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The Ultimate Guide To
Employment in Portugal

Portugal Facts

Population size: 10,304,434
Currency: Euro, €
Capital city: Lisbon
Languages spoken: Portuguese, Mirandese
Ease of Doing Business: 25

Employing in Portugal: What You Need to Know

The Portuguese labour market operates in a relatively peaceful work environment. Portugal, as a member of the European Union, embraces similar employment law systems as its EU partners, and has incorporated into its laws a set of European directives on labour relations that better regulates employment relationships. Portugal also has particular regulations, especially those pertaining to the regulation of collective labour matters, such as collective employment contracts. The legal framework for employment in Portugal heavily supports equal treatment of foreign employees who work on Portuguese soil, ensuring the same rights and duties apply for foreign nationals as well as Portuguese employees.

Key Factors to Consider When Employing in Portugal

Hiring in Portugal? Here's our latest article on employment in Portugal.
  1. Contracts

    Employment contracts in Portugal are not required to be in writing as a general rule, although it is customary to express certain information in writing once the employment relationship has commenced. Certain types of employment contracts must be in written form, including:

    • Foreign worker employment contracts
    • Fixed-term/non-fixed term employment contracts
    • Part-time work
    • Non-continuous work
    • Service commission agreements

    Portuguese employment law does not specify what language the Portuguese employment contracts must be written in, although it is advised to have Portuguese versions of the contract readily available as many Portuguese institutions and official entities only accept documents in Portuguese.

    The terms and conditions within the Portuguese employment contract are not required to be expressly agreed upon, as many provisions are derived from the relevant statutory provisions, collective bargaining agreements (CBAs) and work rules in the Portuguese Employment Code. This means that certain mandatory employment terms may be implied, such as probationary periods and termination of employment. The employer does have the obligation to provide in writing the following information:

    • Full identity of employer
    • Place of work
    • Employee’s professional category
    • Description of activities performed
    • Date of employment
    • Vacation duration
    • Salary amount
    • Working periods
    • Applicable CBAs
    • Notice period for termination

    Types of Contracts

    Fixed term employment contracts

    The minimum duration for this contract is 6 months, extending to a maximum of 3 years. For those looking for a first job, the maximum duration is 18 months, while in specific situations it may be 2 years.

    Fixed-term employees work under the same rights and duties as permanent employees. Fixed-term employment contracts may be renewed up to two times, each which must not exceed 18 months and must not be less than 1/6 of the maximum contract duration.

    Indefinite fixed-term employment contracts

    Indefinite employment contracts remain in force until the event or activity for which the employment contract was entered into to pursue has been completed, such as the return of an absent employee or the completion of a project.

    The maximum duration must not exceed 6 years. If employment is to persist more than 15 days after expiry, the indefinite fixed-term contract is converted to an indefinite-term contract.

    Very short-term employment contracts

    These contracts are most applicable to seasonal or agricultural and are not required to be in writing. Instead, the employer must notify a Social Security office that such a contract has been entered into, stating the identities, signatures and address of the parties, type of work, salary, date of work and place of work.

    The maximum duration of a contract of this nature may not exceed 70 calendar days.

    Part-time employment contracts

    Part-time contracts are applicable for cases where normal working periods are shorter than that of full-time work. The duration may be specified as number of days per week, per month or per year. Part-time employees work under the same rights and duties as permanent employees.

    Intermittent employment contracts

    Intermittent contracts applies to work that carries on in a non-continuous way for activities that have activities are interspersed with periods of inactivity at the start and end of each working period. The work must be full-time for a period of at least 6 months, where 4 months must be consecutive.

    Teleworkers’ contracts

    An employee is employed by a telework contract if their primary work activities occur at a location outside the company’s premise, typically using ICT resources. The contract must expressly mention the teleworking arrangement, the appropriate remuneration and an indicator of normal working periods. Teleworkers work under the same rights and duties as permanent employees.

    Temporary employment contracts

    Temporary contracts are made for fixed or non-specific term between a temporary employment agency and a worker, where the employer is engaged in employment of their services to a third party for remuneration while being employed by the agency.

    For the employer, it allows the company to use temporary labour or a contract for services for a fixed or indefinite duration. The temporary labour contract must contain requirements as outlined in Article 177 of the Employment Code (Codigo do Trabalho [CT]). The employer must also attach some proof of membership for the Labor Compensation Fund (Fundo de compensação do trabalho) or similar institutions. If there is no arrangement, the employer is liable for payment of any compensation that the fund may have paid to the employee on termination of the contract.

    The duration of the temporary arrangement must not exceed a 2 year period, 12 months for exceptional increases in company’s business, or for 6 months in cases of vacancies where hiring has already commenced.

    Occasional assignment contracts

    An occasional contract occurs when an employer supplies an employee to another employer while maintaining a contractual employment relationship in order to provide services. The assignment of the employee must contain provisions as set out in Article 290 of CT. The duration must not exceed one year, although is renewable for periods up to a maximum of 5 years.

