Doing Business In: Portugal

Raposo Bernardo

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Business environment

Portugal is an open economy, particularly dependent on exports and tourism.

Due to this fact, the pandemic of COVID 19 had a strong impact on the country’s business climate and negatively affected, as in practically the whole world, the economic growth.

It would not be wrong to say that the pandemic and its consequences were the fact with the greatest impact on the way business activity is conducted in Portugal.

This was due to the restrictions imposed by the successive states of emergency that were decreed, among which we highlight the compulsory closure of several economic activities, the imposition of compulsory teleworking in the sectors of activity where this was possible and the restrictions on both internal and external movement.

Despite these constraints, there were sectors that demonstrated notable resilience, of which the construction sector stands out, with activity levels remaining practically unchanged.

If the country’s openness may have been negative during the Pandemic, our belief is it will be one of the main advantages in times of normality.

Being part of the European Union, Portugal is a country with a stable regulatory framework, aligned with the best international practices, particularly open to foreign investment and friendly and welcoming to foreigners in general. Portugal also has a strategic geography to enter Europe and access its important market, an exceptional climate along the year, enabling a top ranked tourism industry and related services very well combined with a much-appreciated gastronomy. These are strong arguments favorable to attracting foreign investment.

The country has high-profile entities and structures in place aimed at supporting and attracting investment, to seize, follow up and capitalize on these opportunities, headed by AICEP, the entity whose responsibilities include promoting the internationalization of Portuguese companies and supporting their export activity, attracting foreign investment, and promoting Portugal’s image. Besides this, there are several entities and organizations of sectorial, regional and local scope, which may also provide important support to those wishing to invest in a specific sector or activity.

Furthermore, in certain regions there are also entities specialized in supporting the incorporation of new companies and businesses – business incubators. The way in which these entities have been carrying out their role has been particularly appreciated by investors who seek for sustainable and long-term activities, which has been determinant for the installation in the country of many start-ups of a technological matrix and BPO services.

The extraordinary professional qualifications of Portuguese staff, internationally recognized, and the ease of expression in foreign languages, are also an attractive factor for the country.

The fact is the way to make an investment in Portugal is not substantially different from the way to make an investment in any other European Union country or in any other Western economy. However, despite the countless similarities, there are particularities of various kinds, legal, cultural, bureaucratic, etc., which make it advisable for any project to be considered and executed with the support of local consultants, namely with the support of local lawyers, as the way to mitigate (legal) risks that any investment project entails.


As a member country of the EU, Portugal adopted the Euro, a strong and most stable currency in relation to others.

In the last 6 years, except for 2017, the inflation rate has always been below 1%, and in 2020 the rate was practically zero, as a direct result of the Pandemic.

Traditionally, the main sectors of activity are construction, tourism & hospitality, and industry.

The industrial sector has a strong export component, based on ancient and best consolidated textile and footwear and the paper pulp industries, along with the high specialized automobile and metalworking standing out.

Particularly in the last decade, the services sector has been assuming a growing role in the economy. Portugal has been chosen as the preferred location for service provision centers (BPO) by numerous entities and has hosted and supported numerous projects in this sector of activity.

The agricultural sector has also been experiencing a new boost, with the production and export of fruit and vegetables, olive oil, with equal emphasis on the wine industry, highly appreciated and internationally accredited. Portugal is also one of the main producers of cork and cork-related products.

Current opportunities & future prospects

Portuguese mergers and acquisitions continue to be heavily driven by foreign investment which last year represented 90.2% of the value of Portuguese transactions and 69.9% in terms of volume.

Cross-border transactions, according to the most recent TTR report, totaled 55 transactions involving foreign companies in the acquisition of Portuguese companies, in the first half of the year, representing a 41.5% reduction compared to the first half of the previous year, already resulting from the COVID-19 pandemic.

And surprisingly, the annual value of M&A transactions in Portugal this year is the highest since 2014 and represents a rise of 8.3% on the total transacted throughout 2019, by having reached around €7bn.

Naturally, the M&A market has been obviously affected by the COVID-19 pandemic. Notwithstanding some deals that were already started in 2019 in sectors such as media or energy (fuel distribution) have been concluded in 2020.

