1. Introduction

Portugal is now on the radar of many international investors wishing to move into Europe, seen as a safe haven in a world facing seismic changes. This is because Portugal offers unique living conditions, a welcoming environment and investment opportunities in a wide variety of sectors.

Portugal is a country located in the southwestern Europe, enjoying a prime location and exceptional conditions for doing business. Portugal is a member state of the European Union and enjoys a high level of security compared to most countries worldwide, including those in Western Europe. According to the Global Peace Index, Portugal ranks 7th globally and 5th in Europe.

This briefing describes the main legal and practical aspects for starting a business in Portugal, the choice of the investment vehicle, the forms of companies, the basic rules regarding the management of corporations and the financial information that must be recorded, etc..

Other key information concerning the most relevant aspects about doing business or working in Portugal is available at www.macedovitorino.com/en/Why-Portugal. The «Why Portugal» webpage contains a description of the main aspects that concern businesses and individuals investing in Portugal, including:

• How to set up a business.
• Forms of investment incentives and government grants available and how to apply.
• Getting a Portuguese residence permit or a golden visa.
• Hiring employees, employers' obligations and rules concerning the dismissal of employees.
• Portugal's main taxes, including among others personal and corporate income taxes, VAT and property taxes.
• Intellectual property protection, software, patents, trademarks and technology.
• Real estate, acquisition and lease of property and financing and tax related issues.
• Dispute resolution, the judicial system and of the main steps and costs of lawsuits.

2. The Business Environment

There are no restrictions to the establishment of businesses in Portugal. Only a limited number of business activities are regulated and require the approval of regulatory authorities, such as banking, telecommunications, energy generation and distribution, pharmaceuticals, etc.

In general, there are no restrictions on foreign ownership of businesses and no nationality requirements regarding the ownership of Portuguese companies, save those established by European law and those related to assets considered of strategic importance (defence and essential telecommunications, energy and transport services).

Foreign nationals may take positions in Portuguese corporations. There is no statutory quota of Portuguese nationals in the boards of companies established in Portugal or conducting business in Portugal.

The incorporation process takes one day if the investor chooses to incorporate an "on-the-spot" company.

Portugal is a pioneer in the use of online platforms for the incorporation of companies and making available company records and accounts. The process of business creation is now totally integrated and dematerialized and allows the incorporation of new companies, the registration of trademarks and business names online.

The Portuguese process of business creation allows for full online service provision with focus on the requirements and demands of investors.

3. Choice of the Investment Vehicle

3.1. INVESTMENT VEHICLES

Investors who wish to do business in Portugal may do so through corporate or contractual structures, depending on the nature, scope and objectives of their investment.

The most common forms of organisation are companies and branches. These are typically used when the investor intends to develop a stable and ongoing presence in Portugal, either directly or through a local establishment. The choice between incorporating a company or a branch will depend on various factors, including legal autonomy, regulatory requirements, tax considerations, and the level of operational independence sought.

In addition to these forms, investors may also engage in cooperation agreements with other companies, through:

• Joint venture or consortium agreements;
• Complementary Grouping of Companies (Agrupamento Complementar de Empresas, ACE); and
• European Economic Interest Groupings (EEIG).

These structures are well suited for projects that involve the coordination of technical resources, specialised expertise or local market knowledge between multiple parties, without requiring the creation of a fully autonomous corporate entity.

3.2. BRANCHES

In general, the main operational difference between a branch and a subsidiary lies in the fact that a subsidiary functions as a different legal entity, while a branch serves as an extension of the foreign company in Portugal.

A branch is not a separate legal entity as it does not have legal personality. The branch carries out the same business activity as the parent company, which remains fully liable for all debts and obligations incurred by the branch.

The main differences between opening a branch office and incorporating a company are the following:

• a branch has no equity, although the head-office may allocate an amount of designated capital to the branch for operational purposes. Limited liability companies must have a minimum share capital; and
• the branch’s appointed legal representative shall manage its business, no corporate bodies being required, while a company is required to have a management body and an auditor or auditing board.

