Bordered by Spain and the Atlantic Ocean, Portugal is quickly becoming one of Europe’s most important hubs for startups and tech. With an economy that keeps growing, Portugal is a popular destination for digital nomads and workers at major tech companies, including Microsoft, Amazon, and Google.
In recent years, the Portuguese government has made it easier for companies outside of the country to set up a subsidiary in Portugal in order to encourage foreign investment.
However, when making the decision to open a subsidiary, there are many important considerations that outside companies should take into account.
The main language in Portugal is Portuguese, and almost all day-to-day business matters are conducted in this language. This means your team will need to know Portuguese.
Further, Portuguese business deals heavily with English, French, and Spanish speakers, so being multilingual allows you to have an advantage in everyday business interactions.
For foreign companies looking to expand their business presence in Portugal, the three main subsidiary types are:
Most parent companies choose to incorporate their business as either a private or public limited liability corporation. This option is the easiest and allows both the parent and subsidiary within Portugal to have relative freedom.
There are quite a few steps that must be followed to set up a subsidiary in Portugal. The steps are:
Register your company name at the National Registry of Collective Entities
Set up a bank account in Portugal for business matters
Obtain a Certificate of Registration
Register each employee
Notify the Labor Inspectorate
Register for insurance
All of these steps must be followed in order to comply with Portuguese laws of incorporation.
There are different regulations that dictate how a company can incorporate in Portugal. Smaller companies have the liberty of registering as a private limited liability company (LDA). For most companies, this is the most popular structure and the easiest one for government regulations.
To meet the qualifications for a private limited liability company, the following criteria must be met:
Have a low initial capital investment/expenses
Need 2 founders with a minimum of 5,000 EUR of share capital
Each shareholder has a limited liability based on what they can contribute
Requires a single director who is appointed through a General Meeting and has a supreme authority in the Portuguese LDA
Fewer than 50 employees
With this particular setup, an incorporated LDA company does not need an annual audit if they meet any of the stated requirements during the 2 proceeding years of company incorporation.
Further, Portuguese laws state that an LDA must also have combined assets of less than 1.5 million EUR and a total revenue of less than 3 million EUR.
In Portugal setting up a subsidiary is much simpler than setting up an entity or branch. Once the company is incorporated, any foreign investments are legal and covered by Portuguese laws and business practices.
When you set up a branch in Portugal, you are still setting up an offshoot of the parent company. A subsidiary, on the other hand, acts as its own independent legal entity, and therefore has more jurisdiction over what it can do.
A limited liability company in Portugal is still an offset of the parent company. The parent company protects the subsidiary from any losses or litigation that they may encounter, which means the parent company shoulders all of the responsibility in case of any potential lawsuit. The subsidiary can have its own management and adapt the culture of the subsidiary to the culture of the country.
Either way, the process of building your business presence in Portugal takes time and money. You will need to account for travel, as well as have an advisor who is fluent in the language and knowledgeable on the country’s business. It is also a wise decision to hire a legal advisor to ensure that you are remaining compliant from the get go.
If your main goal in Portugal is to hire competent and knowledgeable workers such as IT, tech and marketing professionals, then you may consider partnering with an EOR service like Via.
By partnering with an EOR service lik Via, you do not need to worry about the tedious process of establishing a business here.
With our easy-to-use platform, Via helps you manage local HR processes for direct employment such as benefits, payroll, background checks, and more. Our team of local labor lawyers and on-the-ground experts ensure that your company remains compliant while expanding abroad. As your employer-of-record/entity in Portugal, Via assumes responsibility for employment liability, so that you can focus on what matters: recruiting and managing your team.
With Via’s transparent pricing, you can pay full-time workforce or contractors in Portugal with no hidden set-up fees, no foreign exchange or transaction fees, and no minimums–start with 1 employee and scale up at your own pace.