Portugal
Company Formation
Starting at €5400
What's included for 5400€ :
What’s Included:
- Company formation
- Governmental fees for first year
- Scanned corporate documents
- Registered Address
Company formation
Company formation
If you’re considering establishing a business in this promising jurisdiction, Portugal offers a range of enticing opportunities and advantages. With its strategic location, thriving economy, favorable business environment, and attractive incentives, Portugal has become an increasingly popular choice for entrepreneurs and investors seeking to enter the European market. As a thriving European nation, Portugal has emerged as a prime destination for incorporation, offering a multitude of advantages and opportunities for businesses of all sizes and industries. With its robust economy and strategic location as a gateway between Europe, Africa, and the Americas, Portugal provides a solid foundation for companies seeking to establish a strong presence in international markets.
One of the key factors contributing to Portugal’s allure is its business-friendly environment. The country has implemented a range of measures to attract foreign investment and foster entrepreneurship. From streamlined incorporation processes to simplified tax systems, Portugal is committed to supporting business growth and ensuring a smooth and efficient experience for entrepreneurs.
Advantages of setting up a company in Portugal
Incorporating a company in Portugal offers several advantages. Here are some key benefits of choosing Portugal as the jurisdiction for incorporation:
- Business-Friendly Environment: Portugal has implemented various reforms to improve its business environment, making it more attractive for investors. The government has focused on simplifying administrative procedures, reducing bureaucracy, and promoting entrepreneurship.
- Strategic Location: Portugal is geographically well-positioned, providing easy access to both European and international markets. Its location makes it a gateway to European Union (EU) countries, Africa, and the Americas, enhancing trade and investment opportunities.
- Infrastructure and Connectivity: Portugal has made substantial investments in its infrastructure, including transportation networks, ports, and telecommunications. It has a reliable and well-connected transportation system, which facilitates the movement of goods and services domestically and internationally
- Competitive Tax Regime: Portugal offers a competitive tax system, especially for companies engaged in certain activities. The corporate tax rate is relatively low compared to other EU countries, and there are several tax incentives available for specific sectors, such as technology and research and development.
- Stable Political and Economic Environment: Portugal has a stable political system and a well-regulated economy. It is a member of the EU and benefits from the economic stability and security provided by the Eurozone. This stability contributes to a favorable business environment and instills confidence in investors.
- Double Taxation Agreements: Portugal has an extensive network of double taxation agreements (DTAs) with numerous countries worldwide. These agreements aim to prevent double taxation on income earned in one country by residents of another country, thus providing tax relief and encouraging international business activities.
- Startup and Entrepreneurship Support: The Portuguese government actively promotes entrepreneurship and supports the startup ecosystem. Initiatives such as Startup Portugal provide various resources, funding opportunities, and mentorship programs, fostering innovation and facilitating the establishment of new businesses.
- Access to EU Funding: Being an EU member state, Portugal provides access to a range of EU funding programs and grants. This can be advantageous for companies looking to finance their projects, research and development activities, or investments in specific sectors.
Taxation
Taxation
Taxation in Portugal is based on a progressive tax system, where individuals and companies are subject to various taxes. Here are the key taxes in Portugal:
- Personal Income Tax (IRS): Personal income tax is levied on the worldwide income of individuals residing in Portugal. It is calculated based on progressive tax rates that range from 14.5% to 48%. The tax rates and thresholds are subject to change and should be verified for the specific tax year.
- Corporate Income Tax (IRC): Corporate income tax applies to the profits earned by companies in Portugal. The standard corporate tax rate is 21%, although reduced rates may apply to certain regions or activities. Small and medium-sized enterprises (SMEs) can benefit from a reduced tax rate of 17% on the first €25,000 of taxable profits. It’s worth noting that dividends received from subsidiary companies may also be subject to withholding tax.
- Value Added Tax (VAT): VAT is a consumption tax applied to most goods and services in Portugal. The standard VAT rate is 23%. However, reduced rates of 13% and 6% apply to specific goods and services, such as food, accommodation, cultural events, and certain medical supplies.
