Sole Proprietorship In Portugal

Portugal is a gateway to several European markets for offshore companies. Several companies also consider Portugal a hub to venture into the continent. The top factors attracting foreign investments in Portugal are attractive tax incentives and a young and vibrant workforce.

The Portuguese government has been encouraging activities to attract investment from global companies. An Ernst and Young report states that most investors have higher confidence in Portugal over countries such as Germany, UK, and France. The country also offers several tax cuts to small and midsize businesses in the commerce and agricultural sectors. Entities investing up to 5 million Euros get around 20% of tax deductions.

The borders and the ports in Portugal allow for free trade with all other European Union nations. The EU  is a significant player in the trade market of the world. The average cost of hiring talent in Portugal is much lower when compared to places like Paris, London, and Dublin. Portugal ranks 39 in terms of Ease Of Doing Business for 2020. The country also ranks third on the Global Peace Index 2020. These rankings encourage companies to invest in the region confidently.

Setting up a sole proprietorship in Portugal offers an accessible mode for expanding businesses globally. Read on how to register a sole proprietorship in Portugal below.

Who can be a Sole Proprietor in Portugal? 

Anyone can start a sole proprietorship in Portugal, even as a freelancer, business owner, or entrepreneur. The norms around a sole proprietorship are relaxed compared to any other company form.

• Nationality is not a constraint to start a sole proprietorship in Portugal. No additional liability applies around the company to anyone but the proprietor. Establishing a sole proprietorship in Portugal is easier and quicker to process than other company types.
• The main criteria for opening a sole proprietorship in Portugal is that the business must have an annual turnover of up to 200,000 Euros.
• There is no demarcation between business income and personal assets or income for a sole proprietor. In Portugal, a sole proprietorship can be with a sole quota owner or with two quota holders. For the latter, you can have a partner who is also a proprietor. The share capital must be 1 or 2 Euros at the minimum.

Benefits of Sole Proprietorship in Portugal

If you wish to register a business in Portugal as a sole proprietor, you get to enjoy several benefits of being a proprietor.

• Sole proprietorships in Portugal applications can be submitted online and are processed quickly.
• Proprietors enjoy social security-related discounting for the first year of business. 
• Proprietors have complete control over all aspects of the establishment.
• The owner gets to enjoy all profits because there is no legal separation between a proprietorship and a person.  
• All individual tax rates apply to the taxation of sole proprietorships in Portugal.

Documents Required for Registering Your Business in Portugal

The documents you need to register a sole proprietorship in Portugal are mentioned below

• Identity proof in the form of a passport
• Portuguese visas such as D2 or StartUp visa or whichever is relevant. For a Golden visa, the base investment stands at €250,000.
• Completed incorporation form and application to the Commercial Registrar
• Registration with Tax Authorities and declaration to start doing business
• Documents demonstrating the entrepreneur’s business plan
• Articles of association in Portuguese
• Declaration of company name and details of trade after obtaining the NIF

Special note 

• All documents need to be notarized and signed by the incorporator.
• All documents must be in Portuguese.
• A business license 
• Check up on compliances with applicable laws of business in the industry of your trade

Other Criteria for Registering a Sole Proprietorship in Portugal

To set up a sole proprietorship in Portugal, you need to ensure the following are in place-

• A local bank account for transactions
• Local tax ID 
• Registration with VAT authorities
• Registration with the Tax Office 
• Social security registration
• Annual turnover record

Post-registration compliances

When the sole proprietorship in Portugal is registered, make sure you have completed-

Tax registration

• Special license sanction
• Law-related compliance such as Copyright Act, Price Law, and Data Protection Law, among others.

Taxation

The list of the leading business and personal taxes for any sole proprietorship in Portugal is as follows-

Corporate tax

• The corporate tax varies among the territories of the Portuguese mainland, the Area of Madeira, and the Region of Azores. The rates for resident businesses and permanent non-resident establishments are 21%, 14.7%, and 16.8%, respectively.

VAT

• The VAT rate varies between 6%, 13%, and 23% per the type of goods for Mainland Portugal. 
• It varies between 5%, 12%, and 22% for Madeira.
• The rate for VAT varies from 4%, 9%, and 16% for the Azores.

Personal income tax

Here is the residence income tax rate ranges from 14.5% to 48%, depending upon the employee’s salary.

How to Register a Sole Proprietorship Firm in Portugal?

As a foreign investor, apply for a work visa first. If you are part of the EU, a NIF number, social security ID, and registration certificate suffices. The sole proprietorship company is called the Empressa Individual in Portugal. Here is a guide on how to register a sole proprietorship in Portugal.

Step 1- Registration

• Visit Empresa na Hora physically and apply for company registration. However, you can also register the same online. Submit the Memorandum of Association to establish the sole proprietorship in Portugal. This will help you get the Numero de Identificacao Fiscal (NIF).
• Choose the company form applicable. Here it would be a sole proprietorship.
• Register the company name by choosing a suggested name from the National Registry, offline or online. If you are not choosing from these names,  apply for a Denomination Approval Certificate.
• Submit the application for registration of sole proprietorship in the Register. 

Step 2- Tax ID

• Obtain a tax number. You must supply a copy of your passport, address proof, and the company registration application. 
• You might need help from a professional accountant here.
• Translate all documents into Portuguese and then notarize the same.

Step 3- Bank account

• Next, apply to open a corporate account at a bank of your choice.

Step 4-Final steps

• Draft Articles of Association and obtain Commercial Registration. Declare that you are initiating business with the tax authorities.
• Move on to register for social security. This needs your passport or permit of residence.
• You might need help from a professional accountant here. Additionally, go ahead with registering the owner’s name at the Registo Central de Beneficário Efetivo within a month.
• Establishing a sole proprietorship in Portugal, send an application to Directorate-General for Economic Activities. This has to be submitted at the Balcão do Empreendedor. Check the license requirements for the industry in which you are doing business.

How Can Multiplier Help?

Before setting up a sole proprietorship in Portugal, you must understand the compliance and local rules or regulations. You can partner with Multiplier to complete the registration and finalization of company formation. 

Multiplier is a global employment solution for all businesses, including that of a sole proprietorship. We assist in managing payroll with our one-click payroll services to pay and control freelancers’ payments.