Portugal Economy Overview

Currency

€ Euro (EUR)

Working hours

40 hours/week

Public/bank holidays

13 public holidays

Capital

Lisbon

Languages

Portuguese

Population

10.2 million

Minimum hourly salary

€5.43

Tax year

1st Jan – 31st Dec

Date format

DD/MM/YYYY

Misclassification penalties

Fines between €2,040 and €9,690 plus retroactive social security contribution and risk of director’s personal liability for each employee misclassification.

Fun fact

Portugal has a set list of approved names that parents can give their children.

In a recent study by PwC, Portugal was ranked as one of the top countries for foreign investment. But what makes Portugal so appealing to international investors?

Portugal’s strategic geographic positioning and tech-friendly environment create a favorable landscape for business expansion. 

However, starting a business in Portugal involves navigating certain complexities. While the opportunities are plentiful, there are important considerations to keep in mind to ensure a successful expansion into the market. With this, doing the necessary groundwork and understanding the local market dynamics, regulatory requirements, and cultural nuances is crucial.4

Overview of Portugal's Economy

Portugal, traditionally seen as a charming southern European nation, has been steadily carving out a new identity in global business. It is fast emerging as a hub for innovation and entrepreneurship. This change has significant implications for businesses looking to invest in Portugal, particularly those in the tech and digital sectors.

Recent data shows a robust and growing economy in Portugal. According to the European Commission’s Spring 2024 Economic Forecast, Portugal’s GDP growth is projected to be 1.2% in 2024, which reflects a more tempered pace compared to previous years but still signifies ongoing economic resilience and potential for growth in sectors like technology and renewable energy.

What’s putting Portugal on the map for businesses, especially in tech, is the Portugal Tech Visa. This program streamlines the process of attracting international tech talent, making it easier for companies to bring in the expertise they need. In an industry where agility and innovation are key, this visa program is a breath of fresh air, removing the usual bureaucratic hurdles often associated with global talent acquisition.

Portugal also offers enticing tax incentives for digital nomads and remote workers, recognizing their unique contribution to the economy and fostering a supportive environment for remote work. These incentives are part of a strategic plan to position Portugal as a leading destination for digital and tech professionals.

Taxes

Employer Tax: 23.75%

Social Security

23.75% (22.3% for nonprofit companies)

Labour Accident Insurance

1.75%

Wage Guarantee Fund

1%

Employee Tax: 11%

Social Security

11% 

Solidarity Tax

2.5% for those earning more than €80,882, going up to 5% for salaries > €250,000 

Income Tax

Portugal uses a progressive income tax system where tax rates increase with higher earnings. Residents are taxed on worldwide income, while non-residents are taxed only on income sourced in Portugal.

Gross Income (€)

Up to 8,059

8,059 – 12,160

12,160 – 17,233

17,233 – €22,306

22,306 – 28,400

28,400 – 41,629

41,629 – 44,987

44,987 – 83,696

More than 83,696

Tax Rate

12.50%

16%

21.5%

24.4%

31.4%

34.9%

43.1%

44.6%

48%

Deductible Amount (€)

0

282.07

950.91

1,450.67

3,011.98

4,006.10

7,419.54

8,094.51

10,939.90

Business Regulation in Portugal

If you are considering doing business in Portugal, gaining a thorough understanding of the country’s regulatory environment is crucial for ensuring your expansion’s success. Below are some more specifics. 

Company Registration

In Portugal, the “Commercial Companies Code” governs corporate entities, outlining company formation and dissolution. This legal backbone ensures clarity and transparency in business operations. Registering a company in Portugal means you’ll need to acquaint yourself with this code thoroughly.

The Local Workforce

According to a 2023 Eurostat report, Portugal boasts a high level of education among its younger population, with an increasing number specializing in technology and engineering fields. This talent pool is a significant asset for any company in Portugal, particularly those in tech and innovation sectors.

Portugal’s labor laws, detailed in the “Labor Code” (Código do Trabalho), emphasize employee rights and protections, which you must understand and adhere to. These laws cover contract types and termination processes. Compliance is key to maintaining a harmonious workplace and avoiding legal issues.

Taxation

Portugal offers a competitive corporate tax rate, currently at 21% for mainland companies, as reported by PwC in their latest taxation overview. Under the ‘Participation Exemption Regime,’ though, taxation exemptions are allowed on dividends received and capital gains from the disposal of shares under certain conditions. 

Benefits of Doing Business in Portugal

For entrepreneurs eyeing Portugal, many sectors stand out due to its existing and potential growth. This  tourism, technology, renewable energy, and real estate.

Labor Market

Portugal has a highly skilled and educated workforce, particularly in technology and engineering. According to Eurostat, around 35% of the younger population have completed tertiary education, which is higher than the EU average. The country’s emphasis on education and vocational training ensures a steady stream of qualified professionals, which, ultimately, makes it an attractive destination for tech and innovation companies.