- Capital Gains Tax: Capital gains tax is applied to the profits earned from the sale of assets, such as real estate, stocks, and businesses. The tax rates vary depending on the nature of the asset and the holding period. For most assets, the tax rate is 28%.
- Property Transfer Tax (IMT): IMT is a tax applied to the transfer of real estate property. The rates depend on the type and value of the property and can range from 1% to 8%.
- Stamp Duty: Stamp duty is levied on certain legal acts, such as contracts, deeds, and documents. The rates vary depending on the type of transaction, ranging from 0.04% to 0.8%.
- Social Security Contributions: Both employees and employers are required to contribute to the Portuguese Social Security system. The rates for social security contributions depend on the income level and are subject to caps.
VAT application
VAT application
In Portugal, most companies engaging in commercial activities are required to register for Value Added Tax (VAT) purposes. The following types of companies typically need to apply for VAT registration:
- Companies with Annual Turnover above the VAT Threshold: Businesses that exceed a certain annual turnover threshold are obligated to register for VAT. The current threshold in Portugal is €12,500 for the provision of services and €22,000 for the sale of goods.
- Companies Engaged in Imports and Exports: Companies involved in importing or exporting goods to or from Portugal are generally required to register for VAT, regardless of their turnover.
- Companies Engaged in Intra-Community Transactions: If a company carries out transactions with other EU member states, such as the purchase or sale of goods or services, it may be required to register for VAT in Portugal.
- Non-Resident Companies Providing Services in Portugal: Non-resident companies that provide services in Portugal are usually required to register for VAT, regardless of their turnover level.
- E-commerce and Distance Selling: Companies engaged in e-commerce activities, including selling goods or services online to customers in Portugal, may need to register for VAT, even if their turnover does not exceed the threshold.
- Companies Engaged in Tourist Accommodation: Businesses operating in the tourist accommodation sector, such as hotels, guesthouses, and holiday rentals, are generally required to register for VAT.
- Companies Engaged in Certain Professions: Some professional activities, such as legal services, accounting, consulting, and architectural services, are subject to mandatory VAT registration.
If a company registered in Portugal carries out business activities outside of Portugal, it generally does not need to apply for VAT in Portugal solely for those activities. VAT registration is typically required when a company engages in taxable activities within the country or has a significant economic presence in Portugal.
However, there are specific circumstances where VAT registration may still be necessary. Here are a few scenarios to consider:
- Reverse Charge Mechanism: If a Portuguese company receives services or goods from another EU country and the reverse charge mechanism applies, the Portuguese company may need to register for VAT to report and account for the VAT due on those transactions.
- Distance Selling Threshold: If the Portuguese company engages in distance selling (selling goods remotely) to customers in other EU member states, it may need to register for VAT in the customers’ countries once it exceeds the distance selling thresholds set by each country.
Steps of company formation in Portugal
Steps of company formation in Portugal
To incorporate a company in Portugal, you need to follow several steps. Here is a general overview of the process:
- Choose a Company Name: Select a unique and available name for your company. The name should not be misleading, offensive, or similar to existing registered company names.
- Appoint Directors and Shareholders: Identify the company’s directors and shareholders. At least one director must be appointed, and for an LDA (LLC), there must be at least one shareholder.
- Open a Bank Account: Open a bank account in Portugal in the company’s name. You will need to provide identification documents and company-related information. The minimum required share capital must be deposited into this account.
- Notarize Documents: Certain documents, such as the company’s Articles of Association, need to be notarized by a Portuguese notary (cartório notarial). The notary will verify the authenticity of the documents and their compliance with legal requirements.
- Obtain a Tax Identification Number (NIF): Apply for a Tax Identification Number (Número de Identificação Fiscal – NIF) from the Portuguese Tax Authority (Autoridade Tributária e Aduaneira). This number is essential for tax-related purposes and is required to conduct business activities in Portugal.
- Fulfill Licensing and Permits: Depending on the nature of your business activities, you may need to obtain specific licenses, permits, or authorizations from relevant government authorities or industry-specific regulators.