It is foreseeable that the progressive return to normality will lead to an increase in M&A activity both in the number of operation and amounts involved considering the increasing number of opportunities that may arise as a direct consequence of the pandemic.

It is true that one of the main consequences of the pandemic was the decapitalization of companies.

There are therefore many companies, in the most diverse sectors of activity, that would be willing to welcome investment projects that would allow them to reinforce their equity capital.

This is certainly why, even during the pandemic, international funds, private equity houses, family offices, as well as other institutional and private investors, have been consulting us on various investment opportunities and the legal regime applicable to their implementation.

Investment projects and opportunities exist in both the M&A and real estate markets.

Important real estate investment projects have been announced, not only in the main cities, such as Lisbon and Porto, or in the main tourism destinations, such as the Algarve, but also throughout the country, in locations where attractive investment opportunities had not yet been discovered. Also, the origin of the investors is the most differentiated, as India, Brazil, France, the UK, Nordic countries, Israel, among others, have invested in the Portuguese real estate market, which has been considered by numerous sources as one of the most promising in Europe.

The growing number of foreign citizens, many of whom are retired, who have chosen the country as their place of residence, as result of the incentives granted to those who wish to invest or live in Portugal, has not only been an important factor in stimulating the property market, but has also favored the creation of companies in sectors such as hospitality, expatriate services, health services and domestic care.

When talking about investment prospects, it is not possible to forget that the economic recovery measures announced and supported by the EU will certainly create investment opportunities in the infrastructure and construction sectors.

Although the crisis in aviation may have some impact on the already announced construction of the new Lisbon airport, it is certain that investment in the railway network has already been announced as a priority, to improve domestic and international train traffic, and the continued development of port terminals, so that Portugal can continue to exploit the attractions of its cruise ship terminals.

The crisis caused by the pandemic may also provoke a consolidation movement of banks or other financial institutions.

Government support for renewable energy production and the success of the latest auctions of solar energy production capacity may also create investment opportunities in this sector. We cannot forget that the energy sector is essential in the process of decarbonization of the economy and that, in this aspect, Portugal has achieved very important results, such as the consecutive days in which the country only uses energy from renewable sources, with 51% of the energy consumed in the country being from renewable sources in 2019.

Speaking of the energy issue, it is also not possible to forget the country’s bet on electric mobility, a sector that should also be on the radar.

It has been reported by different entities that several international investors, especially investment funds, have been contacting them with the aim of finding real estate assets, such as hotels, office buildings, etc., or companies in which to invest, promoting their renovation or restructuring, to put them in a better competitive situation and promote their sale in the future.

The pandemic may also have created the opportunity sought by sectors such as health, technology, and education, to promote their visibility and attractiveness for foreign investment.

As we have already mentioned, Portugal has been considered a good ecosystem for the creation of new projects, especially technological ones. The living conditions enjoyed in the country, especially in large cities a few kilometers from the coast and beaches, have attracted new generations of entrepreneurs, who have decided to set up their companies here.

The response to the needs of these new projects and of those who work in them has also created opportunities for investment, of greater or lesser scale, in the most varied sectors of activity.

Portugal, with its nearly 10 million inhabitants, is not a large market, but we must not forget that its market is the European Union and that it has privileged relationships with several other markets, namely at Africa. Therefore, it may also be a good platform for marketing products online, a trend that has been assuming an increasingly relevant role during the pandemic and that will most certainly continue in the future.

Legal system

Portugal belongs to the so-called Civil Law legal family.

The administration of justice is the responsibility of the courts, which are independent and decide exclusively based on the law. Their decisions are binding on both private and public entities and prevail over any administrative decision.

Apart from the special jurisdictions, there are two essential jurisdictions: Judicial or Common Courts Jurisdiction and Administrative Jurisdiction. The common jurisdiction includes courts with special competence, such as the Labor Courts.

The courts are organized in several instances, and the decisions of lower courts can be appealed to higher courts, as provided by law.

Final and binding administrative decisions are subject to judicial impugnation.

It is important to bear in mind that many activities are subject to supervision by regulatory or supervisory entities, for example the Securities Market Commission, the Competition Authority, the Energy Services Regulatory Entity, etc. The decisions of these entities can also be appealed in court.

