Starting a Business in Portugal: A Step-by-Step Guide for Freelancers and Entrepreneurs

If you’re considering starting a business in Portugal, you’re not alone. Portugal has become a popular destination for entrepreneurs and freelancers, thanks to its business-friendly environment, affordable cost of living, and beautiful landscapes.

This comprehensive guide will walk you through the process of opening a business in Portugal, covering everything from legal requirements to tax information.

Who Needs to Open a Business in Portugal?

Any individual who plans to work independently in Portugal is required to register their business with the Portuguese tax authorities (Autoridade Tributária e Aduaneira, or AT). This applies whether you are a full-time freelancer or simply looking to supplement your income with a side hustle.

Who Can Open a Business in Portugal?

Anyone who meets the following criteria can open a business in Portugal:

• Residents of Portugal: Individuals residing in Portugal can register their businesses.
• Non-residents: Non-residents are also eligible to open businesses in Portugal, provided they are obligated to file a tax return in the country.

Opening a Business in Portugal: A Step-by-Step Guide

Here’s a detailed breakdown of the steps involved in opening a business in Portugal:

1. Registering Your Business

You can register your business in Portugal either online through the Portal das Finanças or in person at a local tax office.

Online Registration:

• Access the Portal das Finanças: Visit the Portal das Finanças website and log in using your tax number (Número de Identificação Fiscal, or NIF) and password.
• Register: If this is your first time accessing the portal, you’ll need to register. After registering, you will receive a password by mail.
• Start the Registration Process: Once logged in, navigate to “Todos os serviços” (All Services), then “Início de Atividade” (Business Start-up), and finally “Entregar declaração” (Submit Declaration).
• Submit the Declaration: Click on “Entrega de Declaração de Início de Actividade” (Submission of Business Start-up Declaration).
• Complete the Declaration: You will be presented with a form to fill out. Some information will be pre-filled, but you need to carefully review and complete all mandatory fields, including:
  • CAE Code: Choose the correct Classification of Economic Activities (CAE) code that matches your business type. The tax rate applied to your income depends on this code. You can find a list of CAE codes here.
  • Start Date: Indicate the expected start date of your business.
  • Estimated Income: Provide an estimate of your annual income.
  • IBAN: Enter your bank account number.
  • VAT Regime: Select the VAT regime that applies to you. This will depend on your estimated annual income. If your annual income is expected to exceed €13,500, you will be subject to VAT and withholding tax at source.
  • Accounting Regime: Choose between the simplified accounting regime (contabilidade simples) or the organized accounting regime (contabilidade organizada). The simplified regime is automatic unless you opt for the organized regime. The organized regime is mandatory for businesses with a turnover exceeding €200,000.
• Submit and Validate: After completing the form, carefully review the information and submit the declaration. You will receive a letter with a validation code at your address within a few days. Use this code to validate your business start-up on the Portal das Finanças.

In-Person Registration:

• Visit a Tax Office: Go to a local tax office in your area of residence.
• Bring Required Documents: Bring your Citizen Card (Cartão de Cidadão) and your IBAN.
• Inform the Tax Office: Tell the tax office that you want to start a business and specify the accounting regime you wish to use.
• Submit Your Application: This application must be submitted before you start working independently or, at the very least, before you start issuing invoices.

2. Understanding Key Concepts: CAE Code, VAT Regime, and Accounting Regimes

CAE Code: The CAE code is a crucial element of your business registration. It classifies your business activity and determines the tax rate you’ll pay. Choosing the right CAE code is essential to ensure you are paying the correct taxes.

VAT Regime: The VAT regime you choose will depend on your estimated annual income. If your income exceeds €13,500, you will be subject to VAT and withholding tax at source. However, if your business falls under certain categories listed in Article 9 of the VAT Code, you may be exempt from VAT, even if your income exceeds €13,500.

Accounting Regimes: Portugal offers two accounting regimes:

• Simplified Accounting (Contabilidade Simples): This is the default regime for most businesses. It involves a fixed tax rate of 75% on your income, with the remaining 25% tax-free.
• Organized Accounting (Contabilidade Organizada): This regime requires you to hire a certified accountant (Técnico Oficial de Contas, or TOC) to handle your accounting and tax obligations. It is mandatory for businesses with a turnover exceeding €200,000.

3. Closing Your Business

If you decide to close your business, you must inform the AT within 30 days.

Online Closure:

• Log in to the Portal das Finanças: Access the Portal das Finanças and log in.
• Navigate to the Closure Section: Go to “Serviços” (Services), then “Entregar” (Submit), “Declarações” (Declarations), “Atividade” (Activity), “Cessação de actividade” (Business Closure), and finally “Entrega de Declaração de Cessação de Actividade” (Submission of Business Closure Declaration).
• Complete the Declaration: A pre-filled form will appear. Review and submit the declaration.
• Print and Keep Records: Print the declaration and attach it to the letter you will receive from the tax authorities to keep as proof of business closure.

In-Person Closure:

• Contact a Tax Office: Visit a local tax office and inform them of your decision to close your business.
• Submit the Necessary Documents: Provide the required documentation for closing your business.

4. Working for Someone Else and Having a Side Business

You can have a full-time job and register a business in Portugal if you want to generate additional income by issuing invoices. This is a common practice for freelancers and entrepreneurs who want to supplement their income.

Tips for Success

• Research the Market: Thoroughly understand the market you are entering to identify potential opportunities and competition.
• Create a Business Plan: Develop a comprehensive business plan outlining your business goals, target market, marketing strategy, and financial projections.
• Seek Professional Advice: Consider consulting with a lawyer, accountant, or business advisor to ensure you are complying with all legal and tax requirements.
• Network and Build Relationships: Connect with other entrepreneurs and professionals in your field to gain valuable insights and support.
• Explore the Portuguese Culture: Take the time to learn about Portuguese culture and business practices to build strong relationships with clients and partners.

Bottom line

Portugal offers a welcoming environment for entrepreneurs and freelancers. With careful planning and preparation, you can launch your business and thrive in this dynamic economy.

References

Pedro, S. (2024, April 19). Como abrir atividade nas Finanças passo a passo. Compara Já.