  2. Probation Periods

    Notice periods typically are required to be written in the employment contract, and may be rescinded by both parties without need of prior notice or compensation, unless otherwise stated in the contract.

    The probation period duration is variable according to the type of contract:

    Non-fixed contracts:

    • General employment – 90 days
    • Positions of technical complexity – 180 days
    • Directors and top executives – 240 days

    Fixed contracts:

    • 6 month or more – 30 days
    • Less than 6 months / unspecific term – 15 days
  3. Termination Procedures

    All rules on termination procedures are mandatory. The employer cannot unilaterally terminate employment without a just cause. The nature of whether termination was through “just cause” can be objective or subjective depending on the nature of dismissal.

    An objective cause is where termination was not due to the employee, but due to economic, market, structural or technological reasons. A subjective just cause is due to a breach of the employee’s employment contract, in that they failed to fulfil or violated their contractual obligations which renders the employment relationship impossible. The Labour Code assists in the identification of the nature of a just cause.

    Contracts of employment may be terminated for different reasons:

    Termination by employee

    The employee may terminate the contract if a just cause is provided by the employee, such as failure to pay the employee for the given work, inadequate health or safety conditions, or any personal attacks to the employee. The notice of termination must be given with 30 or 60 days’ notice depending on whether the employee has been working less or more than 2 years.

    Dismissal with just cause

    The employee is dismissed if the employer has proved that one or more incidences have rendered the employment relationship impossible, such as failure to obey orders or loss of confidence in the employee.

    Dismissal through job extinction

    Under Article 368 of the Labour Code, dismissal may be on the grounds of commercial, economic, operational, structural or technological reasons that the company faces which renders the employment relationship impossible. The employer is responsible for providing non-discriminatory reasons for termination of the employee.

    Dismissal for inadequacy

    Under Article 375 of the Labour Code, the employee may be terminated on grounds of inadequate performance for the position, making continual contractual relations impossible. This method of termination is only valid under certain situations specified by the Code, including:

    • Ongoing reduction in productivity/quality
    • Repeated damage to property
    • Safety or health risk of the employee to others
    • Insufficient skills to achieve objectives

    Termination via this method results in no right to compensation for the employee, unless training has been provided.

    Notice periods

    In fixed-term contracts, the employee is given 8 days’ notice of termination if the contract is up for renewal, or 15 days’ notice of termination if the contract is expiring.

    In definite-term contracts, the notice period may be 7, 30 or 60 days, depending on the term of the contract.

    Disciplinary procedure

    • The employer notifies the employee on the grounds for dismissal in writing.
    • The employee has 10 business days to acknowledge or challenge the facts of the notice.
    • The employee may request the employer to produce documents as evidence.
    • The notification must be given the Works Council and the Trade Union if employee is a Trade Union representative.
    • The final result may be challenged in the Courts by either the employer or employee.
  4. Compensation

    According to Article 366 of the Labour Code, an employee is entitled to 20 days’ remuneration and seniority payments in the event of termination of their employment contract. The total basic monthly remuneration cannot exceed 20 times the guaranteed monthly minimum remuneration (RMMG) of €9,700, while the maximum amount of compensation cannot exceed 12 months or 240 times the minimum wage, at €116,400.

    Compensation is paid by the employer and by any associated employment compensation funds. If no scheme is in place, the employer is responsible for the entire compensation payment.

  5. Statutory Leave

    Annual Leave

    All employees are entitled to a period of paid annual leave for each calendar year. The right to holidays commences the January 1st after the contract of employment has been entered into. The employee is entitled to 22 working days’ holiday per calendar year which cannot be replaced with compensation. An employee’s rest days that lie on working days, weekends or public holidays may add onto the number of annual leave days per year.

    Accumulated holidays are not rolled over to the next year, although it may be extended up to 30 April of the following year if defined in the contract.

    The employer has the duty to assign when the annual leave days take place, although it is accepted that it is agreed upon between the parties. If no agreement takes place, it is to fall between 1 May and 31 October. It is common for certain industrial sectors to close factories for the whole or half of August, while in service industries staff numbers are reduced for the break.

    Sick Leave

    Absences may be allowed under certain circumstances outlined in Article 249 of the Labour Code. Any absences taken outside of these conditions may be met with disciplinary consequences such as reduced pay for the period of absence or even dismissal if 5 consecutive days or 10 non-consecutive days of unjustified absence occurs in one calendar year.

    Absence due to sickness does provide paid leave for the employee, where 60% is paid by Social Security for the daily amount of remuneration. There are no established customs for the employer’s portion of the employee’s paid leave, where no payment or full payments are both possibilities.

    Maternity Leave

    Maternity and paternity provisions are of notable importance in Portugal. The newer Employment Laws encourage sharing parental leave of both father and mother, where either may take up to 1 years’ leave.

