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Start-ups in Portugal - Overview and advantages
25 Nov 2022 . By Roberto Castro Mendonça - Lawyer

Start-ups in Portugal - Overview and advantages

There are many advantages to creating a start-up in Portugal. Besides being a gateway into the larger European market, this country has created one of the best start-up ecosystems in Europe.

What’s more, Portugal has a robust intellectual property protection tradition. It introduced a Patent Box regime in 2014, being one of the pioneers in this kind of incentive in the European Union (EU).

Intellectual Property in Portugal

Under Portuguese legislation, there are two meanings of intellectual property: broad and strict. The former covers industrial property – patents, models, trademarks, logos, trade secrets, designations of origin and geographical indications – and the latter encompasses copyrights and related rights.

In the Portuguese legal system, provision is made for both more common intellectual property rights – patents, models, trademarks, logos, designations of origin, geographical indications, and copyrights – and less common rights, such as topographies of semiconductors, plant variety rights, trade secrets or know-how.

The Portuguese Institute of Industrial Property (INPI) is the Portuguese public organisation that protects and promotes industrial property. It is particularly active in assisting entrepreneurs and ensuring they meet all the Portuguese legal requirements.

 

The patent box regime in Portugal

Since its introduction in 2014, the Portuguese Patent box regime has been amended and aligned with the latest OECD standards, such as the modified nexus approach. In 2022, the Portuguese boosted the regime by increasing the tax deduction from 50% to 85% of the income deriving from covered intangibles, which means that with a corporate tax (and surcharges) at normal effective rates between 21% and 29%, this type of income can enjoy effective rates between 3.15% and 4.35% (all rates referring to Portuguese Mainland, with further reduced rates for Madeiran companies).

Initially, the favourable tax treatment was only applicable to income generated through a reduced array of intangibles, namely industrial property rights (patents and industrial designs and models). The scope of this regime was extended to include registered software copyrights, which made it much more inclusive and aligned with a current value-creation trend in the Portuguese economy.

To benefit from the regime, companies must meet specific cumulative requirements, such as:

  • using the covered intangibles in a commercial, industrial, or agricultural activity;
  • having separate accounting records for the activities carried out in connection with the covered intangibles; and
  • the purchaser or user of the covered rights not being domiciled in a blacklisted country.

How to create a start-up in Portugal?

There is a broad consensus that entrepreneurial activity is one of the most important mechanisms of economic development for small economies like the Portuguese, with studies showing the positive relation between new ventures and job creation, increasing competitiveness and social equality.

Portugal is no stranger to this trend, and there is the certainty that this will be an essential sector in the years to come.

Therefore, Portugal offers several programs that target start-ups specifically, with assistance available for each phase of the investment and flexibility on its structuring. Entrepreneurs also benefit from a broad, nationwide network of accelerators and incubators that ensure smooth navigation through the Portuguese legal framework.

The start-up ecosystem in Portugal

Portugal has the ideal framework for an entrepreneurial ecosystem, with a set of material, social and cultural elements – such as policies, infrastructures, networks, leadership, investment capital and openminded customers.

Although the Portuguese ecosystem of start-ups is still very young, it is producing astonishing results. According to the latest available data, this ecosystem accounts for 1.1% of the country’s gross domestic product, with the number of start-ups growing consistently. Furthermore, there are already 7 unicorns with Portuguese DNA.

As a result, the number of start-ups per capita in Portugal is 13% higher than the European average, and the country is considered the 12th most innovative in the EU.

 

Start-up accelerators in Portugal

Portugal has a National Network of Incubators that identifies, maps, and interconnects existing incubators and accelerators in the country. This network currently has over 100 accelerators and incubators spread throughout the territory. You may find the most suitable incubator for your potential location here.

The role of this National Network of Incubators is to promote cooperation and the sharing of resources and knowledge within the network to improve the resources and services available to entrepreneurs and incubated companies.

 

Startup Visa – residence permit in Portugal

The Startup Visa program welcomes foreign entrepreneurs who wish to develop an entrepreneurial and/or innovation project in Portugal.

Foreign entrepreneurs who wish to start an innovative company have access to a residence visa that allows them to create a start-up from scratch or relocate an existing one to Portugal. To do so, entrepreneurs must prove the following:

  • that they wish to develop activities for producing innovative goods and services with an internationalisation mindset;
  • that their projects and/or companies focus on technology and knowledge with the potential development of innovative products;
  • that they have the potential to create qualified employment;
  • that they have the capacity to establish a company and the potential to reach a turnover higher than € 325,000/year and/or assets valued at more than € 325,000/year, up to 5 years after the validity of the incubation contract.

The assessment of the economic and innovative potential is based on the degree of innovation, scalability of the business, market potential, the capacity of the management team, and the potential to create qualified employment in Portugal.

Start-ups in Madeira - advantages

Madeira offers excellent advantages for anyone wishing to invest or start a business.

Madeira provides an ecosystem conducive to the founding of companies, boasting an extremely dynamic entrepreneurship centre (StartUP Madeira – which is part of the European network of business and innovation centres), coworking spaces, funding and investment programmes, a university with a technology wing that provides support to start-ups; all supported by a clear governmental commitment to boosting entrepreneurship and attracting foreign investment to the region.

The workforce in Madeira is productive, highly qualified, and most are English-speaking.

Additionally, Madeiran companies benefit from a reduced corporate income tax rate (14.7% or 5% in the International Business Centre of Madeira), significantly lower than the standard rate applicable in the mainland.