Setting up a branch in Portugal is generally simpler and more cost-effective than incorporating a separate legal entity, as it avoids some of the formalities and capital requirements associated with company formation, although the parent company may choose to allocate capital to the branch for operational needs.

Another key advantage of a branch structure is the free flow of capital between the branch and the parent company. Since the branch is not legally independent, any transfers of funds are considered intra-company transactions rather than profit distributions, allowing for simpler internal financial flows.

Additionally, a branch allows the parent company to maintain closer control over local operations. As an integral part of the corporate structure, the branch is more easily aligned with the group’s overall strategic direction, ensuring consistency and streamlined decision-making across jurisdictions

3.3. REGISTRATION OF A BRANCH

To open a branch and appoint its legal representative before the Commercial Registry Office, the following documents are required:

• good-standing certificate of the parent company confirming its legal existence;
• parent company’s resolution approving the incorporation of the branch and the appointment of the legal representative;
• details of the branch's appointed legal representative;
• copy of the parent company’s articles of association; and
• statement indicating the branch’s ultimate beneficial owner.

If the documents are written in a foreign language, a Portuguese translation must be provided. The parent company’s resolution, its articles of association and the good-standing certificate must bear the Hague Apostille.

The legal representative must have a Portuguese tax number, which must be obtained in advance.
This process may be completed either in person at the Commercial Registry Office, by submitting Form 2 of the National Registry of Legal Entities, or online via the Sucursal Online platform.

4. Commercial Companies

4.1. TYPES OF COMPANIES

Portuguese companies must adopt one of the following legal forms:

• joint stock companies (Sociedade Anónima, "S.A.");
• quota companies (Sociedade por Quotas, abbreviated "Lda.");
• general partnerships (Sociedade em Nome Coletivo); and
• limited partnerships (Sociedade em Comandita).

Most national and foreign investors choose as their investment vehicle a limited liability company because it best suits the purpose of limiting the parent company’s liability. The equivalent form to the Portuguese limited partnerships (Sociedade em Comandita), where only one of the shareholders’ liability is limited, is also seen in Germany, France and Italy. Limited partnerships are rarely used in Portugal.

The main difference between¬ limited liability companies (Sociedade por Quotas and Sociedade Anónima) and unlimited liability companies (Sociedade em Nome Colectivo and Sociedade em Comandita) is related to the shareholders’ liability for the companies’ debts. Other major differences concern the transfer of shares and the companies’ management and supervision structure.

4.2. DIFFERENCES BETWEEN QUOTA COMPANIES AND JOINT STOCK COMPANIES

The most commonly used types of limited liability companies in Portugal are quota companies (Lda) and joint stock companies (S.A.).

When deciding what legal form the subsidiary should assume, the foreign investor will take into consideration the differences between quota companies and joint stock companies that may influence their business operations in Portugal. From a day-to-day point of view, both can be managed in broadly similar ways, although the quota company can in some cases be less formally managed. For instance, it requires only one Managing Director and not a Board of Directors as joint stock companies generally do. On the other hand, the shareholders of quota companies retain the power to intervene and decide on management issues, while in joint stock companies it is up to the Board of Directors to decide on any matter concerning the management of the company.

There is also a difference regarding the minimum number of shareholders. As a general rule, a joint stock company must have at least five shareholders, while a quota company only requires two. However, under certain conditions the law allows both types of companies to have a sole shareholder. Still, in this case, the liability of the sole shareholder is not fully limited, as such shareholder will be personally and unlimitedly liable in case of insolvency if the company’s assets are not kept separately from the shareholder's personal assets.

Regarding income tax, both companies’ gross revenues will be subject to corporate tax (Imposto sobre o Rendimento das Pessoas Colectivas – "IRC"), currently set at the rate of 20%.

Quota companies have a simpler governance structure and are more suited for smaller or short-term investments. In contrast, joint stock companies are more commonly used for larger or long-term investments.

