A Guide to Starting a Business in Portugal as a Foreigner 

Portugal is celebrated for its scenic beauty and vibrant culture, which has made the Westernmost European Union country a popular expat and tourist destination. According to the Global Citizen Solutions Quality of Life Index, which scores each country according to environmental sustainability, cost of living, infrastructure, and personal and political freedoms, Portugal currently ranks as the 13th best country in the world.

In this guide to starting a business in Portugal as a foreigner, we will share insight into the country’s growing corporate and entrepreneurial innovation scene, discuss who is entitled to start a business in the Portuguese market, and explore other intricacies of opening a business in Portugal.

Who can start a business in Portugal?

Portuguese citizens and citizens from outside the European Union can start a business in Portugal. If you have the right to live and work in the country, a sound business structure, and ethical business practices that align with Portuguese business laws and have the minimum capital investment for personal and business assets, then you can kickstart your business venture in Portugal.

It’s also important to note that Portugal welcomes foreign investment through business operations. The booming tourism industry, tech, and business opportunities create the perfect environment for setting up and running businesses.

In the sections below, we will go through two types of visa programs the Portuguese government offers, which will enable one to live and start a business in Portugal.

Exploring the Portugal D2 Visa for Entrepreneurs 

The Portugal D2 Visa is a residency visa created by the Portuguese government for entrepreneurs who want to start their private limited company in Portugal.

This visa program is intended to increase the growth of foreign investment in Portuguese companies, encourage more foreign investment projects, and boost the Portuguese economy by allowing digital nomads and foreign entrepreneurs with a sole proprietorship to live and work in the country.

Types of Portugal D2 Visas

There are two different types of Portugal D2 Visa that you can apply for depending on your unique situation, business structures, and entrepreneurial requirements.

The Portugal D2 Visa for entrepreneurial innovation

We will discuss the first type of Portuguese D2 Visa for entrepreneurs’ keen on opening their own company online, starting a business in Portugal, or investing in existing Portuguese companies. To apply for the D2 Visa, you will need to:

• Obtain a NIF (Portuguese tax identification number) 
• Open a business bank account in a Portuguese bank with the required minimum capital 
• Complete commercial registration of your private limited company (LDA) or private limited liability company (LLC) 
• Employing an accountant well-versed in the Portuguese tax system 

Foreign investors will also need to have enough minimum capital to acquire and maintain their personal and business assets for the duration of their time in Portugal and have sufficient funds for any business debts to pay the Portuguese Tax Authority taxes, such as corporate income tax and other tax obligations including social security contributions to Portugal.

The Portugal D2 Visa for independent service providers

The second type of the Portuguese D2 Visa is known as the independent service provider or sole trader route designed for freelancers, offering services to local or global clients. To apply for this type of D2 Visa, you will need to:

• Apply for a NIF (Portuguese tax identification number) 
• Open a Portuguese bank account  
• Provide proof of a self-employment agreement or individual limited liability establishment agreement 
• Register online or visit the Portuguese tax office to pay taxes such as personal income tax and social security contributions 

The D2 Visa application will come with certain costs and the need to prove financial eligibility by having sufficient finances to support yourself for at least a year and proof of long-term accommodation for your stay.

The Portugal Job Seeker Visa

The second type of visa program that could help you live and work in Portugal and eventually start your own business once you secure a residence permit is the Portugal Job Seeker Visa.

Starting a business in Portugal as a foreigner will require you to have a work visa and, for this, you will need to have received a job offer. Citizens of the European Union do not need a Portugal work visa to work in the country unless they plan to stay for a period longer than 90 days.

Should they wish to do so, they will need to apply for a residence certificate (Certificado de Registo). Below, we will explore the application requirements for the Portuguese Job Seeker Visa.

Portugal Job Seeker Visa requirements

To apply for the visa program, you must prepare the documents below before visiting your local Portuguese Embassy and applying for the Portuguese work visa.

• A valid employment contract
• Your business structure or business plan
• A valid passport
• Passport-size pictures 
• Proof of sufficient funds to sustain yourself in a Portuguese bank account
• Your criminal record certificate from your country of residence. 
• Criminal record check document
• Proof of health insurance
• Proof of accommodation in Portugal

Working as a Freelancer in Portugal

To legally work as a freelancer in Portugal, non-EU citizens must set themselves up as sole traders. There are a few key things to tick off your list. First, you will need a residence permit, which will allow you to live and work lawfully in Portugal for the long term.

