How to Start a Business in Portugal as a Foreigner

Are you excited about the idea of launching your own business in one of Europe’s most dynamic and appealing countries? With its perfect climate, breathtaking coastline, and vibrant cultural scene, Portugal is not just a fantastic place to live but is also rapidly becoming a top choice for foreign entrepreneurs.

If you’re ready to seize the opportunity and start your business in Portugal, you’re in the right place! In this blog, we’ll guide you through all the essential steps to establish your business as an expat in Portugal successfully. Let’s embark on this exciting journey together and turn your entrepreneurial dreams into reality with Lexidy!

Why Portugal?

You might be wondering why Portugal has become a top hotspot for foreign entrepreneurs recently.

Here’s why: Portugal offers a robust and stable economy, providing a solid foundation for business growth. As an EU member state, it opens the gateway to the entire European market—making it the perfect entry point into Europe!

This means your business enjoys seamless access to trade and operations across all EU countries without extra tariffs or barriers.

But that’s not all—Portugal also features a highly skilled, multilingual workforce, cutting-edge infrastructure, and a supportive government eager to boost entrepreneurship through exciting incentives and funding opportunities for foreign investors and startups.

Combine all this with Portugal’s exceptional quality of life, and it’s clear why it’s an unbeatable location for starting your business! Ready to dive in? Let Lexidy guide you through every step and turn your entrepreneurial dreams into reality!

Best Places to Start a Business in Portugal for Foreigners

When choosing the perfect spot to launch your business in Portugal, there are many exciting factors to consider, from the type of business to the amenities you’ll need for seamless operations. Here are our top picks for the best cities to start your venture in Portugal!

Lisbon

As Portugal’s vibrant capital and largest city, Lisbon is brimming with opportunity! With its dynamic tech scene and a wealth of co-working spaces, it’s a magnet for talented professionals and successful businesses across various sectors. You’ll benefit from a strong support network of fellow expats and entrepreneurs, making Lisbon an ideal launchpad for your business.

Porto

Known for its rich history and lively culture, Porto is rapidly becoming a hotspot for start-ups. The city’s growing business ecosystem, driven by a wave of young entrepreneurs, focuses heavily on innovation. As Portugal’s second-largest city, Porto offers a lower cost of living than Lisbon, making it a smart choice for your business.

Braga

A bit further north, Braga is emerging as a tech hub, fueled by its vibrant academic scene and a steady stream of driven young professionals. With affordable living and operational costs, Braga is perfect for tech enthusiasts and start-ups looking to tap into a burgeoning talent pool.

Faro

Often celebrated for its stunning landscapes and Algarve beaches, Faro is also a fantastic choice for tourism and hospitality ventures. The city benefits from a constant influx of tourists via its busy airport. Plus, Faro’s high quality of life and appeal to digital nomads make it an attractive location for business.

Madeira

Located off Portugal’s west coast, Madeira is an island paradise offering unique tax incentives for businesses. Its pleasant climate and breathtaking scenery make it an ideal spot for digital entrepreneurs and remote workers looking to blend work with a delightful lifestyle.

Ready to explore these fantastic opportunities? Let Lexidy guide you through every step and help you make the most of Portugal’s vibrant business landscape!

Legal Requirements for Starting a Business in Portugal as a Foreigner

When starting a business in Portugal as a foreigner, there are many legal obligations you must consider.

1. Residency and Visa: EU citizens can start a business in Portugal without the need for a visa, but they must register with local authorities beforehand. For non-EU citizens, the process is a bit more complex. Typically, they will need a residence visa that permits business activities, such as the Digital Nomad Visa.
2. Business Registration: To legally run a business in Portugal, you must register your business with the Portuguese Commercial Registry, or Registo Comercial. At the same time you have registered your business, you can obtain your Tax Identification Number (NIF) from Portuguese Tax Authorities.
3. Company Structure: You must decide on the legal form of your company. For example, whether you will operate through a sole proprietorship, limited liability company, etc. We will discuss these options further later in the blog!
4. Social Security and Tax: You must register for social security in Portugal and ensure you are tax compliant with Portuguese tax regulations. We recommend reaching out to a Portuguese tax expert to avoid missing any tax payments.
5. Licenses and Permits: Depending on your sector or business activities, you may have to obtain additional licenses or permits to sell your products or services legally.

Portugal Company Registration: Choosing the Right Business Structure

Selecting the appropriate business structure is crucial when registering a company in Portugal. Now, we are going to give you a breakdown of the ownership, liability, taxation, and setup for the most popular business structures.

Sole Proprietorship (Empresário em Nome Individual)

• Ownership: Single owner.
• Liability: Unlimited personal liability.
• Taxation: Income taxed as personal income.
• Setup: Simple and low-cost.
• Minimum Authorized Capital: No minimum requirement.

Limited Liability Company (Sociedade por Quotas – Lda)

• Ownership: One or more shareholders.
• Liability: Limited to the capital invested.
• Taxation: Corporate tax rate.
• Setup: Requires more formal registration and a minimum capital investment.
• Minimum Authorized Capital: € 5,000.

Registration Process for Starting a Company in Portugal

Now you have a better idea of the types of companies you can start in Portugal and what location may be best suited for your business. So next we have created a step-by-step guide to registering your company in Portugal.

1. Choose a Company Name

Decide on the name of your company and verify its availability with the Institute of Registries and Notaries (IRN): check the confusability before. But don’t stress out with the name, you can always aim to register it as a trademark!

2. Prepare the Necessary Documentation

To open a business in Portugal, you will have to submit the required documentation along with your application. These documents include a valid passport or ID, your Portuguese Tax Identification Number (NIF), your company’s Articles of Association, and proof of the address of your business.