The capital of joint stock companies is divided into shares (ações) with a minimum value of €0.01. In contrast, the capital of quota companies is, as a rule, divided into as many shares (quotas) as the number of shareholders, representing the part each of them owns in the company. There is no minimum mandatory share capital in quota companies, but the value of each share must be equal to or higher than one euro. In joint stock companies, the minimum share capital is €50,000.

Unlike the shares of quota companies, which ownership and transfer are registered with the Commercial Registry Office, the shares of joint stock companies are designed to ensure that they can be transferable privately or in stock exchanges. Ownership and transfer of shares are not filed with the Commercial Registry Office.

In both types of companies, the transferability of shares can be restricted. However, in joint stock companies, imposing such limitations is more difficult, as any restrictions must be stated in the articles of association

4.3. ORGANISATION OF QUOTA COMPANIES

Quota companies are, as a rule, managed by Managing Directors.

In addition to their authority over the company's governance, including the appointment and dismissal of Managing Directors and the approval of financial statements and profit distribution, the shareholders are entitled to directly adopt resolutions concerning management issues, such as:

• the disposal or acquisition of stakes in other companies; and
• the disposal or encumbrance of real estate.

Quota companies are not required to have a supervisory body – internal auditor – unless two of the following thresholds are exceeded in two consecutive years:

• the balance sheet exceeds €1.5 million;
• the turnover exceeds €3 million; and/or
• the average number of employees during the year exceeds 50 employees.

4.4. ORGANISATION OF JOINT STOCK COMPANIES

In general, joint stock companies must adopt one of the following models:

• Board of Directors (Conselho de Administração) and Supervisory Board (Conselho Fiscal) or statutory auditor (fiscal único). The appointment of a supervisory board is mandatory for listed companies and other companies that exceed two of the following thresholds:

i. The company’s balance sheet exceeds €20 million.
ii. The turnover exceeds €40 million.
iii. The average number of employees during the year exceeds 250 employees.

• Board of Directors (Conselho de Administração), Audit Committee (Comissão de Auditoria) and external auditor.
• Executive Board (Conselho de Administração Executivo), General and Supervisory Board (Conselho Geral e de Supervisão) and external auditor.

A Single Director may be appointed when the company’s share capital is less than €200,000.

A Board of Directors, with an odd or even number of members, is required if the company’s share capital is equal to or exceeds €200,000.

The Board of Directors is responsible for managing the company’s business and can decide any management matter concerning the company without the approval of the shareholders, such as:

• acquisition, sale and encumbering of real estate;
• providing collateral or guarantees by the company;
• prepare and submit the management report and financial statements;
• establish or cease partnerships or other forms of cooperation with other companies;
• opening or closing important businesses or relevant fractions of the company; and
• major changes in the organisation of the company, including the acquisition of other companies, the reduction of its activity and the preparation of mergers.

The articles of association may allow the appointment of Directors entrusted with the management of specific areas of the business, such as finance, operations, etc.

It is the responsibility of the general meeting of shareholder to resolve on matters assigned to it by law or the articles of association that are not included in the competence of other corporate bodies. As a general rule, the shareholders' meeting resolves on the following matters:

• changes to the articles of association;
• increase and reduction of share capital;
• approval of the company’s annual accounts;
• general assessment of the management’s performance;
• appointment and remuneration of the members of the corporate bodies;
• removal of directors, members of the supervisory board or the audit committee, and
• mergers, spin-offs or changes of the business form of the company.

The general meeting cannot resolve on management matters except when requested by the Board of Directors.

4.5. INCORPORATING A COMPANY

4.5.1. «ON-THE-SPOT COMPANIES» (EMPRESA NA HORA)

The so-called «on-the-spot» process is a simplified procedure for setting up a company.

The founders only need to go to an authorised office to incorporate the company, present the documents that prove their identity, capacity and powers to execute the deed, and choose one of the pre-approved names and one of the pre-approved forms of articles of association.

