How to Incorporate a Business in Portugal: First Steps
Opening your own business is a very common New Year's resolution for many people. In the next articles we will explain everything that requires, from bureaucracies, taxes, financing and internationalization. Today we talk about how to register, costs and taxes you will incur and the importance of developing a business model.
This post is part of a collaborative effort between Startup Portugal, The Next Big Idea, and Sapo24, meant to create relevant content to tackle the COVID-19 pandemic.
Content available in Portuguese.
It has never been this easier to register a company in Portugal and, nowadays, you can do it in less than an hour. However, before doing so you must be well informed about everything you will need and what costs you will incur.
Register a company
Currently, it is possible to register a company in Portugal in less than an hour, with the Empresa na Hora service. This can be done over the counter or online. The type of documentation required depends on the type of partners and the type of company you want to create. The website makes this information available. To do this online you will also need to have the Digital Mobile Key or a citizen card reader and respective PIN. The costs also depend on the type of company to be created. A standard order costs around 360 euros.
Please note that for non-portuguese that do not have this kind of documentation, you might need to hire a portuguse lawyer to access the process for you. Check all the requirements here.
Beside the documentation and payment, it will also be necessary to appoint an Official Accountant (TOC) and it is required that the company’s partners have deposited the amount of the company’s share capital or declare that the amount will be deposited in cash or delivered to the company’s coffers.
As for the name of the company, you have two options, access a list of names already approved or present an admissibility certificate previously approved by the Registo Nacional de Pessoas Coletivas. This certificate has a cost of 75 euros or, in case of an urgent request, 150 euros.
In addition to the costs already mentioned, you should take into account that, from the moment you register a company, you will already have tax obligations. These will be the 4 main taxes to be aware of:
– IRC (Imposto Sobre o Rendimento das Pessoas Coletivas): This tax is applied to your company’s profits, and represents a 21% tax. SMEs benefit from a 17% tax on the first 15 thousand euros of profit. Only when this value is exceeded is the 21% rate applied.
– IVA (Imposto sobre o valor acrescentado): VAT rates can vary between 6%, 13% and 23% in Portugal, depending on the goods or services provided by your business. However companies pay VAT to their suppliers and charge VAT on their products to customers, the difference between both is communicated and, if necessary, paid monthly or every three months.
– TSU (Taxa Social Única): this is a Single Social Tax and is the contribution that is paid to Social Security for each worker that a company has. Currently, the TSU represents a rate of 23.75% on the salary of each worker.
– Derrama Municipal: this amount may vary depending on the city where the company is based and will be paid to the municipality, it does not exceed 1.5% of profits.
Essential Steps to Success
In addition to the costs and bureaucracies that opening a new business requires, it is necessary to ensure that your business will succeed.
The validation of an idea is the first step to be taken, even before registering the company, in order to ensure that it is worth investing and in what ways. In a brief search for the topic, several ways can be found to carry out this validation. It is unanimous that it is necessary to probe potential customers, whether using feedback from family or friends, or using market studies carried out by specialists and that it is important to check what already exists and what the competition will be.
Once the idea is validated, it is essential to have a structured business model, which allows you to identify the resources, skills and partnerships that you have or will need and how best to use them. There are several templates to formulate your business model, the Canvas model and the Porter Value Chain model being the most popular. In addition to the templates available on the internet, you can also use books or training from different institutions such as Anje or Turismo de Portugal, among many others. The lack of a valid business model is one of the most prominent causes when analyzing reasons why a startup fails.
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