Discover the advantages and disadvantages of starting a business in this vibrant startup hub, including taxes, bureaucracy, and language barriers.
Portugal is a rapidly growing hub for startups and innovative businesses, with the city of Lisbon in particular becoming a hotspot for entrepreneurs and investors alike. As a result, many people from outside of Portugal are considering founding a company in the country. If you're one of them, you may have questions about the process of founding a company in Portugal, the advantages and disadvantages of doing so, and what to expect when it comes to taxes and other legal considerations.
In this blog post, we'll answer those questions and give you a comprehensive guide to founding a company in Portugal.
Portugal has several advantages as a location for founding a company. Here are just a few of them:
Portugal is located at the western end of Europe, making it a gateway to both the European Union and the Americas. This strategic location has made Portugal an important hub for international trade and commerce, with several major shipping and logistics companies operating out of the country.
Portugal has a highly skilled workforce, with a high proportion of workers holding advanced degrees. The country also has a large pool of multilingual workers, making it an attractive location for companies that need to communicate with clients or customers in multiple languages.
The Portuguese government has implemented a range of policies and incentives to support entrepreneurship and innovation. This includes tax incentives for startups, subsidies for research and development, and support for foreign investment.
Portugal is known for its high quality of life, with beautiful weather, affordable living costs, and a rich cultural heritage. Lisbon, in particular, is known for its vibrant startup scene, with a thriving community of entrepreneurs, investors, and innovators.
Now that we've outlined some of the advantages of founding a company in Portugal, let's take a look at the steps involved in the process:
The first step in founding a company in Portugal is to choose your business structure. The most common types of business structures in Portugal are:
Once you've chosen your business structure, you'll need to choose a name for your company. The name must be unique and cannot be too similar to any existing company names. You can check the availability of a name on the website of the National Registry of Collective Persons.
To register your business in Portugal, you'll need to obtain a tax number (NIF = Número de Identificação Fiscal) from the Portuguese tax authorities (Autoridade Tributária e Aduaneira). You can apply for a tax number online or in person at a local tax office.
Once you have your tax number, you'll need to register your business with the Commercial Registry (Registo Comercial). This can be done online or in person at a commercial registry office.
Depending on the nature of your business,you may need to obtain additional licenses or permits to operate legally in Portugal. For example, if you plan to sell alcohol, you'll need to obtain a license from the Portuguese government. You can find information on the specific licenses and permits required for your business on the Business Portal Portugal website.
To operate your business in Portugal, you'll need to open a bank account in the country. This will allow you to receive payments from clients, pay taxes, and manage your finances. Most Portuguese banks require proof of identity and proof of address to open an account.
If you plan to hire employees for your business, you'll need to register with the Portuguese Social Security system (Segurança Social). This will allow you to pay social security contributions for your employees and provide them with access to healthcare and other benefits.
As we mentioned earlier, there are several advantages to founding a company in Portugal, including its strategic location, skilled workforce, supportive business environment, and high quality of life. However, there are also some potential disadvantages to consider:
While many Portuguese people speak English, the official language of the country is Portuguese. This can present a barrier to communication for some businesses, particularly those that need to work with Portuguese-speaking clients or partners.
Like many countries, Portugal has a complex bureaucracy that can make it difficult and time-consuming to navigate the process of founding a company. However, the Portuguese government has made efforts to streamline the process in recent years, and there are many resources available to help entrepreneurs navigate the bureaucracy.
While Portugal has a relatively low corporate tax rate of 21%, businesses may still be subject to other taxes and fees, such as social security contributions and value-added tax (VAT). It's important to work with a qualified accountant or tax professional to ensure that you're meeting all of your tax obligations.
Founding a company in Portugal can be a rewarding and profitable experience for entrepreneurs and investors looking to tap into the country's growing startup ecosystem. With its strategic location, skilled workforce, supportive business environment, and high quality of life, Portugal is a great place to start and grow a business.
However, it's important to do your research and understand the process and potential challenges involved in founding a company in Portugal. By following the steps we've outlined in this blog post and seeking out advice from professionals, you can navigate the process with confidence and build a successful business in Portugal.