In the same process, the founders may appoint an accountant or choose one from the list of accountants available.

At incorporation, the founders receive:

• a certificate of the articles of association;
• the access code to the permanent certificate of commercial registry;
• the access code to the electronic card of the company; and
• the company’s social security number.

The procedure is started and completed on the same day and has a cost of €360.

The company’s equity capital must be deposited within five business days after incorporation or until the end of the first financial year.

The company founders have 15 days to register the company with Tax authorities, 10 days as of the registry with tax authorities to register the company with Social Security authorities and 30 days to file the first ultimate beneficial owner statement.

4.5.2. ONLINE INCORPORATION

Companies can be incorporated online by filling out an online form and submitting the documents through https://registo.justica.gov.pt/empresa.

The founders may file the application online, choose a pre-approved name, or a tailored corporate name provided it has been previously approved by the National Registry of Companies, and one of the approved forms of articles of association, or a tailored form of such articles.

It is not necessary to provide evidence of the deposit of the share capital at the time of incorporation. The shareholders are required to declare that they will deposit the funds in the five days following the filing or until the end of the first financial year.

The online filing must be completed within 24 hours after the submission of the application. The registration of the company may take up to 10 business days.

The cost of online incorporation is €220 if the articles of association have one of the pre-approved forms and €360 when founders propose their own articles of association.

4.5.3. TRADITIONAL METHOD OF INCORPORATION

The steps required to incorporate a company using the traditional method are:

• requesting the company’s name approval with the National Registry of Companies (at IRN or in person);
• executing the articles of association through a public or private deed;
• for joint stock companies, depositing the minimum initial share capital in a bank;
• registering in the Commercial Registry Office;
• registering the company with the tax authorities and social security;
• filing of the first ultimate beneficial owner statement at https://rcbe.justica.gov.pt/.

4.6. ACQUIRING SHARES IN A PORTUGUESE COMPANY

Foreign investment in Portugal may take the form of acquiring shares in an existing Portuguese company, rather than incorporating a new one. While this type of transaction is common and straightforward, it may entail certain formal requirements for the foreign investor, whether an individual or a legal entity.

Any non-resident person acquiring shares in a Portuguese company must obtain a Portuguese tax identification number:

• NIF (Número de Identificação Fiscal) in the case of individuals; and
• NIEEE (Número de Identificação de Entidade Equiparada Estrangeira) in the case of legal entities.

Depending on the country of residence, the appointment of a Portuguese tax representative may also be required. This applies mainly to investors residing outside the European Union, the European Economic Area, or jurisdictions with which Portugal has a tax cooperation agreement in place. The tax representative acts as a point of contact with the Portuguese Tax Authority and ensures that any necessary tax obligations are duly fulfilled.

These requirements are not unique to Portugal, but across most of the European Union member states to facilitate the communication between their respective tax authorities and detect and prevent money laundering activities.

5. Financial Information

5.1. ANNUAL ACCOUNTS

Three months after the end of its fiscal year (which may or not coincide with the calendar year), the company's general assembly of shareholders must approve its annual accounts and file them by the fifteenth day of the seventh month after the end of its fiscal year (15 July if the company's fiscal year coincides with the calendar year). The filing is completed electronically at Portal das Finanças.

5.2. THE SIMPLIFIED INFORMATION SYSTEM

The simplified corporate information system (Informação Empresarial Simplificada, IES) allows companies to comply with the following reporting obligations by filing a single document with the tax authorities, which serves to:

• file annual accounts;
• provide statistical information to the Portuguese National Statistics Institute (Instituto Nacional de Estatística, INE);
• submit annual accounting data for statistical purposes to the banking authority (Banco de Portugal, BdP); and
• submit statistical information to the Directorate-General for Economic Activities (Direção-Geral das Atividades Económicas, DGAE).

The IES is submitted electronically at Portal das Finanças annually no later than the 15th day of the 7th month after the end of the relevant financial period, which for most companies will take place on 15 July of each year.