As a member state of the European Union, the rules of European law also apply in Portugal.

Regarding the courts and administration of justice, investors should bear in mind that the resolution of cases is not always swift, especially if there are appeals to higher courts. However, the government has been trying to resolve this situation, which has improved significantly in recent years.

The delay in the judicial resolution of disputes has been an important incentive for the increasing use of mediation and arbitration, especially in private procurement.

The implementation of an investment operation in Portugal must take into consideration, from the initial stages of its conception, the specificities of the national legislation and regulations, the culture, and practices of national institutions, from the courts, administrative entities, to national, regional, or local government entities which may have some intervention/decision in the projects in question, whether in their authorization, in the contracting of incentives, etc.

Therefore, it seems extremely important to us that, although it may seem unnecessary (especially for investors from other member states of the European Union), the hiring of local legal support and, whenever it is necessary to hire other consultants, that the choice falls on consultants with concrete experience of acting in this market.

It is common that, even before the negotiation phase, the parties involved sign a Memorandum of Understanding, which defines the essential terms under which the negotiation will take place, and a Confidentiality Agreement, which protects the information that may be disclosed during the negotiations from indiscriminate disclosure.

Already during the negotiation, it is usual for the investor to make an evaluation of the assets he intends to acquire and of the risks affecting them. It is therefore a common practice to perform a legal and accounting due diligence, whose scope and extent naturally depend on the type of asset in question and the operation that is intended to be implemented.

In this respect, it is important to note that there are several assets, such as real estate, which are subject to mandatory registration and that there are certain activities which require registration with regulatory and supervisory authorities.

Compliance with these registration obligations, as well as other obligations essential to the exercise of the activity in question, must be assessed through due diligence.

Regarding the implementation of the investment, the most common way for foreign investors to proceed is by incorporating companies under local law.

The most common types of companies are the private limited company and the public limited company.

The essential characteristics of these types of companies are as follows:

Private limited company:

  • Minimum number of partners – 1
  • Minimum share capital – EUR 1
  • Liability of members – without prejudice to special situations, the liability of members is limited to the paid-up share capital
  • Management body – one or more managers
  • Supervisory body – not compulsory. However, companies that fulfil certain requirements are obliged to appoint a statutory auditor
  • Representation of share capital – the share capital is represented by quotas, and the ownership of quotas is subject to registration

Public limited companies:

  • Minimum number of shareholders – 5. A single shareholder is allowed in the case of a legal entity
  • Minimum share capital – EUR 50,000
  • Liability of shareholders – without prejudice to special situations, the liability of shareholders is limited to the paid-up share capital
  • The statutory bodies of public limited companies can assume different models, however, as a rule
  • Management body – sole director or Board of Directors, depending on the fulfilment of certain requirements
  • Supervisory body – the company must have a Supervisory Board or appoint a Statutory Auditor
  • Securities – the share capital is represented by shares, which must be registered

Both types of companies are incorporated by means of a formal document of incorporation, whose signatures must be certified in person by a notary or a lawyer. The incorporation of the company is subject to registration at the Commercial Registry Office, and the beneficial owner(s) of the company being formed must be indicated.

As can be seen, in addition to the differences regarding the number of partners and minimum capital requirements, public limited companies are a type of company with greater operating requirements and are therefore usually adopted for larger, more complex projects involving a larger number of partners.

Portugal has adopted a policy of reducing the number of business activities requiring prior licensing.

Nevertheless, there are still many regulated sectors whose exercise requires a prior licensing or registration process. Examples are the banking and financial services sector, telecommunications, insurance, among others.

It is of the utmost importance that foreign investors assess what kind of conditions or restrictions apply to the exercise of the activity in which they intend to invest, so as not to be surprised by situations they did not foresee and did not expect.

Foreign investment restrictions

As we have already had the opportunity to mention, Portugal is a country open to foreign investment and, therefore, does not impose special restrictions on investments made by foreign entities.

There are important foreign investments in sectors such as energy, banking, insurance, telecommunications, transport, etc. And when we refer to foreign investments, we mean not only investments originating in EU countries but also, and above all, investments originating in third countries.