3. Register the Company

You can register your company either in person or online. To register in person, you must visit the Empresa na Hora service. You can register your company online through the Empresa Online portal. As part of your registration, you must submit the Articles of Association, your bank declaration, and your identification documents.

4. Open a Bank Account

Next, it’s time to open your company’s business bank account. Once it’s open, you have to deposit the initial capital and obtain a bank declaration.

5. Obtain a Business License

As mentioned previously, depending on your business activity, it may be necessary that you obtain the necessary licenses or permits to run your business.

6. Register for Taxes and Social Security

Lastly, you must register your business for corporate tax (if applicable) and VAT at the local tax office. You must also register for social security at the Social Security Institute.

So there you have the steps involved in legally establishing your business in Portugal to ensure you are compliant with company law. As you may be aware, each company case differs slightly, so we recommend speaking to a Portuguese business lawyer to ensure you are not missing any vital information! They can help you navigate smoothly through these intricacies. 

Understanding Taxes and Incentives for Foreign Businesses in Portugal

Portugal offers a competitive tax regime, including corporate income tax, VAT, and social security contributions. In addition, Portugal has created incentives to attract foreign investment and support new businesses.

Corporate Income Tax

The standard corporate income tax rate in Portugal is 21% on taxable income. There are, however, reduced rates available for small and medium-sized enterprises.

Value Added Tax

VAT in Portugal is charged at 23% for the standard rate. Some specific goods and services have a reduced rate of either 13% or even as low as 6%.

Personal Income Tax

Personal income tax varies, with a progressive rate depending on income. This ranges from as low as 14.5% and rises to 48% for high earners.

Social Security Contributions

Employers are obliged to pay social security contributions of 23.75% of their employees’ gross salary. In addition, employees must pay 11% of their gross salary in social security contributions.

Incentives for Foreign Entrepreneurs

Non-Habitual Resident (NHR) Regime

The updated Non-Habitual Resident (NHR) Regime in Portugal provides substantial tax benefits for eligible foreign entrepreneurs for up to 10 years. Under the current NHR 2.0 framework, individuals can benefit from a reduced flat tax rate of 20% on Portuguese-sourced work income from specific high-value activities within some types of Portuguese Companies. Additionally, certain types of foreign-sourced income may be exempt from Portuguese tax.

Golden Visa Program

The Golden Visa program in Portugal provides residency to investors who fulfill certain investment criteria. Over time, investors can qualify for permanent residency and citizenship. The program also allows for visa-free travel within the Schengen Area and extends residency benefits to family members.

Investment Incentives

The Portuguese government has introduced various grants and funding programs to support innovation, technology, and regional development. These include specific Portuguese grants for research and development, as well as tax credits and deductions for R&D activities.

Understanding Portugal’s tax system and the available incentives can help foreign entrepreneurs maximize their benefits and establish a successful business.

How to Get Residency in Portugal Through Business Investment

The Portugal Golden Visa is a great opportunity for non-EU nationals to obtain residency in Portugal through business investment. Let’s explore the details of this type of visa.

Investment Requirements

For those willing to invest a minimum of €500,000 into a Portuguese company and create a minimum of 5 permanent jobs, you could obtain a coveted Golden Visa. Create a company, find an investor – you or a third party – plus add 5 employees and you are ready to proceed with your Golden Visa application. 

Application Process

To obtain the Portuguese Golden Visa, investors must submit the necessary documentation. This includes a valid passport, proof of investment, proof of Portuguese bank account, and a clean criminal record. The application can be submitted through the Portuguese Immigration and Borders Service.

Benefits of the Portuguese Golden Visa

If you successfully obtain the Portuguese Golden Visa, you now have access to residency permits for yourself and your family. Not only can you live in Portugal with this visa, but you and your family can move freely throughout the EU. 

You will also have access to Portuguese healthcare and education for the whole family while your visa is valid. After 5 years of residency, you can then apply for permanent residency and/or citizenship.

The Golden Visa program is very compelling for investors looking to establish a foothold in Europe. You can learn more about the Portuguese Golden Visa here!

Frequently Asked Questions About How to Start a Business in Portugal as a Foreigner

What is the minimum investment required to start a business in Portugal as a foreigner?

The minimum investment depends on the business structure. For a Limited Liability Company (Lda), the minimum capital requirement is €1. However, it’s advisable to invest between €5,000 and €10,000 to effectively sustain your business activities.

What are the most common challenges foreign entrepreneurs face when starting a business in Portugal?

Common challenges include navigating bureaucratic procedures, understanding local tax regulations, and overcoming language barriers. An expert lawyer will help to smoothly succeed.

How long does it typically take to complete the business registration process in Portugal?

The business registration process in Portugal typically takes between 2-4 weeks if all documents are in order and no complications arise.

Are there any specific industries in Portugal particularly welcoming to foreign startups?

Yes, industries such as technology, tourism, renewable energy, and real estate are particularly welcoming to foreign startups in Portugal.

Conclusion: How Lexidy Can Help You Start a Business in Portugal as a Foreigner

Portugal is the perfect destination for ambitious foreign entrepreneurs! With its robust economy, gateway to the European market, and welcoming business climate, it’s an exceptional place to launch your venture. Add to that the exciting incentives and the Golden Visa program, which provides a fantastic pathway to residency through business investment, and Portugal becomes even more attractive.

Ready to kickstart your entrepreneurial adventure in Portugal? Book your free consultation with Lexidy’s expert legal team today and set the stage for a seamless and successful business setup! Let us help you make your Portuguese business dreams a reality!