    Mothers are allowed up to 30 days’ parental leave before birth. Either the father or mother is allowed 4-5 months parental leave after the child is born with full compensation. If this period is shared between both, the duration extends to 6 months leave at 80% compensation.

    Fathers are entitled to parental leave of 10 working days in the month after the child is born, 5 of which occurs immediately after birth.

    Working Hours

    Normal working hours are a standard 8 hours a day, 40 hours per week maximum. All employees are entitled to a rest period between 1 and 2 hours during the day and guaranteed minimum of 11 hours rest between two work days. It is possible to change the terms related to normal working hours and rest periods under the collective employment regulations (Banca de Horas) up to a 60 hour week, with a maximum of 4 hour increase per day for busy periods of the year, which should be offset by reduced working hours in other periods.

    Employees are required to work overtime if requested except for certain circumstances, such as pregnant women or disability. Overtime is restricted to 2 hours per normal working day, and an annual maximum of:

    • 150 hours in SMEs and large companies
    • 175 hours in micro and small enterprises
    • 80 hours for part-time employees
    • 200 hours under a collective bargaining regulation

    The increase pay from overtime is 50% for the first hour, 75% for subsequent hours and 100% for work on a weekly rest day or public holiday.

  6. Pensions and Benefits

    Social Security

    The contributions to the employees’ pension is the responsibility for the employer, who must send a Statement of Remuneration (declaração de remunerações, “DR”) to Social Security (Segurança Social) every month for each employee in their service. The DR must state the amount of remuneration subject to deductions, number of working hours and the applicable contribution rate. The DR must be submitted online by the 10th day of each month to Social Security Direct (Segurança Social Direta) and is only valid when they are received by them.

    The employer is responsible for contribution payments to Social Security for all employees in the company. Contributions are obligatory and are calculated by applying a general rate to the employee’s remuneration, determined by the Social Support Index (indexante dos apoios sociais, “IAS”), which updates every month. They are paid monthly by the employer between the 10th and 20th day of the month.

    Although employer contributions are compulsory, the employee may still benefit from alternate private pensions or medical assistance schemes. Foreign employees who contribute to obligatory schemes in their home country may continue to do so for up to 2 years while employed in Portugal.

    Types of Schemes

    • Welfare Subsystem: A contributory scheme which covers most employees and self-employed individuals. The aim is to provide financial support to employees who lose their income due to sickness, maternity/paternity leave, unemployment, occupational diseases, invalidity, old age and death.
    • Solidarity Subsystem: A non-contributory scheme. Guarantees essential citizenship rights with an aim to eradicate poverty and exclusion by providing support to individuals or families who are not covered by the welfare subsystem.
    • Family Support Subsystem: Covers most Portuguese workers through providing assistance for families who have increased expenditure from disability or dependency.
    • Social Action System: Provided by local authorities and private non-profit institutions to provide special protection to vulnerable groups like children, young workers, workers with disability and the elderly.
    • Supplementary System: An optional scheme which is made up of a supplementary group-initiative scheme, an individual initiative scheme and a public capitalization scheme that allows voluntary participation by workers.

    Social Security Contribution Rates:

    Employees Employer Employee Total
    Employees in general 23.75% 11% 34.75%
    Home workers 20.3% 9.3% 29.6%
    Members of governing bodies of corporate entities 20.3% 9.3% 29.6%
    Employees under very short-term contracts 26.1% 26.1%
    Disabled workers 11.9% 11% 22.9%
    Agricultural workers 22.3% 11% 33.3%
    Local fishing and coastal vessel employees 21% 8% 29%

GEO Solutions or DIY Employment in Portugal?

Companies entering Portugal must make a decision whether to use their own resources for a Do-It-Yourself (DIY) approach, or to use a Global Employment Organization to handle payroll and employment responsibilities.  A GEO or Portugese Employer of Record solution makes it faster, easier and cheaper to deploy staff if they don’t have a Portugese entity established that can run payroll.

A DIY approach will typically be delayed until there is a properly incorporated company ready to run payroll and may be a costly option.  Shield GEO can deploy foreign staff in 4-6 weeks and local staff in 48 hours. Additionally Shield GEO is responsible for all compliance issues related to the employment.

Tax
Income Tax Rates

Residents of Portugal are subject to tax on their worldwide income, while non-residents are subject to personal income tax for any income generated within Portugal. They are considered residents of Portugal if:

  • Their stay in Portugal is greater than 183 days per calendar year
  • They have a dwelling in Portugal to be used as a habitual abode
  • They have a spouse with residency in Portugal

Various types of income tax applies:

  • Employment Income (Imposto sobre o Rendimento de Pessoas Singulares, “IRS”)
  • Business and professional income
  • Directors’ fees
  • Investment income
 
Grossed income Tax Rate (%)
0 - €7,000 14.50
€7,001 - €20,000 28.50
€20,001 - €40,000 37.00
€40,001 - €80,000 45.00
€80,001+ 48.00

From 2014, a solidarity tax of 2.5% applies for income from €80,001 – €250,000, and an additional 5% solidarity tax applies for income exceeding €250,000.