Competitive Tax Environment

Portugal offers a favorable corporate tax rate of 21% for mainland companies, which is competitive within the EU context. In addition, the ‘Participation Exemption Regime’ allows for exemption from taxation on dividends received and capital gains from the disposal of shares, provided certain conditions are met. This structure is particularly beneficial for holding companies and investment funds.

Supported by initiatives like the Portugal Tech Visa, the government has also made it simpler for tech companies to bring in international talent.

Strategic Location

Positioned as a gateway to both European and global markets, Portugal’s strategic location offers businesses easy access to Europe, Africa, and the Americas. The country’s robust infrastructure, including modern ports and airports, supports efficient logistics and distribution. 

Expansion Options in Portugal

There are a number of expansion options you can consider when setting up in Portugal. From subsidiary incorporation to PEO engagement. Here are some specifics.

Portugal Employer of Record (EOR)

The Portugal EOR becomes the official legal employer of your Portugal team. This method is fast and efficient, making it perfect for companies that need to quickly deploy staff on the ground. 

An EOR handles payroll, benefits, taxes, and compliance with local labor laws, allowing businesses to focus on their core activities. They may also provide additional services, such as Portugal talent acquisition and visa support. 

LEARN MORE

Portugal Professional Employer Organization (PEO)

For businesses looking to simplify their entry into the Portuguese market, partnering with a Professional Employer Organization (PEO) or an Employer of Record (EOR) can be helpful.

Partnering with a professional employer organization (PEO) allows companies to employ local staff in Portugal without the need to establish a legal entity. This approach is quicker and less expensive, making it ideal for businesses testing the Portugal market or those with limited operations. PEOs handle administrative tasks and ensure that companies comply with Portugal regulations, reducing the complexity and risk associated with hiring local employees. 

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Subsidiary Incorporation

When you’re considering setting up a subsidiary or a branch in Portugal, understanding the legal requirements is crucial. For incorporating a subsidiary, businesses must comply with Portuguese corporate laws, which include registering with the Commercial Registry, and adhering to the Corporate Income Tax Code. The process, while straightforward, requires attention to detail and an understanding of local corporate norms.

Branch Registration

Registering a branch might be a suitable alternative for some businesses. This process involves fewer formalities compared to a subsidiary. A branch, being an extension of the parent company, doesn’t enjoy the same level of autonomy as a subsidiary but offers a quicker setup process and less administrative overhead.

Business Opportunities in Portugal

Expanding into Portugal offers significant benefits for businesses. The country provides a favorable corporate tax rate of 21%, along with other government incentives like the ‘Participation Exemption Regime’ to attract foreign investment. Furthermore, Portugal’s robust and comprehensive legal framework ensures clarity in business operations, and companies can choose from various expansion strategies, including subsidiary incorporation and engaging a Professional Employer Organization (PEO).

Business Opportunity Reasons
Technology and Innovation Portugal has emerged as a thriving hub for technology and innovation, with a strong emphasis on sectors such as artificial intelligence, cybersecurity, and blockchain. The country’s skilled IT workforce, competitive labor costs, and supportive startup ecosystem have attracted global tech companies and fostered the growth of innovative startups. The Portugal Tech Visa program further facilitates the attraction of international tech talent.
Renewable Energy Portugal has set ambitious targets for renewable energy and is investing heavily in the transition to a low-carbon economy. The country’s abundant solar, wind, and hydro resources, combined with favorable government policies and incentives, present significant opportunities for investors in renewable energy projects, equipment manufacturing, and energy services.
Tourism and Hospitality Portugal’s stunning coastline, rich cultural heritage, and agreeable climate have made it a popular tourist destination. The country’s well-developed tourism infrastructure, coupled with the government’s efforts to promote sustainable and high-quality tourism, offer opportunities in various segments, such as luxury hotels, eco-resorts, and experiential tourism.
Real Estate and Construction Portugal’s growing economy, coupled with its attractive Golden Visa program, has fueled demand for residential and commercial real estate. There are opportunities for investors in property development, renovation, and management, particularly in major cities like Lisbon and Porto, as well as in emerging tourist destinations.
Agribusiness and Food Processing Portugal’s diverse agricultural sector, known for its high-quality produce and traditional food products, presents opportunities for agribusiness investment. The country’s strategic location and access to EU markets make it an attractive base for food processing and export-oriented operations. There is potential for innovation in areas such as organic farming, sustainable agriculture, and food technology.

Portugal also boasts a highly skilled labor force, particularly in technology and engineering, making it ideal for tech-driven businesses. Combined with strong intellectual property protections and compliance with international standards, Portugal is a strategic location for business growth in Europe.