The News

Updated policies and business rights in Portugal

27/02/2022

There are two forms of business that foreign investors doing business in Portugal often use: a joint stock company (SA) or a limited liability company (LDA). The procedure for setting up a business usually lasts for about 1 month. The minimum capital contribution for SA is €50,000 and LDA is €5,000. Portuguese law does not provide for a maximum capital contribution.

There are two forms of business that foreign investors doing business in Portugal often use: a joint stock company (SA) or a limited liability company (LDA). The procedure for setting up a business usually lasts for about 1 month. The minimum capital contribution for SA is €50,000 and LDA is €5,000. Portuguese law does not provide for a maximum capital contribution.

Tax policy and tax rates

Income tax:

For individuals in Portugal is Imposto sobre o Rendimento de Pessoas Individuais (IRS), and for businesses it is IRC. All types of income from regardless of whether the source is personal or business are subject to tax (except in the case of operations in the Acores Islands or Madeira Free Trade Zone). Portugal has one of the lowest income tax rates in the European Union (EU). The current tax rate is 34% (down from the previous level of 36%), some localities apply higher than the above average of 10%.

Value Added Tax (VAT)

VAT has been in place in Portugal since the country joined the European Union in 1986. VAT is calculated on the basis of the value of goods including import tax and applies to all items as follows:

The tariffs are reduced to just 5% on essential commodities such as oil fuel, food and some pharmaceuticals;
The average VAT rate is 12%;
The basic VAT rate is 17%;
Excise taxes on alcoholic beverages, tobacco, gasoline and vehicles.

Goods exported out of the EU are subject to VAT but usually this tax is equal to 0%. Goods imported from outside the EU into Portugal are subject to VAT.

Import duties:

Portugal is a member of the EU, so it offers preferential import tax rates for goods originating from EU associate member states, developing countries and members of the European Free Trade Association (EFTA). The European Community (EC) has replaced national rules and regulations for import tax rates with expanded European directives. These directives are in line with national regulations in Portugal.

Portugal is a member of the harmonized trading system within the EU. Common Customs Tariffs (CCT) are imposed on goods imported from non-EU countries. Import duties are largely calculated at the price of goods, based on the GATT Tax Calculation Value Code (approximately equal to the value of goods including transportation and insurance costs). The import tax rate for each specific item is assessed on the quantity or net volume of the imported item. Special import tax rates apply to tobacco, alcoholic beverages, gasoline and motor vehicles.

For more information on import duties into Portugal, the country's Customs Office can be contacted at the following address:

Direccao-Geral das Alfandegas Ministerio das Financas

P-1194 Lisbon

Tel: +351 1 886 8185

Fax: +351 1 888 4208

2. Free Trade Area

Portugal has two foreign trade zones and a free trade port in the autonomous territories of the Madeira and Azores islands. These foreign trade zones and free-trade ports operate on the basis of rules and regulations that encourage EU trade for member states. Businesses established in these areas enjoy import-export, financial and tax incentives.

3. Setting up a business