An extraordinary surcharge also applies for any income exceeding the minimum wage of €6,790.

Tax Returns Supplied

Yes

Payroll and Tax in Portugal

Foreign companies operating in Portugal may find it challenging to deal with the complexities of the country’s tax system. The primary concerns for a foreign company that needs to comply with tax laws in Portugal are: Individual income tax for employees in Portugal, social security costs, VAT, withholding tax and corporate taxes.

Here's our most recent article on running payroll and taxes in Portugal.

Information Explanation
Remote Payroll ?

A remote payroll in Portugal is where a foreign company, i.e. a non-resident company, payrolls a resident employee in Portugal. This applies to both local and foreign employees. One option for a non-resident company to payroll its employees (local and foreign) in Portugal is to use a fully outsourced service like a GEO or PEO which will employ and payroll the staff on their behalf.

Local Payroll Administration ?

In some cases, a company will register their business in Portugal under one of the forms available but prefer to have another company administer its payroll. This can be accomplished through a payroll provider. It is important to note that the company, as the Employer of Record, is still fully responsible for compliance with employment, immigration, tax and payroll regulations. But the payroll calculations, payments and filings can all be outsourced to the payroll provider.

Internal Payroll ?

Larger companies with a commitment to Portugal may wish to run their own local payroll for all employees, foreign and local. In order to accomplish this, they will have to complete the incorporation, register the business and then hire the necessary staff. There will be a need for in country human resources personnel who have the background needed to manage a Portuguese payroll and can fulfil all tax, withholding tax and payroll requirements.

This approach carries significant cost and requires some knowledge of local employment and payroll regulations. The company will need a local accounting firm and potentially legal counsel to ensure full compliance with Portuguese employment laws.

Fully Outsourced Payroll & Employment ?

Companies can outsource the employment and payroll of their staff in Portugal to a GEO, like Shield GEO. This is possible for both foreign workers and Portuguese nationals. This is the easiest, fastest and safest way to payroll staff in Portugal.

Shield GEO manages all aspects of payroll for workers in Portugal, including taxes, withholding, social security payments and other statutory requirements. Shield GEO becomes the Employer of Record and employs the staff on behalf of the client.

Staff are paid monthly with tax and social security deducted at source and paid to local authorities. Shield GEO will invoice the client monthly in advance of the payroll date. The invoice consists of the Total Cost of Employment (Base salary + Employers Statutory Contributions + Additional statutory contributions) and a Management Fee. Shield GEO provides the employees with payslips.

Read more about outsourced payroll and employment through Shield GEO.

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Setting up payroll in Portugal

Information Explanation
Currency ?

Euro, €

Tax Figures

Information Explanation
Corporate Income Tax ?

Companies doing business in Portugal are subject to a number of corporate income taxes (IRC), including:

  • Portuguese corporate tax: 21% (Expected reduction to 17-19% in 2016)
  • A state surcharge (surtax) ranging from 3% to 7% of taxable profits depending on levels of profit
  • Municipal surcharge: Up to 1.5% depending on municipality
  • Combined tax rate: Maximum of 31.5%
  • Small and medium-sized entities: 17% for first €15,000 of taxable profit

It must be noted that the tax rates applicable to foreign companies are levied at the same rates on the Portuguese-source income. Investment income derived by non-resident entities and are subject to a privileged tax regime in their home country has a tax of 35%.

Long term capital gains in Portugal are taxed at the standard Corporate Tax rate. Stamp duty is also levied for most transactions, ranging from 5 to 10% depending on asset type and location.

Income Tax Rate ?
Grossed income Tax Rate (%)
0 - €7,000 14.50
€7,001 - €20,000 28.50
€20,001 - €40,000 37.00
€40,001 - €80,000 45.00
€80,001+ 48.00

From 2014, a solidarity tax of 2.5% applies for income from €80,001 – €250,000, and an additional 5% solidarity tax applies for income exceeding €250,000.

An extraordinary surcharge also applies for any income exceeding the minimum wage of €6,790.

Payroll Tax ?

None

Sales Tax ?

The Value Added Tax (VAT) in Portugal is known as the Imposto Sobre o Valor Acrescentado (IVA). The standard rate is 23%.

A reduced tax rate applies, varying from 6% for foodstuffs, water, publications, electricity, transport and hotels, and up to 13% for catering, petrol and certain foodstuffs. No VAT applies to financial services/insurance, medicines, education and training.

A vehicle or road tax called IUC also applies in Portugal.

Withholding Tax ?

