Stay ahead of the curve by understanding the latest legal and regulatory obligations for Portuguese companies, ensuring your operations are fully compliant, efficient, and poised for sustainable growth in today’s dynamic business landscape.
Portugal has specific laws and regulations that every Company must comply with, like any other nation. Before you start your journey to establish or run a company in Portugal, it is essential to understand the legal and regulatory requirements governing businesses in this beautiful country. As a company owner or manager, adhering to these rules is crucial to avoid legal troubles and ensure the smooth operation of your business.
Portuguese companies’ critical legal and regulatory aspects include business registration, tax obligations, employment laws, and data protection. Furthermore, it is essential to be aware of the labor laws, which protect the rights of both employees and employers.
In this guide, we will explore these legal and regulatory requirements in a simple and easy-to-understand manner, helping you confidently navigate the Portuguese business landscape.
Different Legal Structures
The first step before starting a business in Portugal is selecting the best legal structure for you. Here is a list of existing business structures in Portugal that will help you better understand the different legal requirements for each:
| Company Type | Description |
| Individual Entrepreneur (Empresário em Nome Individual) | An entrepreneur can provide services or products without requiring a minimum capital. However, personal and business assets are not separated, leading to unlimited liability. One can claim social security fees tax exemption from in the first year. |
| Individual Limited Liability Establishment (Estabelecimento Individual de Responsabilidade Limitada) | This type requires a minimum share capital of €5,000 and ensures a distinction between personal and your business assets. |
| Sole Proprietorship (Sociedade Unipessoal por Quotas) | Owned by a single person, this structure allows you to set your capital with an investment of €1 (€2 for two partners). Creating your own bank account and hiring an accountant is also necessary. |
| General Partnership (Sociedade em Nome Coletivo) | There is no specific minimum share capital for a general partnership. Each partner holds unlimited liability for the Company’s social obligations. |
| Limited Partnership (Sociedade em Comandita) | This type of legal structure requires a minimum investment of €50,000. It consists of two types of partners: Those with unlimited liability who manage the Company, And others with limited liability. |
| Private Limited Company (Sociedade por Quotas) | It needs a minimum of two partners and an investment of €5,000 |
| Public Limited Company (Sociedade Anónima) | A public limited company should have at least five partners, each owning company stock. A minimum capital of €50,000 is necessary to apply for this type of Company. |
Company Registration
Registering a company in Portugal is quick and straightforward, regardless of the type of Company you want to open. Here are the primary regulatory steps you’ll need to follow:
- Select your business name
- Draft the Articles of Association
- Open a bank account for depositing the minimum share capital.
- Apply for licenses and permits with Directorate-General for Economic Activities (DGAE)
- Register for tax and social contributions in Portugal.
Shareholder and Rights
Share Capital Requirements:
| Company Type | Minimum Share Capital Requirement |
| Single quota holder LLC | EUR 1 |
| LLC with two or more quota holders | EUR 2 |
| LLC operating with shares | EUR 50,000 |
| Branches | Variable |
Non-Cash Consideration:
Both limited liability companies by quotas and limited liability companies by shares can issue shares for non-cash consideration.
Automatic Rights Attaching to Shares:
Every shareholder has the automatic rights to:
- Receive profits.
- Vote on resolutions related to shareholders’ decisions.
- Receive information about the Company’s activities.
- Be considered in the Company’s management and supervisory role.
Rights Attaching to Shares:
Some rights attached to shares can be restricted, such as issuing shares without voting rights or shares with different dividend rights.
Preferential shares can also be issued, granting priority rights to dividends or liquidation over other shares.
Management
The management structure of limited liability companies by shares typically includes if the share capital is below EUR 200,000:
- A board of directors
- Or a sole director
Limited liability companies by shares have the option to adopt different management structures. They can have:
- Board of directors with an audit committee and a statutory auditor,
Or
- An executive board of directors, a general and supervisory board, and a statutory auditor.
Financial Reporting
Financial reporting is critical to corporate transparency and accountability, providing stakeholders with crucial information about a company’s financial performance and position.
