By Shannon Power, 25th January 2023
Ever since the pandemic, there has been a heightened interest from many entrepreneurs to base their new businesses in places that have the benefit of a warmer climate. Portugal has increasingly become one of the most attractive European countries to investors around the world. Besides its hot climate, Portugal offers a wide range of financial and geographical benefits for those looking to invest in the country. This blog shines a light on some of the benefits of incorporating your business in Portugal.
Geographical, Political, & Economical Benefits
Portugal has been a member of the European Union since 1986, meaning the country uses the euro plus the European rules on the free movement of goods, capital, services, and labour are fully in place. Portuguese is the country’s official language and is the 7th most spoken language in the world, making it very easy to communicate with other countries. Plus, 71.8% of the population speaks a second language. Portugal also maintains a thriving cultural and economic bond with multiple countries such as Angola, Brazil, Cabo Verde, Guinee-Bissau etc.
Portugal is directly accessible from the Atlantic Ocean with numerous ports with advanced commercial capacity placed along its west coast. This allows for easy imports and exports of products to different continents. On the country’s opposite side is the Spanish border, which is well-equipped with a developed, far-reaching rail and road network. This allows direct access to the rest of Europe’s economic trading ground.
Low Tax Rate & Benefits
Portugal has a flat CIT rate of 21%, plus additional municipal tax which varies between 1.5%-7% and may be imposed whenever companies’ income exceeds specific amounts. Lower tax rates may apply to companies operating in different regions across the country. For example, a Madeira Local Company can benefit from 11.9% corporation tax up to €25,000 taxable profit. This entity can then migrate to become a Madeira IBC that will offer additional corporate tax benefits reaching the 5% rate.
If you are paying high taxes in your current country of residence, Portugal also offers a tax category known as a “non-habitual resident”, where a low tax rate of 20% is applied to earnings. This can be used by people in a number of different professions, such as artists, actors, architects, dentists, doctors, engineers etc. This status can be held for a maximum of 10 years.
Foreign Investment Benefit Schemes & Programmes
Portugal offers many schemes and programmes that can have tax and economic benefits for companies looking to incorporate. The significant impact of the 2008 financial crisis led to the Portuguese government instating multiple tax incentives for foreign investment. These incentives mainly favoured investments in sustainable growth, job creation, and company investment.
Investment incentives schemes for singular people:
- Seed Programme – Aims to support capital investment in micro/small innovative enterprises
- Capital gains from the sale of shares in micro and small enterprise
- Tax regime for non-habitual residents
- Tax regime applicable to ex-residents
Investment incentives schemes with tax benefits for companies:
- Contractual benefits to productive investment
- Investment support tax scheme (RFAI)
- Tax incentive system for research and business development (SIFIDE II)
- Deduction for retained and reinvested profits (DLRR)
- Installation of companies in inland territories
Multiple Work Visa Options in Portugal
The Residence Authorisation for Conducting an Investment Active regimen, also known as the Golden Visa, is a citizenship scheme that involves making a substantial investment in exchange for residency. This scheme is for citizens outside of the EU and grants them a visa to work and live in Portugal. These investments could include capital transfer, creation of jobs, purchase and/or regenerate real estate property, investment in scientific research, art, culture, heritage, or creating a small to medium-sized business.
Golden Visa holders only have to reside in Portugal for 7 days in their 1st year. For each year thereafter they must reside for 14 days. This visa allows the holder to have the benefits of EU citizenship without relinquishing their own passport. Then, if they so wish, can apply to become a Portuguese citizen after 6 years.
A second option is the Investor Visa. This is for larger companies where applicants must put in a minimum capital investment of €1,000,000, create at least 10 jobs with their project, and acquire a property for a minimum of €500,000.
If you are looking for more information on Portugal Company Formations and are looking to get started, Euro Company Formations would be happy to help! Contact us today on + 353 (0) 1 6461627 or fill out our contact form.