Portugal has entered into double taxation treaties with 52 countries. The withholding tax applicable are as follows:

  • Dividends: 25% (35% for residents of a listed tax haven. 0% for residents of a tax treaty jurisdiction who have met domestic participation exemption regime conditions)
  • Interest: 25% (35% for residents of a listed tax haven. Reduced rate under a tax treaty.)
  • Royalties: 25% (35% for residents of a listed tax haven. Reduced rate under a tax treaty.)
  • Technical service fees: 25% (35% for residents of a listed tax haven. Reduced rate under a tax treaty.)
Other Tax ?

Stamp Duty: Variable duty rates apply for type of transactions regarding real estate acquisition, leases and transactions. For residential property valued at over €1 million, a 1% stamp duty applies.

Real Property Tax: A municipal level tax is levied on property sales and transfers.

Inheritance/Estate Tax: Stamp duty for gifts and inheritances apply at a 10% rate, and is exempted if the heir is spouse, descendant or ancestor.

Environmental Tax: A series of new environmental taxes will be introduced in 2015 as part of the Environmental Tax Reform.

Time to prepare and Pay Taxes ?

243 hours

Time required to start a Business ?

4.5 days

Immigration and Work Permits in Portugal

Foreign workers are required to have the proper visas and work permits in Portugal, as established by immigration laws.  Work permits must be secured for employees, and sponsored by a locally licensed and incorporated entity, which can be a problem for companies just entering the Portuguese market.  If you have yet to complete the incorporation process you can use an outsourced management company or GEO Employer of Record to sponsor the employee for the necessary permits.

Have your own Company?

The process of hiring a foreign national in Portugal involves obtaining both a work permit (Autorização de Trabalho) and an entry visa for Non EU citizens, while Nationals of an EU country simply require a Residence Permit (Cartão de Residência). Portugal is also part of the Schengen Area, which allows free transit between Schengen countries with a Schengen visa.

For a foreign company to begin hiring employees, the company is not required to have a local entity incorporated to employ local workers in Portugal, although certain registration duties must be adhered.

The process is as follows:

1. Registration of the foreign entity with the relevant authorities

The foreign entity must obtain a Portuguese tax number within the National Registry of Collective Bodies (Registo Nacional de Pessoas Colectivas, “RNPC”). Supporting documents must be submitted to prove its legal existence in the home country of the foreign entity.

The company must register with the Portuguese Tax and Customs Authority (Autoridade Tributária e Aduaneira). A tax representative must be appointed for the foreign company who must be a Portuguese resident.

The company must register with Social Security (Segurança Social). If no local entity has been incorporated for the foreign company, the employee must act as the company’s representative for their social security. It is common for foreign companies to hire accounting services and payroll firms to comply with tax and social security duties.

Incorporation of the company is not a required step, although it does require the above steps to be carried out, in addition to obtaining a Validation Certificate (Certificado de Admissibilidade) issued by RNPC, registering a company name at the Commercial Registry and submitting a Start of Activity Declaration to the Tax Office among other mandatory formalities. The process of incorporation is designed to be streamlined as one stop shops, with the Create a Company in an Hour scheme (Empresa na Hora) administered by Centro de Formalidades das Empresas (CFE) who will facilitate the process.

2. Obtaining a visa

For foreign nationals who are not from EU/EEA Member States or from the Schengen area requires a visa, which can be a Short Stay Visa, Temporary Stay Visa or a Residence Visa/Blue Card. The employment of foreign nationals is governed by Law no. 223/2007 and Decree no. 84/2007 which provide the legal framework for the hiring of foreign nationals.

The process for obtaining a visa is as follows:

The foreign national submits an application for a visa to the Portuguese Consulate of the employee’s country of residence, or at Portuguese Immigration Services (Serviço de Estrangeiros e Fronteiras, “SEF”) if they are in Portugal.

The relevant documents must be submitted with the application, including:

  • Valid passport with at least 2 blank pages
  • One coloured passport photo
  • Document for purpose of trip, e.g. letter of invitation from employer
  • Flight reservation documents or itinerary for multi-area visits
  • Health and accident insurance
  • Bank statements as proof of sufficient funds (Minimum is €40 plus €75 per country visited)
  • Proof of accommodation, E.g., hotel reservation or address of residence
  • Biometric data, E.g. fingerprints and digital photos

The employee is provided the visa to Portugal who is then legally allowed to enter the country.

Time: 2 – 3 months depending on visa

Please contact us for a quote.

3. Obtaining a work permit (Autorização de residência)

For workers who are intending to stay in Portugal for longer than six months, the residence card or work permit must be obtained for employees who are not from the EU/EEA region. A temporary permit is valid for 1 year and renewable for an additional 2 years. The permanent residence permit is indefinitely valid as long as it is renewed every 5 years.

It is more difficult to secure a work permit if the employee is from a non-EU/EEA country, unless they possess specialized skills or if there are no qualified Portuguese workers who may fill the position.

