Everything About How to Start Business in Portugal: The Ultimate Guide from ProCoders CEO
9 min.

In recent years, Portugal has emerged as a beacon for entrepreneurs seeking new opportunities in Europe. Its strategic location, welcoming atmosphere, and growing economy have made it an attractive destination for entrepreneurs to start a private limited company or another type of business.

To shed light on the intricacies of starting and growing your business in Portugal, we had the privilege of speaking with a seasoned entrepreneur who happens to be our very own CEO and has successfully navigated these waters — Oleg Kopachovets.

ProCoders CEO -- Oleg Kopachovets.

In this interview, Oleg shares valuable insights and experience about moving to another country, business registration, residence permit needs, and more. Besides, our guest will share exclusive tips to help aspiring business owners make informed decisions when considering Portugal as their next business destination.

– So, starting a business in Portugal… How has the journey been so far? What metrics define success for your business? Could you share your story in brief?

– In the IT sector, no matter if it’s Portuguese companies or others in the European Union or, say, the US, people are the cornerstone; they innovate and shape new digital solutions. A primary hurdle is acquiring genuine talents within a realistic budget and timeframe.

The financial stability of business assets is anchored on achieving a particular Gross Profit Margin (GPM) and NET profit with personnel expenditure being a prominent feature in your Profit and Loss statement (P&L).

The ‘time-to-market’ for IT solutions is vital; hence, waiting several months to hire the right specialist isn’t an option – we often need them “yesterday.” Fortunately, Portugal offers a solution, boasting affordable talents who possess the required skill set available in a reasonable timeframe.

– Impressive indeed. Could you delve into the details — the whats, whys, and hows — of choosing Portugal as the hub for starting your business?

– Well, it turns out Portugal has one of the lowest salary indices in Europe, which extends to the IT labor market, especially when you compare it to other European Union nations.

The country is home to numerous universities nurturing young talents ready to venture into the IT market, standing tall compared to other hubs we had considered, like Croatia and Bulgaria.

An added advantage is the English proficiency of the youth, owing much to the non-dubbing of movies in local cinemas — learning English becomes somewhat mandatory! By my estimation, over 80% of the population can communicate in English fluently.

This landscape presents an excellent opportunity to hire project managers and tech support specialists. Furthermore, the convenient time zone allows seamless business operations with Europe, the UK, and even North America, considering a mere 4-6 hours difference. And let’s not forget the shorter flight distance to the USA.

Moreover, adding to the benefits of starting a business in Portugal, the country offers an exceptional living experience with one of the best climates in Europe, a welcoming ocean, and delicious cuisine.

– What should aspiring entrepreneurs be aware of before setting up a business in Portugal? Could you list the top 3 things to keep in mind?

Firstly, setting up a private limited company or any other legal entity and managing accounting single-handedly is practically impossible; it’s prudent to engage a trusted individual or consulting firm in Portugal.

Secondly, avoid the remote hiring route through platforms like LinkedIn, which usually leads to overpriced requests due to high demand for potential candidates. Opt for local recruitment for better results.

Lastly, don’t limit your search to big cities like Lisbon and Porto as many Portuguese companies do. Smaller cities like Braga and Coimbra harbor a pool of talent and offer substantially lower office maintenance costs — a reduction of around 20-35%.

– Could you walk us through your personal journey of starting a business in Portugal?

Portugal cityscape

– In 2021, a friend and colleague voiced his desire to open an office in Portugal, aiming to be closer to the US market while hiring consultants, tech support specialists, project managers, and salespeople locally.

Intrigued, I embarked on a meticulous market research journey, specifically focusing on Southern European nations. Portugal emerged as a highly appealing option.

Fast forward to 2023, we initiated a representative office, and later in the same year, we established a full-fledged office in Lisbon. The path wasn’t devoid of challenges and missteps, yet now we hold invaluable experience of operating in Portugal, nurturing a full business structure and budding success story.

– How much does it cost to start a business in Portugal? What is the minimum capital investment in your experience/opinion? Are tax rates high in the country?

– The minimum capital investment definitely varies! To kick-start an LDA (akin to LTD, LLC), you’ll need a foundational capital of 10,000 euros.

Of course, there will be additional expenses, such as setting up a company bank account and managing accounting which could cost anywhere from 1,000 to 2,000 euros. When it comes to office space, it can range from 5 to 40 euros per square meter depending on the location and the class of the building.

Discussing the Portuguese tax office and the local system, it’s a whole different ball game. There are personal and social security taxes, as well as a corporate income tax. For a business in Portugal, we are looking at Value Added Tax (VAT) and corporate tax.

I wouldn’t say the situation is a total haven, nor are the payments sky-high. If you are considering moving here personally, you can look forward to a special tax regime (NHR) offering 0% on dividends for 10 years.

– What are the difficulties of moving a company abroad and how to overcome them? Any unexpected ones?

– One might find it challenging initially to get in tune with the local rhythm of life, understand the mechanisms of solving legal issues, and effectively hire personnel.

– Is visa an issue? Do you need a residence permit?

– Absolutely, having a residence permit or another legal foothold in Portugal is a must.

For most passports, the stay is limited to 90 days out of 180, which implies that if you have serious plans here, securing a long-term visa should be on your checklist. If applicable, you can even consider a Portugal Golden Visa, but it’s quite an investment.

Generally, visas aren’t a stumbling block. You can secure one under several provisions such as 90.2 as a highly qualified specialist or 89.2 as a self-employed individual.

Local consulting firms can typically help you get this done within three months. You’ll just need to showcase your education credentials, bank account status, and provide a statement of income to prove your personal assets.

