Starting a Business in Portugal - what you need to know
Steps to follow to set up your business in PortugalSetting up business in Portugal - what you need to know. Step by step guide to starting a business by All Finance Matters.
Portugal has recently become a very attractive country for expats looking for a new life in the sun. While some plan on retiring, or move for wellness and health reasons, others move to Portugal and set up business here. All Finance Matters, a tax and accountancy consultancy in Tavira, Algarve offer expert insights and practical advice to make the process easier. Their expertise ensure your business is set up as efficiently as possible.
Below is a guide to setting up business in Portugal by All Finance Matters.
Anyone can start a business in Portugal, irrespective of the nationality or residency, providing you have a good idea and the capital required to make it work. Getting the proper tax advice will help you identify tax breaks that you are eligible for, and it also makes going through the bureaucratic process much simpler. Although many expats do feel that the process is bureaucratic and confusing we will try to help you navigate the system. Here are five things you should know when starting your business in Portugal.
Business environment in Portugal
According to the World Bank’s Doing Business 2018 report, Portugal figures at number 29 in the ‘Ease of doing business’ ranking which uses 11 indicator sets to measure aspects of business regulation that matter for entrepreneurship. This report evaluated 190 developed countries based on the ease of starting a company, funding it and carrying on business. The report maintains that it is quicker and easier to start a business in Portugal than France or Italy, for instance, and very similar to the neighborhood country Spain, but obtaining business credit continues to be a tough task.
Step 1: choose a name for your company
Any proposed name can be checked against a computer database. If the name has not already been taken that name can be registered via a Validation Certificate (Certificado de Admissibilidade) issued by the National Registry of Companies. This certificate can be issued in a week and it’s normally valid for 3 months.
Step 2: the business structure
You can structure your business in many ways, these are the most common. You can decide to be the sole proprietorship, so using a Sole Shareholder Private Limited Liability Company (Sociedade Unipessoal por Quotas). If you choose to run the business with other individuals, other options available are Private Limited Liability Company (Sociedade por Quotas) or Public Limited Liability Company (Sociedade Anónima).
Step 3: setting up the company
With the name and structure chosen, it’s time to sign the deed of incorporation at a notary. This can be done electronically and allows the creation of a company almost immediately. The company will be given a tax number (NIF) and a social security number. The deeds will also include: the identification of the partners/shareholders; Name and type of company (Limitada, etc); Activities of the company; Head office of the company; Share capital of the company; Each shareholder's/partner's capital share in the company; All assets that form the share capital in kind and cash
Step 4: starting the activity
Once you sign the deeds, you need a bank account for the company. Only with the IBAN information, your accountant can register the activity of your new business at the tax office. Please note that once you create a company, it’s mandatory to appoint an accountant to register your activity and prepare your VAT declarations, amongst other tax obligations.
Once the company is registered your accountant will normally take care of the following additional tasks:
- Register the directors and employees with the Social Security
- Create the Shareholders Meeting Book (Company Minutes) which all pages need to be signed by the shareholders
- Make the initial minutes, indicating the salary of the director and other relevant business information
Don’t forget to take out compulsory employees' accident insurance at a private insurer. This covers all salaried workers and managers.
Last but not least, you need to have an official complaints book, which will hopefully never be used by your clients. This is now obtained online, so clients can register their complaints or compliments, on the web.
There are different taxes paid by companies in Portugal, here are the most common.
Corporate tax is 17% for first 15,000€ of profit and 21% thereafter.
Social Security is 23.75% of the gross salaries.
Municipal business tax can be up to 1.5% and are determined by each municipality each year. As a matter of interest companies with head office in the municipalities of Loulé, Tavira Olhão, São Brás de Alportel, Castro Marim, Alcoutim, Lagoa, Monchique or Aljezur, are exempt fom this tax.
The tax paid by the shareholders on dividends is 28%, but if you are resident you may be tax exempt on 50% of the dividend received.
Incentives to create a bussiness
Depending on the market sector you wish to do business, there may exist some different incentives or tax reliefs applicable.
DISCLAIMER: this text contains description of a generic nature and cannot preclude specialist advice in connection with specific situations.
Information originally published by All Finance Matters.
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