There are several types of residence permits, although most are functionally similar to regular work permit. They include:

  • Residence permits for professional activities
  • Residence permits for research
  • Residence permits for investment business
  • EU Blue Card residence permits (Highly qualified activities)

The process for obtaining a work permit is as follows:

An application is submitted by the employee or by the employer on behalf of the employee at the regional directorate or the Delegation of the Portuguese Immigration and Borders Service (Serviço de Estrangeiros e Fronteiras, “SEF”).

The necessary documents must be submitted with the permit application, including:

  • Valid passport or travel document
  • Valid residence visa
  • Two coloured passport photo
  • Bank statements as proof of sufficient funds
  • Proof of accommodation
  • Criminal record checks
  • Proof of Portuguese proficiency (Only in some cases)
  • The employment contract with the employer
  • Any relevant tax documents
  • Registration of the employee with Social Security

The employee is provided the residency permit which allows him/her to work under the foreign employer in Portugal legally.

Processing time: Up to 60 days

Please contact us for a quote. Fees can vary depending on type of visa, nationality of applicant, country of application and other circumstances.

4. Arrival procedures

Once the employee has been invited to work for an employer in Portugal and the visa and work permit has been obtained, the employee may travel to Portugal. Upon arrival, the employee must:

The Social Security and Tax departments will require:

  • Valid passport
  • Authorized photocopies of the employee’s tax returns from the previous three years in their country of residence
  • National Insurance Number

Once the steps above have been adhered to and successfully completed, the employee may commence employment.

 

Use the Shield GEO Employer of Record Solution?

Once you get in touch with us, one of our consultants will take all the work off your hands, coordinate with our local partners to get all the required permits organised, provide the processing time, costs, document-checklist and keep you informed through the process. Contact us to know more.

Types of visas in Portugal

Category Description of Visa
Short Stay Visa

The short-term visa applies to foreign nationals if the purpose of the stay does not fall under any other visa category. For example, business visitors who will engage in non-work business visits, meetings or negotiations fall under this category.

This visa is granted for a period up to one year. It is renewable for up to 180 days, although the duration of a single uninterrupted stay must not exceed 90 days.

Temporary Visa

The short-term visa is intended to permit entry into Portugal for a limited time relating to activities like provision of services, professional training, independent activity or medical treatment.

Depending on the activity, the temporary visa may be granted for up to 6 months or one year for scientific or highly qualified research. It is normally valid for 4 months and may be renewed up to 2 years for multiple entries to Portugal, unless it is a professional activity in which case it extends up to the duration of the contract.

The approval of the SEF is required for this visa to be granted.

The processing time or decision time limit is a maximum of 30 days from application.

Residence Visa

The residence visa is granted to non-EU nationals who are intending to engage in employment in Portugal or to provide a professional service in Portugal. The purpose of the residence visa is so that the holder may apply for a residence permit for extended work greater than 6 months.

There are several categories of residence visas depending on the type of contractual work, which includes the subordinate professional activity residence visa, exercise of an independent professional activity residence visa and the research or highly-qualified activity residence visa. The first type of residence visa has a quota imposed by the Portuguese Government, limiting the granting of the residence visa to foreign nationals who have employment contracts with Portuguese companies.

The residence visa is valid for two entries up to a period of 4 months stay in Portugal. It is renewable for up to 90 days. During the validity period, the holder must submit a request for a temporary residence permit. The applicant may also apply for family reunion for any dependants.

The approval of the SEF is required for this visa to be granted.

The processing time or decision time limit is a maximum of 60 days from application.

Entry without Visa

If the foreign national holds a residence permit or identity card, or is an EU national who has a residence card, a visa is not required to enter Portugal.

Golden Visa

The Golden Visa Programme is a method for foreign investors from non-EU countries to obtain a fully valid residency permit in Portugal. The purpose of the Golden Visa program provides the national with full EU residency status for individuals as long as certain investment requirements are met. Investments must be made after 8th October 2012.

Some examples of qualifying investments in Portugal are:

– Transferring more than €1,000,000 in funds to Portugal
– Acquisition of property above €500,000
– Creation of at least 10 jobs

Please contact us for a quote.

Once the application has been submitted to SEF, it may be processed within a few months.

Setting up a company in Portugal

When setting up a company you may want to consider these factors:

  1. Business Factors

    The Portuguese government is highly supportive of foreign investments into the country, with several incentives and tax benefits provided for large-scale investments into Portugal. Portugal provides significant financial incentives, tax relieves and aids for foreign companies investing in particular sectors as well.

    There is no discrimination against foreign investments in Portugal, where foreign companies are free to invest in almost any economic sector in Portugal.

    The process of incorporation for foreign entities is very similar to that of local businesses, where initiatives have been implemented to expedite the process of incorporation to under one hour for most cases using One Stop Shop services.

