All About Starting a Business in Portugal
For starting a business in Portugal successfully, you must be well informed. Get to know all about the market and how to obtain a D2 visa.
Have you thought about starting a business in Portugal but still have questions about which direction to start?
Would you like to have access to more information related to obligations and costs to develop your project?
Have you considered that your business, despite looking promising, may not be well received by Portuguese consumers?
Or maybe you’re looking for more information about the procedure for applying for a Business Visa in Portugal.
Well then. This article was created to address the main concerns related to foreign entrepreneurs and to provide accurate information about the development of a business in Portugal.
Therefore, we will analyze the following topics in this guide.
Starting a business in Portugal
Situation in Portugal
Portugal is undoubtedly one of the European countries that have stood out the most in the area of entrepreneurship these days.
Many giant companies like Google, Vodafone, and Volkswagen, or even Startups like DefinedCrowd, Sword Health, and Jscrambler are already operating in Portugal.
The reasons for choosing Portugal as a destination are many, but we can highlight the following:
Safe environment
Excellent infrastructure to develop a business
Incentive policies for business development
It is a European Union member
Low cost of living
The high-quality public health system
Therefore we can classify Portugal as a small country with a developed entrepreneurial structure.
Regarding structure, we can emphasize, for example, the quality of the internet in Portugal, one of the fastest in the world.
In 2020, this country ranked 32 among 207 countries analyzed, with an average download speed of 22.75 Megabits per second (Mbps).
Beyond the internet, essential for the successful development of an enterprise these days, Portuguese cities have been developing spaces for the establishment of new companies. According to a report by PEGN magazine:
“In addition to bringing together, diverse communities of startups, innovation centres, and coworking offices played an essential role in the revitalization of urban spaces in the city (Lisbon). This is the case with projects such as Beta-i and Lacs, dedicated to digital businesses and entrepreneurs of the creative economy"
As highlighted by the StartupHub Portal, in 2020, Portugal housed 1,803 registered Startups, 153 incubators and accelerators, and 50 investor companies. Not bad for a country of just over 90,000 km².
In other words, Portugal has excellent conditions for residence in addition to an outstanding structure for the development of business at a reduced cost.
Opportunities in Portugal
Lisbon and Porto are the best cities to start a business in Portugal.
This whole structure was recently implemented, with Portugal starting its modernization process and encouraging the creation of companies in the last 10 years.
For this reason, we can consider that we are experiencing a period of growth in Portugal’s business structure. What does this mean? Opportunities.
As Portugal is in the process of development, entrepreneurs can still explore many areas, and consumers are interested in trying new experiences.
This picture is even more appealing when we consider the few competitors in many areas.
See below some companies that took advantage of this window of opportunity and ended up starting a business in Portugal.
Hive: Electric scooter rental
IndiGo!: Fast food Indian snack bar
Laser Game Pro: Laser Shot style games
Fitness Hut: Compact fitness centre
Açaí Fusion: Açaí chain in a shopping mall
Sushimore: Fast food Japanese snack bar
Whether to develop a greenfield business or open a consolidated franchise, Portugal has excellent conditions for the entrepreneur.
Areas of activities
Commerce
In addition to companies focused on the technology field, there are other branches of activity that are developing at a fast pace, among which we can highlight the commerce sector.
Portugal’s consumer market has grown like never before in the last 5 years. This boom resulted from numerous factors, among them:
The arrival of immigrants (new consumers) attracted by the Portuguese living conditions.
The increase in the number of tourists, mainly in the regions of Porto, Lisbon and Algarve.
The improvement in the economic conditions of the country and its inhabitants.
The ease of importing and exporting products as a result of its integration with the European Union.
These are some of the factors that contributed to the increase in local trade, whether in the food sector, through the creation of new bars, cafes, and restaurants, but also in the consumption of manufactured products, especially in the textile and footwear, among so many others.
It is important to highlight that the resale of imported products also assumes an important role in the trade sector, with physical or virtual establishments frequently selling Brazilian, Chinese, American, French products, among others.
Services
Services also grew in the same proportion. For example, activities aimed at advising entrepreneurs have never been more demanding.
Viv Europe itself was one of the companies that emerged to advise entrepreneurs to establish themselves regularly in Portugal.
In this sense, through the gathering of professionals who have experience in the sector of development and regulation of companies, this company started its activities to assist foreign citizens and companies to settle in Portugal.
In addition to advisory services, other areas have also followed this growth in Portuguese consumer power, notably personal care (manicure, hairdressing, and aesthetics) and entertainment (festivals, parks, and cinema).
Finally, we saw an increase in the demand for services related to business activities, including accounting, legal and administrative advice.
