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HOW TO START A BUSINESS IN PORTUGAL

Planning. That is the very first word that should come to mind when one thinks of starting a new business. Business name, mission, target markets, draft of a business plan, goals, selling strategy, financial forecast, human resources and investment. There is no planning without the items aforementioned.




If you endure through the initial planning, however, rest assured there is not much of a difference to start a business in Portugal whether you are Brazilian or Portuguese. The only difference is that you have to either be a resident business owner in Portugal – or have your Portuguese citizenship recognized. And remember that Portugal is part of the European Community, therefore a European passport of any country member is valid for such. Of course, if you intend to live in Portugal and work in your company.


Nowadays it is easier and less bureaucratic than ever to start a business in Portugal if you are a foreigner – you are actually capable of doing it, in fact, remotely, through the internet. Starting up the business, seeking and issuing certificates and registries of brands are activities that can all be carried out remotely, as long as you have a valid digital certificate.


To start a business, in case you are Brazilian, you will be required to present your passport and an Individual Tax Identification Number (NIF), which is similar to the ITIN in the US, the CPF in Brazil, or the UTR in the UK.


It is worth reminding that you do not need to be residing in Portugal to start a business, but in case you want to live and work there, you will need to apply for a visa for such purpose, in which case the D2 visa – Entrepreneur Visa (or the StartUP visa, Golden Residence Permit, among others). It is also important to emphasize that starting a business DOES NOT grant you a visa. In case you want to know more about the D2 type of visa, please contact our team.


Having talked about the first step, the passport and the NIF number, let’s get back to the initial idea: planning. With the answers to the questions we raised in the first paragraph in hand, it is time to set off in the actual process to start the company.


To register a company in Portugal, beyond having the company’s capital stock, it is also necessary to pay for the following fees: Standard Request, 360 euros; Brand associated with a class of products or services, 200 euros (each additional class you add costs extra 40 euros); in case your company has real estate or movable property, 50 euros per property, 30 euros for automobiles with cylinder capacity under 50cm³.


On top of these fees to register the company, bear in mind that both you as a natural person and your business must pay income taxes in Portugal. We listed below the main ones your company will be subject to:


  • Corporate Income Tax (IRC) of 21%;

  • Municipal Tax (Derrama), which can go up to 1.5%;

  • Value Added Tax (IVA), which can vary, at 6%, 13% or 23%, depending on the product or service being provided. Essential goods usually have an IVA of 6% (i.e.: bread, milk, cheese, meat), whereas services provided, such as in vehicle repair services, restaurants, hairdressing services, marketing agencies usually are taxed an IVA of 23%).


After this initial planning has been taken care of, you must turn your attention to the choice of type of business modality in which you will be registered under. We have made a brief overview of the existing business types:


Sole Trader (“Empresário em Nome Individual”) is the simplest type of business and it can be established by an only individual, without capital stock to start its operations, and with a couple of advantages concerning taxation.


The first advantage is the possibility to opt for the simplified accounting regime in case the revenue does not surpass two hundred (200) thousand euros a year. Another advantage is that in your first year operating, you are exempt from a contribution to be paid for purposes of Social Security.


Single-Member Limited Company (“Sociedade Unipessoal por Quotas”): this type of business also has only one owner, however, differently from the previous modality, it requires a minimum investment of €5,000, which can be held either by a natural person or by a legal entity.


The responsibility of the capital stockholder will be limited to the contributed capital, that is, the capital that is invested in the company, and, if it is enough, it will protect the natural person’s private assets.


The Private Limited Liability Company is similar to the type of business found in Brazil known as “empresa Limitada” (Ltda.). For a company to be considered a Private Limited Liability Company (“Sociedade por Quotas”), it must have at least two business partners who will share quotas the way they find best, however, each holder needs to have a minimum quota of one hundred (100) euros in quotas.


Just as it is in the Single-Member Limited Company, this business must have a minimum capital stock of €5,000, and the company’s assets will be separated from the private assets of its owners, which offers them more protection.


As for the type Public Limited Company (“Sociedade Anônima”), it is a modality in which a company’s capital is constituted by shares. This type of company is more complex and demands more attention, since it also is subject to more regulations and legal requirements that must be complied with.


Differently from other modalities, the Public Limited Company type must have five distinct natural persons as business partners (individuals) or legal persons (companies), who will be entitled as shareholders, but it also allows for an only partner, as long as he constitutes a corporation.


To organize a Corporation, the minimum capital stock required is of €50,000, which must be split into shares of equal par value, with a minimum number of one hundred shares.


Limited Co-Partnership Company (“Sociedade em Comandita”): Just as the previous modality, for this type of company the minimum amount of €50,000 of capital stock is also required, and it can be made up of personal assets, capital, or shares. Overall, this type of company has two types of partners:


a) Dormant partners (“os comanditários”), whose liability is limited (within the limit to which they invested in the company); and

b) Full partners (“os comanditados”), whose liability is unlimited and who are responsible for the company’s management.


In case you opt for this type of company structure, you will still have to decide whether it will be a Simple Co-Partnership Company (“Sociedade em Comandita Simples”) or a Share-Based Co-Partnership Company (“Sociedade em Comandita por Ações”).


For the first type, the Simple Co-Partnership Company, rules are similar to the ones applicable to a Private Liability Company. On the other hand, in the Share-Based Co-Partnership Company, in addition to the rule that states that at least five (05) Dormant Partners (“sócios comanditários”) and at least one (01) Full Partner (“sócio comanditado”) are necessary, the majority of rules that apply for a Public Limited Company are also applicable to this type.


The Cooperative (“Cooperativa”) is usually used in social and cultural activities and in non-profit organizations, however, it can also generate profits.


To start a cooperative, it is necessary to have at least five (05) members and their responsibility could be either limited or unlimited, depending on the rules defined in the cooperative’s document.


Last but not least, there is the Association (“Associação”), which is, just as the cooperative type, a non-profit organization, even though it can generate profits. An association is made up of people who have common objectives in a variety of fields, and usually comprises three main association bodies:


  • General Meeting (“Assembleia geral”) (the highest body, which approves the association’s plans, bylaws and reports);

  • Management (“Direção”) (which has the role of administering and managing the association) and

  • Supervisory Board (“Conselho fiscal”) (which controls the association’s finance).


Having defined the ideal modality of your company, you must collect all documentation required, which is:


· Citizen Card (“Cartão cidadão”) (in case you have Portuguese citizenship) and/or the Tax Identification Number (NIF) (which is similar to the ITIN in the US, the CPF in Brazil, or the UTR in the UK);

· Proof of registry in Social Security;

· Registry of Commerce (intended to inform of the legal status of a business – it is similar to the State Registry of Commerce found in Brazil, for instance;

· Proof of deposit of initial capital;

· Declaration of the start of business activities;

· Certificate of Company Admissibility (a document that proves that a company or denomination can be used);

· Articles of incorporation of the business.


After gathering all documentation and provided the request is made correctly, your company can be created in only one hour. In case you choose to start your business at a venue that offers the service “Empresa na Hora”, your registration will be issued in a few days.


We remind you that upon completion of the process and once your business was set up, you will need to open a business bank account, so that your personal assets are distinguished from your company’s assets.


Although it might seem complicated to start a business in Portugal, it is, in fact, simpler than it is in other countries, including Brazil. That is partly due to the fact there is less bureaucracy than in other countries, but also because of the many benefits granted by the Portuguese government to new businesses. But that is a conversation we will save for another moment in the future.

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