Why Setup an LLC( Limited Liability Company) in Portugal


Portugal is situated on the West and Southwest side of the Iberian Peninsula in south-western Europe and it consists of continental Portugal, the Azores, and the Madeira Islands.  Its only border is with Spain. The Azores and Madeira Islands are autonomous territories with a special tax regime.

Portugal has become a member of the European Union (EU) in 1986. As a member of the European Union (EU) and the eurozone, it is fully integrated with the EU, uses the euro currency, and follows directives from the European Commission in Brussels.

The workforce in Portugal is highly skilled whilst costs for hiring employees are lower compared to other EU countries.

The private limited liability company (sociedade por quotas – LDA) in Portugal is the most common type of companies set up in Portugal. A Portugal LLC can be established if there are at least two founders with a minimum share capital of EUR 5,000. All the shareholders must bring a contribution to the capital and their liability is limited to that contribution. The management is assured by a director appointed by the general meeting of the shareholders, the supreme authority in the Portuguese LDA.

There are no restrictions on the percentage of foreign ownership allowed in a Portuguese company and it is possible to incorporate a company which is totally owned by non-residents whether corporate or individual.

A Portugese LLC must have a general meeting. Management structure can be set up so it would fit the requirements of the business. The company will also need a statutory auditor if two of the following three conditions are surpassed over two consecutive years:

  • The total of the balance sheet exceeds 1,500,000 Euros
  • Net sales exceed 3,000,000
  • Average number of employees is over 50 in the year

The LLC has to be registered with the commercial registry and the start of its activities with the Tax Authority.

Portugal is a natural hub for trade between Europe and the Americas, the country has an open economy and actively seeks to attract foreign investment, with plenty of incentives available. In order to attract foreign companies, Portugal offers various important incentives, some of them are backed by EU funds. Special incentives are available for large investment projects and for proposals that would impact positively on tourism, science, and the environment.

Portugal has signed agreements with more than 50 other countries for the reciprocal protection and promotion of investments, and double taxation agreements with 79 countries.

Portugal is a strategic location for foreign companies wanting to establish a presence in Europe and for individual investors looking for a market advantage and a favorable business climate.

The normal business tax rate in Portugal is 25%, with an additional 2.5% local tax rate levied on any sales made to citizens or businesses inside the Portuguese borders. The standard VAT rate in Portugal is 23%, but reduced rates of 13% and a further reduced rate of 6% that relates mainly to basic food products.