The COVID impact
Has the Covid-19 crisis in Portugal changed this picture? Sure.
Although Portugal’s business structure is still standing, COVID interrupted most business plans due to the uncertainty that comes along with the crisis.
Despite the fact that this situation could be a reason for the growth of new businesses focused on the tech area, we are optimistic that with the vaccination we will have a better environment to develop new businesses in Portugal overall.
Business attraction policies
In order to take advantage of the good moment in Portugal, the government of this country has implemented policies to encourage entrepreneurs. Starting a business in Portugal is getting easier, thanks to them.
Behind these policies, we see the interest in promoting Portugal and leveraging it as a destination for business development. Among the implemented policies, we can highlight the following:
Non-habitual resident regime
The government established the Non-Habitual Resident Regime to, among other reasons, encourage the arrival of skilled professionals to reside in Portugal by granting tax benefits.
Professionals who fall into the categories listed in the law will be able to develop their activities under special conditions in Portugal.
Viv Europe has a Complete Guide on the Non-Habitual Resident regime that you should definitely take a look at.
Behind these measures is the interest in bringing specialist professionals from certain areas to work in companies located in Portugal and contribute to the country’s growth.
D2 Visa
This is a visa that allows entrepreneurs to reside in Portugal, as long as they develop their business in this country.
After the approval of the business plan by the Portuguese government and upon carrying out activities aimed at developing the business in Portugal, the entrepreneur may reside in Portugal for a certain period.
It is worth mentioning that, if you, as the entrepreneur, remain in Portugal on a regular basis for 5 years, you may even apply for Portuguese nationality.
Startup Visa
Like the D2 Visa, the Startup Visa seeks to attract companies to develop business in Portugal.
This visa, unlike D2 Visa, is intended exclusively for Startup companies, mainly focused on technological activities.
In addition, a Portuguese incubator needs to support the development of these companies.
Portuguese market
When you establish a company in Portugal, it seeks a financial return that justifies the partners’ investment.
In this way, the company expects citizens residing in Portugal to consume their products or services in exchange for income.
The more heated the consumer market is, the greater the probability of a financial return, as more sales are expected to be achieved.
Of course, in addition to the heating up of the market, other aspects can influence the consumer’s purchase decision, among them:
Consumer purchasing power
Price of the products
Cultural aspects
Degree of essentiality of the product or service
Climatic conditions (depending on the product)
However, as a general rule, the more heated the market, the greater the consumption.
In this sense, since 2017, Portugal has maintained an upward curve in consumption, with a slight reduction in the pace in mid-2016.
Also, in 2020, as a result of the global crisis resulting from COVID-19, we saw an expected reduction in consumption.
Exportation
The larger the consumer market, the greater the entrepreneur’s chances of success.
In this sense, as Portugal is a member of the European Union, this country can trade with the other countries that make up this economic bloc, without the imposition of additional taxes or fees.
All trade between members of the European Union takes place smoothly, as the economic bloc has removed trade barriers that previously existed, in favor of integration.
In this sense, we can see that the total value of products exported by Portugal has been increasing annually.
This good phase in terms of production in Portugal can be an opportunity for ex-pats.
According to the National Statistics Institute, below are the products most exported by Portugal:
4,217 million euros: Wood, plastic, rubber, paper, cardboard, cork, synthetic and artificial fibres, optical and precision instruments.
2,192 million euros: Textiles, footwear and hats.
2,012 million euros: Passenger cars materials
1,454 million euros: Construction material and parts of cast iron, tools, appliances and electrical materials.
1,098 million euros: Fresh wines and grapes, fish, vegetables and fruits in general.
1,004 million euros: Petroleum or bituminous mineral oils, natural gas in a gaseous state.
Now, let’s analyze the D2 Visa, which is aimed at citizens who intend to develop a business activity in Portugal.
Obtaining a D2 Visa to Portugal
General features
Before we start the analysis of the D2 Visa, which makes it possible to obtain the Residence Permit in Portugal, we will pass on some information that often raises questions to those interested in residing in Portugal. They are as follows:
In Portugal, there are several types of Visas.
The best known are the following:
Schengen Visa – For short stays up to 90 days. You can get it for tourism, family visits, business, seasonal work, transit, and more.
Temporary Stay Visa – Intended for stays in Portugal for a period of up to one year.
Residence Visa – Intended for stays of more than one year.
The period for issuing visas may vary according to the Portuguese Consulate in the applicant’s country of residence.
After the issuance of the Residence Visa (in any of the modalities), the applicant must arrive in Portugal in order to comply with the second stage of the process.