The D2 Visa and the Portugal Digital Nomad Visa are popular freelancer options, so do some research on those visa programs to see which best fits your situation. You’ll also need a NIF number, like a tax ID in Portugal. You can get this from the tax office (Finanças) and your social security number. Finally, remember that as a freelancer, you’ll be responsible for paying taxes like income tax and social security contributions for the duration of your valid residence permit.

Foreign Companies Registered in Portugal

To open a new branch of an existing foreign company in Portugal, you must register the company with the tax office for Portugal corporate tax purposes and register the company name with the Portuguese National Registry, the Instituto dos Registos e do Notariado (IRN).

Once the registration process is complete, you must present the Commercial Registry Office with a power of attorney, an official document from the company’s board of directors that confirms the opening of a branch in Portugal, and the parent company’s incorporation papers.

Exploring Business Taxes in Portugal

Existing foreign companies or new companies opening their doors in Portugal must prepare to adhere to the country’s tax regulations and ensure that you can successfully navigate all tax-related matters and obligations to the Portuguese Tax Office, Finanças.

Below, we will briefly outline the taxes your company in Portugal will be liable for.

Corporate Income Tax (IRC) in Portugal

All companies earning income from the Portuguese market are liable for paying Corporate Income Tax (IRC). The standard rates for Corporate Income Tax (IRC) are 21 percent in mainland Portugal, 20 percent in the autonomous region of Madeira and 16.8 percent in the autonomous region of the Azores.

Working with an experienced accountant or tax practitioner can give you an excellent understanding of business income tax matters and identify potential eligibility for tax benefits.

Social Security (TSU) in Portugal

Social security tax (TSU) in Portugal is a mandatory contribution that finances the social security system. This system provides essential benefits like family allowances, pensions after retirement, and unemployment support. The TSU contribution is shared between employers and employees. Employees pay a portion of their gross salary at 11 percent. Employers contribute a larger share, at a rate of 23.75 percent. It’s important to note that employers are also responsible for an additional insurance premium to cover occupational accidents. This premium varies depending on the specific job and its associated risks.

VAT (IVA) in Portugal

VAT, or IVA in Portugal, is an indirect tax levied on the consumption of goods and services. The seller or service provider collects IVA at the point of sale and then pays it back to the Portuguese government or Portuguese Tax Authority.

There are three primary IVA rates in Portugal: 

• Standard rate of 23 percent (16 percent Azores and 22 percent in Madeira)
• Reduced rate of 13 percent for certain goods and services like restaurant meals (9 percent Azores and 12 percent in Madeira)
• A low rate of 6 percent for essential items like essentials and groceries (4 percent Azores and 5 percent in Madeira)

Work Compensation Fund (FCT) and Guarantee Fund for Work Compensation (FGCT)

Established in 2013, the European Union created two national compensation funds, namely the Work Compensation Fund (Fundo de Compensação do Trabalho – FCT) and the Guarantee Fund for Work Compensation (Fundo de Garantia de Compensação do Trabalho – FGCT) which protects employees by ensuring that they will receive a payment of up to 50 percent of the monthly compensation they are entitled to for labor according to the contract signed by both the employer and employee.

Advice and Support for Opening a Business in Portugal

Opening a company in Portugal can be exciting, but navigating the legal and financial landscape can be daunting, especially for foreign entrepreneurs. Here’s where securing the services of a lawyer, HR professional, tax advisor, and accountant familiar with the Portuguese business environment becomes invaluable.

Securing the services of a lawyer

Portuguese company formation has its own regulations, and a lawyer can ensure your business complies with all legal requirements. They can guide you through the incorporation process, choose the most suitable company structure, and handle legal complexities. Language fluency is another crucial benefit. A lawyer can bridge the communication gap, ensuring an accurate understanding of contracts and official documents. Furthermore, they can identify potential tax advantages, helping you optimize your financial position.

Government agencies and support in opening your company

Several Portuguese government agencies offer valuable assistance to new businesses. IAPMEI (Agency for Competitiveness and Innovation), Turismo de Portugal (Portugal Tourism), and AICEP (Portuguese Agency for Investment and Foreign Trade) all provide programs and resources specifically tailored to support foreign investors. The Portuguese Ministry of Economy, Portugal Global, and the Program of Support for Local Employment Initiative are additional resources offering data, guidance, and potential financial support.

You could gain a comprehensive support network by partnering with legal and financial professionals, as well as our residency and citizenship division, Global Citizen Solutions, who can help you along the journey of living as expats in Portugal.