6. Other Forms of Business Organisation

6.1. UNINCORPORATED JOINT VENTURES (CONSORTIA)

In Portugal, unincorporated joint ventures, also named "consortia" or collaboration agreements, are set up through a contract where two or more parties agree to jointly pursue a given activity.

Portuguese consortium agreements are governed by Decree-law 231/81 of 28 July 1981 (Consortium Law), which details the legal framework for their formation, internal organisation, scope of joint activities, and the rights and obligations of its members.

In case the consortium members transfer real estate between them, the contract must be executed by public deed to be valid. In any case, the consortium contract is not subject to registration.

The unincorporated joint venture is used when the parties wish to undertake a limited and temporary project. The unincorporated joint venture has no legal personality and cannot have common funds.

Unincorporated joint ventures can be adapted to a wide range of commercial objectives, including the joint development of products or services, the sharing of infrastructure or technology, or the implementation of specific investment projects within a defined timeframe. Depending on the structure adopted, participants retain their separate legal identity and financial independence, while benefiting from the operational synergies and collective organisation made possible by a formal cooperation framework.

Unlike other cooperation agreements where a new entity is formed, generally, the consortium members act separately, acting jointly only when necessary to pursue a specific objective or develop an activity.

Under Portuguese Consortium Law, consortia may be classified as:

• "Internal", where members do not jointly engage with third parties. In this case, one member independently deals with third parties and provides services or goods on behalf of the consortium, either on its own or by subcontracting specific tasks to other consortium members, without expressly mentioning the consortium.
• "External", where the consortium members collectively present themselves as acting jointly in dealings with third parties.

In internal consortia, the members benefit from broad freedom in determining their obligations; in external consortia, the parties must designate a steering body, a supervisory board and a consortium leader.

The consortium leader holds both internal powers, such as coordinating and executing cooperation among all parties, and external powers, including representing the joint venture before third parties, in addition to any other contractually assigned responsibilities.

The parties may also agree to create any other bodies they consider useful to achieve the purpose of the contract, such as technical commissions typically assigned to handle more complex technical matters.

6.2. COMPLEMENTARY GROUPING OF COMPANIES

The complementary grouping of companies (Agrupamento Complementar de Empresas, ACE) is a form of association of two or more companies, endowed with legal personality, with the purpose of improving the conditions for jointly developing a specific activity or extract benefits from the activities developed separately by each of its members.

An ACE is established through a written agreement. A public deed is only required when the members contribute with real estate assets to the ACE.

With the registration of the ACE in the commercial registry, the ACE acquires legal personality.

The ACE may own cash or other assets acquired using the members’ contributions. Each member bears personal and joint liability for the ACE’s debts, thereby sharing responsibility for any financial obligations incurred by the ACE.

The ACE comprises three bodies: a general assembly of members, a board responsible for management and representation of the ACE, and a supervisory body.

6.3. EUROPEAN ECONOMIC INTEREST GROUP

The European Economic Interest Group (EEIG) is the European equivalent of the Portuguese ACE. EEIGs are created by a contract where the parties that carry out activities in the European Union form an international legal entity with the purpose of improving the conditions for the exercise or the results of the activities that the founders develop separately.

The EEIG is formed through a contract and acquires legal personality upon registration in the commercial registry.

The main difference between the EEIG and the ACE is that EEIGs must be formed by companies headquartered (or individual persons whose main activity is located) in at least two European Union countries.

The member of the EEIG have unlimited and joint liability for the debts incurred by the EEIG.

EEIGs have a simple organisational structure, consisting of only two mandatory bodies: the assembly of members and a management board or a single manager. The assembly brings together all members and may take decisions collectively, including the appointment of one or more managers to represent the EEIG and carry out its day-to-day activities, in accordance with the powers granted by the members.

