7 Good reasons to start a business in Portugal in 2023

Portugal is increasingly seen as the ideal country to invest in. Here are 7 reasons why you should consider Portugal to start a business or relocate an existing one.

1. Portugal is a Member of the EU, and VAT Registration is automatic

Portugal has been a member of the European Union since 1986. This offers many advantages for companies planning to expand in the European market. The European Union has a unified market with over 500 million consumers. The European Single Market allows the free movement of goods, services, capital, and people, which means that Portuguese companies can sell their products and services within the entire EU without having to deal with tariffs or trade barriers.

Another advantage of starting a business in Portugal is that the VAT registration is automatic and done at the moment of the opening of the company’s activity. Unlike in other European countries, Portuguese companies do not need to undergo a lengthy VAT registration process to receive a valid VAT number for intra-community transactions.

VAT (Value Added Tax) is an indirect tax levied on the supply of goods and services for consideration. It is paid by the final consumer but collected and paid by businesses. In Portugal, the maximum VAT rate is currently 23%, while in Madeira, it is 21%.

2. Portugal’s Favourable tax regime

Portugal benefits from a very attractive tax environment. The social and business environment is stable, which guarantees the security of your investments.

One of Portugal's most significant tax advantages is the participation exemption regime, which allows dividends paid to companies by their subsidiaries to be exempt from taxation, provided that certain requirements are met. Moreover, any capital gains resulting from the sale of shareholdings in subsidiary companies are also exempt from tax.

scheme that illustrates how participation exemption works in portugal

Portuguese companies are subject to a corporate income tax (IRC) rate of 21%. However, this rate is reduced for companies based in the Autonomous Region of Madeira (14.7% or 5%).

Advantages of starting a business in Madeira

Madeira is an Autonomous Region of Portugal, fully integrated into the Portuguese legal and tax systems. The high degree of autonomy allows companies based in Madeira to enjoy exclusive perks.

The International Business Centre of Madeira (IBCM) is an instrument of economic development that provides the most advantageous tax system in Europe.

Starting a business in Madeira is a good option as it gives access to

  • a reduced corporate tax rate of 5% for companies based in Madeira's IBC and 14.7% for all other companies.
  • exemption from withholding tax on the distribution of dividends to shareholders
  • exemption from withholding tax on the payment of royalties, services and interest to third parties
  • tax credit for international double taxation
  • exemption from withholding taxes on dividends, interest and royalties received from EU subsidiaries
  • an 80% reduction in stamp duty, municipal transaction tax (IMT), municipal property tax (IMI), regional and municipal surcharges, notary and registration fees
  • a 66% reduction in autonomous taxation, in proportion to the applicable corporate income tax rate

3. Innovative and technological business environment

Portugal is one of the leading European hubs for entrepreneurs looking to start a business. The Portuguese Government is committed to supporting entrepreneurship and technological innovation. There are various initiatives and programmes to help start-ups and businesses, including tax incentives, funding opportunities and business incubators.

The emergence of innovative companies and start-ups has boosted the Portuguese business environment, particularly in the technology and digital sectors. These companies contribute to the latest advances in artificial intelligence, blockchain, and the Internet of Things, developing new products and services that transform industries and break conventional business models down.

Another factor contributing to Portugal being an attractive place to start a business is the Portuguese government's commitment to supporting entrepreneurship. A series of policies have been implemented to reduce the bureaucratic and administrative burden on businesses, making it easier to start a business in Portugal.

For start-ups, various funding opportunities are available, from grants to loans and venture capital.

4. Multiple residence permits

If you are a citizen of a non-EU country and plan to start a business in Portugal, obtaining a residence permit is one of the first factors to consider.

The good news is that Portugal has residence permits specifically designed for entrepreneurs and investors, making obtaining the necessary permits to live and work there relatively easy.

The Start-up Visa is a residence permit aimed at international entrepreneurs and investors. To be eligible, you will need to demonstrate that your business idea is innovative and has the potential to create jobs and contribute to the Portuguese economy.

There are other options available for entrepreneurs who want to start a business in Portugal or for remote workers who come to live in Portugal.

By taking advantage of these programmes, it is possible to enjoy all Portugal offers as a destination for entrepreneurship and innovation.

5. Qualified and experienced workforce

One main factor that makes Portugal an excellent country to start a business is the significant government investment in education and research. Portuguese universities and research centres produce engineers, scientists, managers, and other top talents yearly.

The workforce in Portugal is productive and skilled, with a large proportion of it being fluent in English.

6. Safety, stability, and quality of life

Portugal is one of the safest countries in the world. Crime rates are low, and the Portuguese people are welcoming, inclusive, and tolerant. The Mediterranean climate, mild and delicious gastronomy, with world-renowned wines make Portugal also one of the best countries in the world in terms of quality of life for expatriates (Source: InterNations).

The stability of a country is a crucial factor in attracting foreign investment. Portugal’s secure social environment complements a stable and moderate political environment.

Portugal has an excellent infrastructure and access network. There are several international airports with daily trips to capitals and other major European and world cities. Portugal also has a solid telecommunications network and excellent internet connection speeds.

7. Trusted partners

Investing in a new country is always challenging, requiring local knowledge, experience, and an attentive and thorough follow-up. NEWCO offers a complete range of services to help you set up and maintain your investments in Portugal.

We provide an integrated service from the moment you express your interest in investing in Portugal to the full integration into your new business environment.

This is the best way for you to concentrate on your business without having to worry about administrative, tax or legal issues.

To ensure that we provide you with an integrated experience, we work with a network of trusted partners who are experts in their areas of activity.

We have 30+ years of experience and the necessary know-how to ensure the success of your investments in Portugal.

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