000 euros. The liability of the participants is also limited, but a more complex governance structure with a statutory auditor is required.

Sole Proprietorship LLC (Unipessoal Lda.)

This is a single-owner LLC form. The minimum authorized capital is 1 euro; the liability is limited, but one person makes all the decisions.

How do I register a business in Portugal?

The following documents are required to register a company:

NIF (tax number),
Company Charter,
Evidence of office lease or ownership,
Social registration for employee recruitment.

Online registration

It is possible to register a company online through Portal da Empresa.

This portal simplifies the process and allows you to submit all documents online.

For those unfamiliar with the system, it is possible to consult lawyers or consulting companies.

Registration by power of attorney

If you cannot make it to Portugal in person, registration can be done by power of attorney. To do this, you need a notarized power of attorney with an apostille.

Classification of activities (CAE)

When registering a company, you need to choose a CAE (Classificação das Atividades Económicas) code that reflects the main activity of your business. This code affects the taxation and licensing. For example:

56101 — Restaurants and cafes,

62010 — Software development,

86904 — Medical services.

Choosing the right CAE is important for obtaining licenses and subsidies, so it is worth consulting experts before registering. INE provides a directory of CAE codes for accurate selection.

Taxes in Portugal

The taxation system in Portugal is transparent and simplified for small and medium-sized businesses.

Corporate tax (IRC)

The corporate income tax rate is 21%. However, for small companies there is a reduced rate of 17% on the first €25,000 of profit, making the terms more favorable.

Value added tax (IVA)

IVA (VAT) has the standard rate of 23%. However, for some goods and services, such as food, medical services and books, there is a reduced rate of 6%. Restaurants and consumer goods may be subject to the 13% rate.

Personal income tax (IRS)

If you are an individual entrepreneur, you are subject to personal income tax on a progressive scale. The rates range from 14.5% to 48%, depending on income. It is a flexible system that reduces the tax burden on small businesses.

Social contributions

The employers pay 23.75 % of employees' salaries to the social insurance fund, which covers pensions and health insurance. Individual entrepreneurs are required to pay 21.4 % of their income.

Trademark registration in Portugal

Brand protection is an important step for the long-term development of the company. Registering your trademark through INPI (National Institute of Intellectual Property) will protect your name and logo in Portugal.

To protect the brand in the EU, you should register through EUIPO. This is especially important for companies operating in international markets.

Business insurance

Insurance is a mandatory part of business management in Portugal.

Compulsory insurance

All employers are required to insure their employees against accidents at work. This insurance covers medical care and compensation. If the company has vehicles, the car insurance is required.

Additional insurance

In addition, it is recommended to insure property (against fire, theft) and professional liability. This helps protect the business from unexpected losses and legal claims. For example, lawyers, counsellors, and doctors often obtain professional indemnity insurance.

Conclusions

Starting a business in Portugal is a real opportunity for foreign entrepreneurs. Choosing a legal entity form, company registration, taxation, and insurance are the basic steps that will ensure a successful start.

It is important to ensure that all legal and tax requirements are met, and to use online platforms and advisors to simplify the process.

Our company is ready to provide services on business registration, and to support it.

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