At this second stage, the applicant can remain in Portuguese territory for up to 4 months (with the possibility of two entries) until the interview at SEF.
Having a Residence Permit for a period of 5 years allows its holder to obtain a Permanent Residence Permit and the Portuguese Nationality.
In this case, the new Portuguese citizen can take advantage of all the benefits of being a member of the European Union.
D2 Visa Features
The D2 Visa, also known as Business Visa, consists of an authorization granted by Portugal so that the applicant can develop a business activity in this country.
We will carry out a detailed analysis of this visa.
Requirements
In this item, we will analyze the most important requirements for applying for the D2 Visa.
According to the specifics of the business and the applicant, you may have to present other requirements, which is why we suggest the assistance of a lawyer to carry out this process.
As a general rule, the main requirements for applying for the D2 Visa are as follows:
Proof of means of subsistence
You can prove your livelihood by submitting documents proving your financial status. They must be enough for you to be able to reside in Portugal during the period of the Residence Permit.
Currently, it is necessary to present documents proving the amount of, at least:
7,980 € for the first adult
3,990 € for the second adult
2,294 € per child
You must deposit this amount in a bank account of a Portuguese bank.
Thus, before applying for the D2 Visa, the applicant must have a bank account in Portugal with the mentioned amount deposited. Read also: The best banks in Portugal for expats to open accounts
Incorporation of the company in Portugal
The applicant has to prove the opening of a company in Portugal.
You must also perform this procedure before applying for a D2 Visa.
If you as an entrepreneur cannot come to Portugal in person, then you must authorize a lawyer to provide this task remotely.
It is important to mention that before the opening of the company, you must obtain your Tax Number (NIF), as it is a required document for the creation of a company.
Finally, many people do not pay much attention to the costs related to the development of the business before the start of the activity.
As a requirement for opening the company, the applicant must provide the following information:
Qualification of members
Social object
Share capital
Distribution of quotas
Appointment of the manager
Appointment of accountant
Depending on the business structure, you’ll need to insert different information in the Social Pact.
Usually, starting a business takes about 4 days and costs between 160€ and 360€.
Business plan
We can certainly consider the Business Plan as one of the most important documents for applying for the D2 Visa.
Through this document, you can provide important information related to the business you will develop in Portugal, considering, among other characteristics:
The business object
The business structure
The qualification of entrepreneurs
The location of the establishment
The initial investment
The target audience
The expectation of income
These are just some of the information that you must include in the Business Plan.
Entrepreneurs themselves will also be subject to analysis to issue the D2 Visa. The higher the qualification in terms of knowledge and experience in the field, the better.
On the same line, the more structured, researched, and informative the document, the greater the chances of obtaining a Visa.
For this reason, although it is not mandatory, many entrepreneurs prefer to carry out market research in Portugal before preparing the Business Plan.
There are companies in Portugal that assist the entrepreneur in preparing the Business Plan. Viv Europe is one of them.
As Viv Europe already has experience in preparing the Business Plan with a focus on obtaining the D2 Visa, the process will be made easier.
Proof of accommodation
At this stage, to get on with the plan of starting a business in Portugal, you’ll need to present proof of accommodation. The document shows the place where you intend to reside in Portugal, as soon as you enter the country.
Depending on your country of origin, you may present different documents in order to apply for the visa. Among the most common documents we can highlight the following:
Lease agreement
Deed of Property
Invitation letter signed by a person residing in Portugal
Proof of hotel reservation for at least one week
International Medical Insurance
International Medical Insurance must be valid throughout the territory and cover the entire duration of the intended stay.
This insurance must cover the expenses resulting from repatriation for medical reasons, urgent medical assistance, and urgent hospital care, and the amount covered must be at least 30,000 euros.
The biggest challenges of starting a business in Portugal
As far as we can tell, the D2 Visa is not a simple visa to be obtained.
Portugal needs to make sure that the business the applicant will develop has the potential to be successful.
Thus, if the business does not have the minimum requirements to be operational, the visa application will be denied.
Also, you must prove that you have financial conditions to support the costs related to the creation and development of the business.
For these reasons, having a financial reserve is essential for the development of the company.
Among the greatest difficulties seen by the entrepreneur who thinks about starting a business in Portugal, we can highlight the following:
Finding accurate information about Portuguese consumer habits
Carrying out a safe budget plan for the business development in Portugal
Choosing the location of the business establishment
Provisioning the amount for expenses related to the business
Understanding the labour obligations and costs in Portugal
These are just a few of the many questions that may arise for the foreign entrepreneur.
Making the move to a new country is already a big challenge, let alone starting a business at the same time.