    You may also want to consider the following when making your decision:

    • The industry and type of business that will be conducted
    • Nationality of headquarters/individuals
    • Presence of existing trade agreements or relationships
  2. Location

    Location will be another factor. Separate cities and regions may have different rules, costs and availability. It is always recommended to seek advice from relevant professionals, such as business or legal advisors, accountants and others depending on your needs.

  3. Language

    Regional language may be an important consideration. The official language in Portugal is Portuguese which is largely spoken throughout the country, with some differences in dialects between regions. The main foreign languages spoken in Portugal are English, French and Spanish. 32% of citizens in Portugal have some level of understanding of English.

There are three broad forms of incorporation available to foreign companies in Portugal. Each of these business forms have distinct advantages and disadvantages, as well as differing scope of business activities, registration requirements and minimum capital requirements. In most cases it will depend on the degree of commitment a company has to Portugal and the planned business activity.

When setting up a company in Portugal, you have the following options:

  • Limited Liability Company
  • Partnerships
  • Branch Office/Representative Office

This article provides a general guideline for foreign businesses on entering Portugal for business purposes. In particular, it looks at some common pathways to establishing a business presence in Portugal, generally through a limited liability company, partnership or a branch/representative office. In addition, various economic, tax and regulatory factors are provided throughout as a source of useful information to assist those who will enter the Portuguese economy. The guide also looks at some immigration requirements such as obtaining appropriate visa status.

Limited Liability Company

PLC

The limited liability company structure of incorporation can be private or public.

1. Private Limited Company

The Private Limited Liability Company (Sociedade por Quotas, “LDA”) is recommended for entities that wish to establish an enterprise on a small scale in Portugal, with low initial capital investment and expenses. It is the most widely used type of incorporation in Portugal due to its convenience for small enterprises and its more simplistic administrative and supervisory structure.

The LDA must be established by at least two founders with a minimum share capital of €5,000. Each shareholder’s liability is limited to that of their contribution.

The management of the LDA is assured by a single director who is appointed through the general meeting of shareholders, who are the supreme authority in the Portuguese LDA.

In the Portuguese LDA, shareholders do not own shares, but instead they own “quotas”. Quotas represent the capital in the company, and are described in the Articles of Association. Transferring these quotas do not require a public deed, as a private document is sufficient.

The LDA company once incorporated are not subject to an annual audit if they have satisfied two out of three requirements during the two preceding years:

  • Total assets below €1.5m
  • Total revenue below €3m
  • Less than 50 employees

 

2. Public Company

The Public Company or Corporation (Sociedade anónima, “S.A”) is more suited to those incorporating a medium or large enterprise with high levels of investment capital and has a more complex administrative and supervisory structure. This is most appropriate for entities seeking to raise large levels of finance to fund expansion. This method of incorporation also allows the listing of shares on the Portuguese Stock Exchange.

The S.A must be established by at least five shareholders with a minimum share capital of €50,000. Each shareholder’s liability is limited to that of their contribution.

The management of the LDA is assured by a board of directors who are appointed through the general meeting of shareholders and are supervised by the Supervisory Board.

There are two types of shares: certificate and bearer shares, which can take one of two forms of representation: held or scriptural shares.

The S.A once incorporated must be subject to an annual audit.

 

Incorporation Process

The incorporation process in Portugal is designed to be highly efficient and fast via the “One-stop shop” service provided by certain Portuguese agencies. These agencies provide an “On the Spot Firm” (Empresa na Hora) service which expedites the company set-up process in under an hour through a single service, assuming all documents are present. The steps are as follows:

1. Register the name at the National Registry of Collective Entities (Registro Nacional de Pessoas Colectivas, RNPC)

A newly formed company must have its name checked with the RNPC to ensure it is not in used in the register. If the name is available, it may be reserved for a period of 48 hours for a fee. Selecting from the RNPCs list of pre-approved names in the database is also an option. Once the name has been successfully processed, the company is given the name approval certificate.

2. Open a bank account

A bank account must be opened by the founders with a deposit for the minimum required share capital for each member.

3. Obtaining the Certificate of Registration

The founders must request a Portuguese Tax Identification Number from the National Registry of Collective Entities, a current extract of the entry in the Commercial Registry and the minutes of the inaugural meeting of incorporation. The On the Spot firm may facilitate this process and provide a standard memorandum and articles of association once the documents have been submitted.

It is possible to receive the certificate of incorporation, corporate identification card, the Social Security number, the deed and business registration certificate all at once through the On the Spot process, otherwise it must be submitted to the relevant authorities no later than 15 days from incorporation.

4. Registration of employees

The entity must register all employees at the Centros de Formalidades das Empresas (CFE) or the Business Registry Offices 24 hours before they commence activities or no later than 10 days after the declaration of starting the business.

The employer must also register the employees with the Portuguese Social Security services in the area within 24 hours of the employment agreement’s entry into force. Failure to follow these procedures of registering the employee will result in a fine ranging from €75 – €4,800.