Portuguese companies must follow the Generally Accepted Accounting Principles (GAAP) and the International Financial Reporting Standards (IFRS) when preparing their financial statements. The main financial reports include:
- The balance sheet,
- Income statement,
- And cash flow statement,
- Along with comprehensive notes that provide additional details.
Deadlines
Portuguese companies typically have to comply with strict deadlines for financial reporting. For instance, large companies often need to submit their financial statements annually, within four months after the end of the financial year. Small and medium-sized companies may have extended deadlines but must submit their financial reports promptly.
These deadlines are crucial for investors, creditors, and other stakeholders who rely on up-to-date financial information to make informed decisions. Adhering to reporting deadlines ensures that financial data is relevant and accurate, promoting confidence in the Company’s operations and financial health.
Audits
A qualified auditor, known as Revisor Oficial de Contas (ROC), is required to certify the accounts in the following situations:
- If the Company is an SA (Sociedade Anónima) or a holding (SGPS) company.
- If, for two consecutive financial years, the Company meets at least two of the following three conditions:
- An annual turnover exceeding €3 million,
- A balance sheet total value surpassing €1.5 million, or
- Employing more than 50 staff members.
Audit Deadlines
As per Portuguese law, companies must audit their financial statements and records annually. The audit scope depends on the Company’s size, activities, and ownership structure.
Deadlines for conducting audits are usually within four months after the fiscal year-end. Timely submission of audited financial reports to regulatory authorities is vital to avoid penalties and maintain business credibility. Adhering to these requirements fosters confidence in financial information and strengthens the overall business environment in Portugal.
Taxes
The taxation system for Portuguese companies is structured to support economic growth and sustainability. In Portugal, before anyone can carry out any legal act, even as essential as opening a bank account, all parties involved must provide a tax identification number. So, if you plan to invest, do business, or set up a presence in the country, you first need to obtain this tax identification number.
Different Taxes for Companies
| Tax Type | Rate | Description |
| Corporate Tax (IRC) | 21% (17% for SMEs) | Flat rate on taxable profit; reduced rate for small and medium-sized companies on their first €25,000 of taxable profit. |
| Value Added Tax (VAT) | 23% (average), 13% (intermediate), 6% (reduced) | Paid by consumers on purchased goods and services. |
| Social Security (TSU) | 34.75% | Single Social Tax on gross salary; companies pay 23.75%, and employees pay 11%. |
| Work Compensation Fund (FCT) | 1% | Ensures workers receive half of owed compensation upon employment contract termination. Employers contribute monthly. |
| Guarantee Fund for Work Compensation (FGCT) | 0.075% | Ensures workers receive half of owed compensation upon employment contract termination. Employers contribute monthly. |
Deadlines
If you’re a corporation, you must file your annual tax return before the end of the 5th month after the financial year ends, usually December 31st. Additionally, other reporting requirements like VAT returns and social security contributions need to be submitted periodically.
Employment
In Portugal, labor and employment matters are governed by various regulations, including the Portuguese Labor Code, collective labor agreements, and European and international laws.
Salary
An employee’s salary should be mentioned in the employment contract, following the contract terms, established standards, or customary practice. However, it must not fall below the minimum wage of € 887 gross per month in 2023.
Working Hours
As for working hours, the employment contract sets the limits. Employees should work at most eight hours per day or 40 hours per week. Nevertheless, the collective labor agreement may establish a shorter workday or workweek.
Employees must stay within the maximum working hours of 12 hours per day or 60 hours per week. It is essential to adhere to this limit; if followed, employees have the right to receive additional rest periods as compensation.
Vacation
Employees in Portugal are entitled to 22 business days of vacation, but there is the possibility of negotiating additional vacation days through the collective labor agreement. For the first year of employment, the employee can take two business days of vacation for each month worked, up to a maximum of 20 days.
However, these additional vacation days can only be taken after six months of work. There is also the possibility of having extra vacation days determined through collective bargaining agreements.
Foreign Employees
For foreign workers, obtaining a work permit or a permanent or temporary residence certificate is generally required, except for EU citizens, exempt from this requirement. This allows EU citizens to work in Portugal without additional permits.