7. Actions and Formalities after incorporation

7.1. OBLIGATION TO REGISTER BENEFICIAL OWNERS

Commercial companies incorporated in Portugal must file an initial declaration with the Central Register of Beneficial Ownership (Registo Central do Beneficiário Efetivo, RCBE). This declaration is required within 30 days from the date of the company’s registration via an online platform provided by the Portuguese Ministry of Justice.

The declaration must contain accurate and up-to-date information about the individuals who ultimately own or control the company, whether directly or indirectly.

This obligation applies even if the beneficial owners are the same as the registered shareholders or managers.

The information submitted must be confirmed on an annual basis. Non-compliance with RCBE requirements may lead to legal restrictions on the company’s operations.

7.2. OBLIGATION TO REGISTER WITH SOCIAL SECURITY AUTHORITIES

Commercial companies incorporated in Portugal must register with Social Security authorities within 10 business days from register with the tax authorities.

Registration with Social Security is mandatory, even if the company does not hire staff immediately, as it ensures compliance with social security obligations and establishes the framework for future employment relationships.

The process is completed via the Social Security’s online platform. Failure to register may lead to fines and restrictions on the company’s ability to regularise employment situations in the future.

7.3. OBLIGATION TO REGISTER WITH TAX AUTHORITIES

After their incorporation, Portuguese commercial companies must register with Portuguese Tax Authority (Autoridade Tributária e Aduaneira).

This register must be submitted before the start of any business activity and, in any case, within 15 days from the date of incorporation or registration at the Commercial Registry Office. The register must identify the company’s accounting regime, main activity, and other relevant tax details.

Submission is made electronically at the Tax Authority’s online platform by an accountant. Non-compliance may lead to penalties and restrictions on the issuance of invoices or tax documents.

7.4. OPENING A BANK ACCOUNT

As part of the incorporation of a Portuguese company, the company should have a bank account where the shareholders deposit the company's share capital that will enable it to carry on its business in Portugal.

To open a bank account, Portuguese banks generally request the following documents related to the company and its shareholders:

• identification documents of shareholders and directors;
• the company's corporate documents, including its incorporation deed, articles of association, and commercial registration certificate; and
• details regarding the company's beneficial owners and, if not previously provided, the identification of its shareholders or members of the corporate bodies.

8. Conclusions

Below are the key aspects to be considered when starting a business in Portugal:

1. Why Portugal. Portugal is a prime destination for international investors seeking to enter in the European market, valued for its safety, unique living conditions, and welcoming business environment.
2. Business Environment. Portugal imposes no restrictions on foreign ownership or nationality requirements for company ownership, allowing foreign nationals to invest in Portuguese companies under the same conditions as Portuguese nationals and businesses.
3. Investment Vehicles. Investors may opt to incorporate a company, open a branch or enter into other forms joint venture agreements. Branches, as extensions of parent companies, require minimal formalities and no equity, while companies offer legal personality and varied structures suited to different investment scales.
4. Incorporation of companies. The incorporation process is efficient, averaging five to ten days, with options like "on-the-spot" companies enabling completion in as little as one day.
5. Lda vs. S.A. companies. Limited liability companies include quota companies (Sociedade por Quotas, Lda.) for smaller investments and joint stock companies (Sociedade Anónima, S.A.) for larger ventures, each with distinct capital and governance requirements.

6. Corporate Governance. Quota companies have a simpler organisational structure with Managing Directors, being a statutory auditor only required if certain size thresholds are exceeded for two consecutive years.

Joint stock companies have a more complex governance structure with one of the following models: (i) a management body and a supervisory body which may be a supervisory board, (ii) an audit committee and statutory auditor, or (iii) a general and supervisory board and statutory auditor, which is better suited for larger or listed companies.

7. Financial Information. Compliance obligations include annual account approvals and submissions via a simplified system, Informação Empresarial Simplificada (IES), due by mid-July each year.

8. Other Business Forms. Alternative structures include unincorporated joint ventures, complementary groupings of companies (ACE), and European economic interest groups (EEIG).