5. Notifying the Labor Inspectorate

The employer must provide the business name, tax number, copy of the company incorporation announcement, the company activity description and headquarter address to the Labor Inspection Office (Inspecção-Geral do Trabalho). This may be submitted through the One Stop Shop who will deliver it on behalf of the business.

6. Registration of insurance

The last step is to register for the employee’s accident compensation insurance with a private insurer for all employees and managers who receive a regular salary. The insurance is underwritten by a private insurer and can be done after the business has begun activities.

Time:

1-2 days if carried out through a One Stop Shop.

2-3 weeks if incorporating manually.

Cost:

€3340 on average including taxes, duties and fees.

Partnerships

In Portugal, a partnership arrangement occurs when there are two partners who will form the business entity in Portugal. Partnerships are prevalent for professionals, such as lawyers, economists and engineers. They are not often used as a method of incorporation in Portugal for most types of businesses as one or both partners are subject to unlimited liability. The partnership requires a notarized deed signed by both partners which outlines the contribution of each partner, how the profits will be distributed and the admittance process of new partners.

There are three types of Partnerships:

Limited Partnership (Sociedade Em Comandita Simples, “SC”)

A limited partnership is formed by at least two partners, where at least one is a general partner who takes on unlimited liability for the company’s obligations, while the others have limited liability. The general partner executes all decisions and may claim all profits, while the limited partner remains ‘silent’, has no decisional power or claim on profits, but is entitled to a return for their investment. The limited partner is only liable to the extent of their contribution to the business.

General Partnership (sociedadeem Nome colectivo, “SNC”)

A general partnership is formed by at least two partners where both have full liability of the company. Both partners are equally responsible for making decisions and may manage the company as they see fit. Both partners are entitled to the distribution of profits as outlined in the deed.

General partnerships have no minimum share capital requirements.

Limited Partnership with Share Capital (Sociedade em Comandita por Acções)

This is a third form of partnership which is similar to the limited partnership where there are both general partners and limited partners. There is a key difference in that the capital contributed by the limited partner must be divided in shares, essentially transforming limited partners to shareholders. The minimum share capital is €50,000 and the Partnership’s name must include the name of at least one general partner.

 

Branch/Representative Office

A branch office (sucursal) or representative office (escritório de representação) may be established by the foreign business that operates under the company name while carrying out regular business activities. Foreign companies may find this option attractive as it provides greater exercise of control over business operations, while business functions like accounting, HR and tax do not become burdensome. It is intended for those who do not intend to incorporate a fixed corporate structure.

Branches in Portugal are relatively easier to establish as there are no minimum share capital requirements as the initial capital investment is provided by the parent company.  Branches are not considered as an autonomous legal entity and instead are extensions of a foreign company, so the liability for the obligations of the branch office rests with the parent company.

The incorporation procedure for a branch is similar to incorporating a regular Portuguese company, which has its own “Branch on the spot” service as well to expedite the process. The branch office name must be registered with the national Registry of Collective Persons (RNPC) and the business must be registered with the Commercial Register. The following documents are required for this process:

  • Parent company’s incorporation documents
  • Documents of the parent board of directors confirming the establishment of the branch
  • A power of attorney
  • Certificate of registration
  • Articles of association
  • List of management and supervisory board
  • All documents must be written or translated into Portuguese

A Portuguese branch is subject to the same treatments as a local company. It must be registered with Social Security, the Labour Inspectorate and a private insurer similar to any normal incorporation process.

Cost: €200

Time: Up to one week

 

Outsourcing Employment Through a GEO Employer of Record Service

Whether to incorporate in Portugal, and what sort of entity to setup are just two of the many choices companies must make when expanding into a new market.

If the company intends to have staff in Portugal they must also decide whether they will administer that employment internally or use a Global Employment Organization to handle payroll and Employer of Record responsibilities.  A GEO Employer of Record solution is an attractive alternative where

  • the company is looking to setup an office quickly
  • the company wants to work within a defined budget
  • the company wants to limit its initial commitment in Portugal
  • the company needs help with tax, employment, immigration and payroll compliance in Portugal

The complexity of employment regulations in Portugal makes the use of a GEO advisable coupled with local legal counsel to ensure full compliance with employment laws, for example the drafting of local contracts for workers.

Shield GEO provides a comprehensive service in Portugal allowing companies to deploy their staff quickly with reasonable, clearly stated costs and timeframes. The company contracts directly with Shield to employ and payroll their staff on their behalf in Portugal.

Shield GEO then becomes the Employer of Record. Shield GEO assumes the legal responsibility for these employees, sponsoring them on work permits, complying with local employment law and running their monthly payroll. Using Shield GEO is the fastest and most cost effective way to deploy local and foreign workers into Portugal. Read more about outsourced employment through Shield GEO.

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