Doing business in Portugal

Portugal is a fantastic place for businesspeople. This owes in large part to the Portuguese government’s efforts to make Portugal an attractive destination for foreign investment, which culminated in Portugal being considered the eighth most attractive country in Europe for Foreign Direct Investment in 2021 by EY, up from tenth place in 2020.

One of the main benefits of doing business in Portugal is its business-friendly tax system. Portugal’s tax advantages include an investment support tax scheme (RFAI), tax schemes for non-habitual residents, i.e. occasional residents, and deductions for retained and reinvested profits (DLRR).

Setting up a company in Portugal is a relatively straightforward process.

EU citizens need to obtain a series of documents before they can legally start a business in Portugal. They need to provide a tax ID number known as an NIF (Numero de Identificacao Fiscal), a social security number and a registration certificate. People from outside the EU, on the other hand, are required to apply for a Portuguese visa before setting up a business.

You even have the option of registering your company online through the government website. Note that the mandatory initial capital depends on the legal structure that you choose for your company.

Most businessowners choose to incorporate their companies under a Sociedade por Quotas (Lda.) business structure. This is the equivalent, in Portugal, of a Limited Liability Company (LLC).

It takes, on average, two weeks to incorporate a company as an Lda. Private Limited Companies generally require two members; however, it is also permit ted to incorporate Private Limited Companies with a single quota holder. Whilst there is no minimum capital requirement for an Lda., the share capital must be divided into quotas of at least €1.

The Sociedade Anónima (S.A.) is a public limited company with a minimum capital of €50,000; 30% of this must be paid on incorporation. Public companies in Portugal are required to have at least five shareholders, in addition to a board of directors.

Portugal’s services sector dominates the country’s economy, with tourism serving as a particular important fixture. Drawing on its colourful heritage and historical sites, Portugal attracted 9.6m foreign visitors to the country in 2021, and its tourist industry generated $25.5bn in revenue, making it one of the most tourism-dependent economies in southern Europe.

The textile and clothing sector is an important part of the country’s industrial base, with export figures reaching a record €5.4bn in 2021, up 16.5% from 2020. Spain is Portugal’s main export destination, followed by France, which accounts for a steadily increasing share of Portugal’s textile exports. Portugal’s other industries include petrochemistry and cement industries, machinery and plastics and ceramics industries. The European Union is the main market for Portuguese chemicals. Despite the COVID crisis, Portugal’s exports continued to diversify, such that the Portuguese chemical sector exports to more than 180 countries worldwide. The country’s chemical sector recorded €7 billion in export sales in 2020.

For those interesting in doing business in Portugal, there are a number of opportunities across Portugal’s thriving sectors that are ripe for the taking.

Portugal is a country with very diverse and complex mineral resources. In 2019, the mining industry was estimated to have a production value of €1 billion, predominantly in the national production of ores, minerals and water. Portugal is very rich in mineral deposits which are not easy to extract and require sophisticated expertise. British companies that specialise in deep mining on the continent and in the seabed are thus in very high demand in Portugal.

Other sectors that present good opportunities for British exports include financial services, technology and life sciences, with exciting business opportunities in key infrastructural sectors, such as mining and rail transport.

Portugal also acts as a gateway to Portuguese-speaking markets. These include Brazil, Angola and Mozambique.

Tourism has started playing a greater role in Portugal’s economy in recent years: it accounted for almost half its services exports in 2017, and it recorded the highest service export value in 2021, measuring almost €10bn. With tourism beginning to pick up again in the aftermath of the pandemic, there is a real opportunity for British companies seeking to invest in the luxury hotel market.

Another exciting trend relates to Portugal’s commitment to achieving carbon neutrality by 2050 and its booming renewables sector. Portugal has recently launched the development of renewable energies, specifically solar energy (Portugal boasts Europe’s largest solar power station) and wave power. Given the vast sums of money being invested in these clean energy projects, the UK has a golden opportunity to invest in and export to this market.

In Portugal, appearances are everything. Avoid casual attire; opt instead for conservative dress, i.e. suits and dresses, as you will find that your Portuguese counterparts will invest considerable effort in looking the part.

Gifts are regarded as a sign of respect, as opposed to a bribe. If you decide to give a gift, present it in an unwrapped state before moving in with a firm handshake and strong eye-contact.