– Is Portugal friendly to foreign companies and entrepreneurs? How easy is it for a foreigner to get used to the country?

Portugal view

– Portugal boasts a vibrant expat community present in almost every city. The digital crowd is particularly significant here, although the surfers outnumber them!😊

As I mentioned earlier, the majority of the populace speaks English, so settling in, finding an apartment, and getting into the swing of things should be a breeze. As to your business assets, the outcome also depends on your skills as an entrepreneur.

– How did you find and hire employees in Portugal?

– At first, we took the direct route, fishing for potential candidates for our company online through LinkedIn. Unfortunately, it mostly led to surface-level candidates demanding high salaries without the real talent to back it up. Changing tactics, we brought in local recruiters, and that’s when things really started looking up.

– How profitable is outsourcing business in the Portuguese market?

– You can indeed carve out a decent profit margin for your business in Portugal selling to Northern Europe, Germany, the UK, and North American countries. Plus, clients will always be keen to visit you, given the almost year-round warm weather here!

– Can you share your experience of setting up a physical office in Portugal? How much did it cost?

ProCoders office in Portugal.

– Well, setting up our inaugural 70-square-meter office in Lisbon’s business center had us digging somewhat deep into our pockets – it totaled around 7,000 euros. That lump sum covered the initial rental down payment, deposit, and the basic furniture to spruce up the place.

– Can you provide insight into the Portuguese business culture?

– Sure thing.

The first thing that struck us is the stark contrast in the pace of business processes here. It’s a place where the old meets the new; you’ll find companies seemingly stuck in the 19th century, taking days to draft a commercial offer for you, which you then receive as a paper document delivered by courier.

Yet, there are also incredibly forward-thinking businesses operating at a 21st-century pace, offering day-to-day services.

Yes, it’s a world of contrasts, where the quick and the slow, the old-school and the high-tech coexist – be it in banks, law firms, or even restaurants. Thankfully, it’s not as laid-back as Spain where “mañana” (let’s do it tomorrow) seems to be the standard response to any query.

– Does the Portuguese government offer financial support to businesses?

– During the COVID period, the Portuguese government did step in to support businesses.

There are also specific state programs aimed at depressed regions, although I wouldn’t bank on them too much.

On the brighter side, there’s an opportunity to secure the so-called Portugal Golden Visa for yourself and your family by investing over 500,000 euros in the Portuguese economy.

– Could you share your top 5 pro tips for succeeding in starting a business in Portugal?

Portugal at sunset.

– Absolutely:

1. First-hand experience is key. Make a point to visit and soak in the environment, engage with the locals, and understand the ground realities before building a business structure there.

2. Local expertise can be a game-changer. Collaborate with local consulting firms rather than trying to handle everything yourself or relying on international consultants. A foreign country is better understood by a foreign company from the same state.

3. Explore beyond the known hubs. Don’t just limit yourself to Lisbon and Porto as many private companies do; there’s much more to Portugal. Venturing into other regions can be a rewarding experience.

4. Patience is a virtue. Brace yourself for possible delays; processes like company formation or incorporation or setting up a bank account can take longer than expected.

5. Networking is gold. Leverage the expansive communities present while starting a business in Portugal; connecting with them can provide you with valuable insights and networks.

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FAQ
What are some of the key challenges business people face when starting a business in Portugal and how can they be addressed?

Some key challenges faced include navigating the legal and regulatory requirements, finding the right local partners, hiring personnel, and getting accustomed to the slower pace of business processes.

Engaging an experienced local consulting firm can help deal with the legalities. Networking is important for finding the right recruitment and accounting partners. Patience and cultural immersion will help entrepreneurs adapt.

What are the legal and regulatory requirements for setting up a business in Portugal? What potential pitfalls should be avoided?

The main steps are obtaining a Portuguese tax number, registering the company, and dealing with accounting/tax requirements.

Common pitfalls include underestimating bureaucracy and delays, not fully understanding accounting rules, and failing to properly close a company. Getting specialized local advice is recommended.

How can entrepreneurs find and select the right local consulting firm for services like company formation, accounting, hiring, etc.? What criteria should they use?

Referrals, online reviews, industry associations, and government agency recommendations can help identify reputable firms to help you start a business in Portugal.

Key selection criteria include expertise with startup needs, English proficiency, transparency, and international experience. Taking the time to meet and vet several providers is wise.

What options are available for office space when setting up a physical business location in Portugal? What are the pros and cons?

The main options are traditional office rentals, co-working spaces, and business center rentals.

Traditional rentals provide control but require longer leases. Co-working offers flexibility but less privacy. Business centers have short-term leases and built-in amenities. Costs vary based on location.

What popular business structures do companies use when incorporating in Portugal?

Common structures include a Private Limited Company (LDA), a Public Limited Company (SA), and a Branch or Representative Office. LDA is popular for its simple setup and limited liability.

What Portuguese regulations should businesses be aware of when setting up operations?

Key regulations cover accounting, taxes, data protection, labor laws, and specific industry rules. Hiring local experts is recommended to ensure full compliance.

Conclusion

Portugal’s promise as an entrepreneurial haven is undeniable, and the insights shared in this interview provide a roadmap for those who dare to embark on this journey. From understanding the essentials of starting a business in Portugal to the intricacies of navigating talent recruitment, our CEO Oleg Kopachovets has illuminated the path to success.

As we conclude this discussion, it’s clear that Portugal is not just a destination; it’s a thriving ecosystem where innovation and entrepreneurship are celebrated. With the right knowledge and strong will, anyone can seize the opportunity to start and flourish in this captivating corner of Europe.

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