Startups in Portugal: your 5-minute read
The new Tax Incentive for Scientific Research and Innovation (which we unofficially named “NHR 2.0” because it mimics most of the features of the former non-habitual resident program) provides a unique set of personal income tax benefits to qualifying employees and members of the governing bodies of entities certified as Startups in Portugal.
This category is expected to be one of the main highlights of NHR 2.0, but several questions remain: what is a Startup under Portuguese Law? And how can you get proper certification as such?
What is a Startup in Portugal?
A startup in Portugal is any company that:
- Has been in operation for less than 10 years;
- Employs under 250 workers;
- Has an annual turnover of less than EUR 50 million;
- Is not the result of a transformation or split from a large company, and no large company holds a direct or indirect majority stake in its capital;
- Has its headquarters or permanent representation office in Portugal, or it employs at least 25 employees in Portugal; and
- Meets one of the following conditions:
- Is considered to be an innovative company under the terms defined by Ministerial Order no. 195/2018, of July 5th or which has been recognised by the National Innovation Agency in the practice of research and development activities or certification of the recognition process for companies in the technology sector; or
- Has concluded at least one round of risk capital financing by an entity qualified to invest in risk capital subject to supervision by the CMVM or by a similar international authority or through the contribution of capital instruments by investors other than the founding partners or business angels, certified by IAPMEI; or
- Has received investment from Banco Português de Fomento, S. A.
Alternatively, companies that do not meet the conditions outlined in f) above can apply to Startup Portugal for a prior declaration stating that the applicant has an innovative business model, product or service or a rapidly scalable business with high growth potential.
The route of obtaining this prior declaration from Startup Portugal should not be seen as a fast-track procedure. Hence, applicants should bear in mind that the requirements for Startup certification are strict and that Startup Portugal will ask for additional information to assess full compliance with the regime.
How can I get my company certified as a Startup in Portugal?
Portuguese Startups are recognised through a prior communication procedure with Startup Portugal (a non-profit entity with public utility status that supports the Government in fostering entrepreneurship). Startup candidates will need to provide several elements:
- Full identification, as per the Portuguese Commercial Registry;
- Date of start of activity (according to information from the Portuguese Tax Authorities);
- Number of employees;
- Turnover in the previous financial year;
- A proof that the company is not the result of the demerger or transformation of a large company, nor does it have a majority shareholding (direct or indirect) in a large company.
Recent Startups in Portugal must indicate the number of employees registered with Social Security in the previous month and the estimated turnover in the declaration of commencement of activity submitted to the Portuguese Tax Authorities.
In addition, Startup Portugal will request documents evidencing that the company has an innovative business model, product or service or a rapidly scalable business with high growth potential - the applicable legislation intends to grant the certification only to companies that demonstrate this unequivocally. Hence, it would be wrong to consider that this certification will be within reach of any project, even one with an innovative angle.
How much time will it take to certify my startup in Portugal?
According to the applicable regulations, the Portuguese Startup certification is issued within 5 days after the submission of a successful application with all the relevant forms and documents.
The certification is valid for 3 years, but Portuguese startup status may be terminated upon communication from the company itself or whenever the assumptions that led to its recognition by Startup Portugal cease to exist.
I’m an employee or board member of a Startup in Portugal. What will be my benefits under NHR 2.0?
To the extent that you were not a tax resident of Portugal in any of the preceding five years and you become a tax resident of Portugal as from 2024, you will be entitled to:
- 20% flat rate on Portuguese-sourced employment or entrepreneurial income;
- Exemption on foreign income from several categories, namely employment income performed abroad, self-employment income performed abroad, foreign rental income and capital gains on foreign-based assets.
Be mindful that NHR 2.0 does not provide any benefits regarding pension income and that income from blacklisted jurisdictions might be subject to a flat 35% rate.
Are there any additional benefits?
Yes. They should be seen on a case-by-case basis, but have this in mind:
- Startups in Portugal are subject to a 12.5% corporate income tax rate (in Mainland Portugal) or 8.75% (in Madeira) on the first € 50 000 of taxable income (the exceeding amount will be taxed at a rate of 21% in Mainland Portugal or 14.7% in Madeira);
- Startups in Madeira may also find a unique set of benefits, such as the special corporate income tax rate of the Madeira International Business Centre (5%);
- Portugal also offers a competitive regime of taxation of stock options and cryptoassets;
- Non-EU employees and Board Members of Startups are eligible for a fast-track residence permit procedure.
NEWCO is your trusted partner, with over 30 years of experience assisting investors and expats in Portugal and Malta.
Our experienced team of tax and accounting experts can assist with the incorporation, certification and maintenance of your Startup in Portugal, as well as the registration as a non-habitual resident and residence permit application.