Thus, although we have gone through the main guidelines for the entrepreneur who considers starting a business in Portugal, each case must be analyzed taking into account its particularities.
In this way, the pre-operational stage is undoubtedly the most important to creating the basis for business success.
Seeking professional advice at this stage can be crucial to the success of the business.
Franchises
Another business model widely used to obtain a D2 Visa is the franchise.
In short, the franchise model is very advantageous for the following reasons:
Business model already tested and approved
Operational structure ready to be implemented
Suppliers, employees and company guidelines already established by the franchisor
Marketing activities of the business developed by the franchisor
Existence of consumers who already know and trust the brand
Quality control carried out by the franchisor
It is obvious that the implementation of the franchise has many advantages.
The simple fact of having a Business Plan for a successful enterprise can make it easier to obtain the D2 visa.
It turns out that this type of business also presents, as a counterpoint, some additional obligations. Amongst them:
Business supervision by the franchisee
Lack of freedom in the business promotion strategy
Need to pay franchise royalties
Thus, in addition to the percentage of revenue that must be transferred to the franchisor, the costs of advertising and promoting the business will also be charged to the franchisee.
Comparison of Visas for Entrepreneurs
Although the D2 Visa is aimed at entrepreneurs, other types of visas also have a connection with business activity. Which are:
Golden Visa for investment in companies
Startup Visa
We will summarize the main characteristics of these visas so that the reader can choose the one that best matches his preferences:
Eligibility
D2 Visa: People who are interested in starting a new business or opening a franchise in Portugal.
Golden Visa: People who want to invest financially in a company that is already operational in Portugal.
Startup Visa: People who want to develop their Startup company in Portugal.
Main obligations
D2 Visa: Create a business plan and develop the company according to the guidelines of this document in Portugal.
Golden Visa: Make the investment of at least 350,000€ in operating companies in Portugal.
Startup Visa: Apply for the Startup selection process through IAPMEI and create or transfer the business to Portugal.
Characteristics of the target audience
D2 Visa: People who have an interest and financial conditions to develop a new company or franchise in Portugal.
Golden Visa: People who have the financial conditions to make the investment and have no interest in participating in the development and operational process of the business.
Startup Visa: People who already have a Startup company or who is planning to develop one and would like support to implement the business in Portugal.
By analyzing the information, we can see that each type of visa has its requirements and is intended for a diverse audience.
Operational expenses
We will now analyze the costs related to the exercise of business activity. You must consider such expenses to develop any type of business activity in Portugal.
Among the main expenses, we can list the following:
Employees
Employee costs (payroll) usually reflect the company’s main disbursements. However, they are extremely important for the development of your activity.
In Portugal, the employee receives a total of 14 salaries per year.
In addition to the salary, the company must pay a share of the worker’s Social Security payment, in the amount of 23%, and the worker must pay the remaining 11%.
Payment by the employer of occupational accident insurance is mandatory and falls on 1% of the employee’s salary.
Thus, considering an employee who receives a gross monthly salary of 1,200€, his annual salary will correspond to 22,409.76€, and his effective monthly cost to the company will be 1,867.48€.
Other expenses regarding starting a business in Portugal
Obviously, in addition to employee expenses, the employer must bear the company costs for the development of the activity to be carried out, which must be included in the Business Plan.
Among them, we can highlight the following:
Acquisition of raw material
Logistics
Acquisition or lease of property
Hiring an accounting service
Hiring service providers
Payment of registration fees
Purchase of machinery
Marketing activities
Still interested in starting a business in Portugal? Make sure you read our answers to the Frequently Asked Questions about Developing a Business in Portugal.
Tax Burden
Depending on the type of activity to be developed by the entrepreneur, different taxes may be levied on the activity.
We will deal with this topic with taxes that must be paid considering all businesses, without exception.
Corporate Income Tax (IRC)
IRC is the main tax levied on income resulting from the exercise of a business activity, which applies to the taxable amount of the organization.
Taxes for businesses in Portugal
It corresponds, quite simply, to the difference between the total income and the total expenses of the company in a given period.
IRC rates apply to the taxable amount.
For most companies, the rate of 21% is considered.
Also, in most municipalities, the municipal surcharge in the amount of 1.5% is levied as taxable profit.
The calculation of the company tax must be performed by a qualified accounting professional, given the complexity and responsibilities arising from this function.
Starting a business in Portugal: Conclusion
We hope that this article was useful for the decision to undertake in Portugal.
Portugal is going through a special moment in terms of opportunities and the development of a business will certainly be successful if some precautions are taken.
Article by Viv Europe - Official Legal and Relocation Partner to KipperTree.
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