Portugal is going through a process of legal-administrative-technological modernization in order to attract foreign investments, simplify the constitution of new companies to improve the local economy.
However, it's recommended to those who intend to invest and set up their businesses in the country to get familiar with the legislation and general characteristics of the Portuguese legal system, especially the rules related to corporate, tax, and labor law.
The company's constitution legal base and the kind of activity in practice, the number of people on behalf of the company, the responsibility limits to the company activities, such as the economic needs and the taxes involved on the company operations, in addition to the employment contracts and its issues are some relevant information that should be specifically examined for a successful entrepreneurial project in Portugal.
Corporate Law
One of the first steps for a business project in Portugal is the choice of the legal base form that must be adopted by the company, considering aspects like the type of business activity, the number of partners involved and their responsibility around the company interests, including all the costs and taxes about the company's composition and registration in Portugal.
Therefore, before deciding to enter the Portuguese market and set up a company, it's important to answer the following question: What kind of companies can be constituted?
If you want to develop a business activity in a singular way (individual entrepreneur), you can choose the form of the individual entrepreneur; Single Ownership Society; or Individual Limited Liability Establishment.
On the other hand, if the intention is to set up a Business Partnership (companies), other ways of constitution can be chosen as company by quotas; SA; society in collective name; Limited partnership; or business cooperative.
Taxation Law
In Portugal, as companies are subject to five type of taxes, with emphasis on IRC and VAT.
IRC - Corporate Income Tax
IRC is the main tax for companies. They are covered by this taxation as legal entities and institutions with headquarters or effective management located in Portuguese territory which explores commercial, industrial or agricultural nature activities (commercial companies, cooperatives).
Legal Tax base:
- Legal persons with headquarters or effective management in Portuguese territory who exercise activity of a commercial, industrial or agricultural kind (commercial companies, cooperatives) »» Universal Income Profit.
- Legal persons that are not resident in Portuguese territory which exercise their activity through a permanent establishment »» Profit attributable to a permanent establishment located in Portuguese territory.
- Legal persons not resident in Portuguese territory without a permanent establishment »» Taxed by withholding tax over the resources earned in Portugal.
Rate:
- Resident entities and stable branches of non-resident entities »» 21%.
- Resident entities qualified as small or medium-sized companies, on the first € 15,000 of tax base »» 17%.
IVA (VAT - Value Added Tax)
IVA is an indirect tax charged over the supply of goods and services payments. The IVA mechanism provides for the deduction of IVA. incurred in the purchase of goods and services between companies. Each economic operation can be reduced over the IVA supported during the purchase and selling supplies and services transactions. In this case, IVA runs through the entire economic circuit to the final customer, who tolerate the entire tax.
IVA Rates:
- Standard Tax Rate »» 23%
- Reduced Tax Rate (food and other essential goods) »» 6%
- Intermediate Tax Rate (food and beverage services, etc.) »» 13%
Labor Law (Labor)
There are professionals who work under contracts and professionals who work for receipts, called green receipts (recibos verdes).
Those who work with terms stipulated in the employment contract must follow the company rules, as established schedule, security patterns, and other rules not prohibited by law and written in the contract. In the other hand, the worker normally is entitled to vacation (22 working days) and holidays, Christmas benefit (13th salary), alimentary tickets, social security payment(INSS) been the company responsibility.
Those hired by the green receipts ways are considered autonomous, by the law, they are not entitled to holiday and Christmas allowances, nor to days of holidays or holidays. They must pay social security by themselves, and do not have to strictly follow a schedule, being able to practice their activities in the company or other places stipulated with the employer.
There are no major difficulties in ending an employment relationship in Portugal. The worker can resign from a job by notifying the employer, as well as the company is also allowed to dismiss the employee, who will be entitled to the subsidy allowance, paid by Social Security, if the employee has worked for at least 360 days and have been registered this wages during the 24 months prior to unemployment situation.