Notwithstanding the above, there are a few sectors that impose specific rules for investment, both by national and foreign citizens. And the compliance with such rules is essential for the success of the investment.

Again, the aspect mentioned in a side-by-side manner and that we believe is important to mention regarding investment restrictions, is related to the rules on transparency about the identity of investors.

In the last few years, Portugal has been adopting rules that facilitate the identification, namely by the authorities, of who are the effective owners of the investments made in the country. This has happened throughout the European Union following the implementation of rules to combat money laundering and the financing of terrorism.

For this reason, besides the fact that all shares are now compulsorily registered and bearer shares are no longer allowed, the so-called Central Register of the Beneficial Owner (RCBE) was created.

The RCBE aims to identify all individuals who control associations, cooperatives, foundations, civil and commercial companies, as well as any other personalized collective entities, subject to Portuguese or foreign law, who carry out an activity or perform a legal act or business in Portugal, which requires a tax identification number (NIF) in Portugal.

Regarding Portugal’s attractiveness, we can refer that, according to the last AICEP report published:

  • The country is situated in a geostrategic position between Europe, America, and Africa.
  • It occupies 21st position (among 141 countries) in terms of Quality of overall infrastructure, according to the World Economic Forum (WEF) Global Competitiveness Report 2019.
  • Ranked 39th (among 190 economies) of Ease of Doing Business ranking in the World Bank’s Doing Business 2020 report.
  • It has risen to 34th position in the ranking (among 141 countries) Global Competitiveness Index 2019 of the WEF.
  • Portugal has a technologically advanced telecommunications infrastructure network. The state-of-the-art fiber-optic network covers most of the territory. The proportion of fiber optic connections in total broadband was 36.8% at the end of 2018, higher than the OECD average (28%), placing Portugal in 9th in the OECD and 4th in the EU.
  • The country offers social stability, attractive labor costs, a good level of labor skills, telecommunications infrastructure, potential to increase productivity and good transport and logistics infrastructure.
  • According to the consultancy firm EY, the country shows a positive evolution in the development of the start-up ecosystem, to encourage foreign direct investment (FDI) and promote the country’s attractiveness.
  • Also of note is the relevance of the tourism sector, which benefits from Portugal’s geographical position, enjoying a Mediterranean climate. According to the World Tourism Organization Portugal (UNWTO World Tourism Barometer-July 2020), in 2019 Portugal was the 20th world market (and 8th in the EU) in terms of tourism receipts and the 15th receiver market for tourists, with 24.6 million arrivals having been recorded.

Portugal is party to numerous agreements on the promotion and reciprocal protection of investments.

These agreements contain binding measures of a bilateral nature, aimed at creating more favorable conditions for investments by investors of one of the signatory states in the territory of the other, ensuring, on a reciprocal basis, the most favorable treatment of investors and a guarantee of full protection and security for investments already made.

The areas typically covered by this type of agreement are admission of investments, treatment of investments, expropriation and investment losses, and dispute settlement.

Portugal has concluded this type of agreement with the following countries outside the EU. : Albania, Angola, Algeria, Argentina, Bosnia Herzegovina, Brazil, Cape Verde, Chile, China, South Korea, Cuba, Egypt, United Arab Emirates, Philippines, Gabon, Guinea-Bissau, Equatorial Guinea, Jordan, Kuwait, Libya, Macau, Morocco, Mauritius, Mexico, Mozambique, Pakistan, Paraguay, Peru, Qatar, Democratic Republic of Congo, Republic of Congo, Russia, Sao Tome and Principe, Senegal, Serbia, Timor, Tunisia, Turkey, Ukraine, Uruguay, Uzbekistan, Venezuela and Zimbabwe.

In addition to agreements to promote and protect investments, Portugal has numerous conventions in place to avoid international double taxation (DTC), following the OECD model convention. As we know, this type of convention is also an important regulatory instrument within the scope of international economic relations.

It should be noted that Portugal’s policy of attracting and maintaining FDI allows foreign investors to benefit from support and benefits (many of which are also available to national investors), which is yet another argument in favor of setting up new projects in the country.

Let us not forget that the European Union’s support programs for economic recovery will allow for the creation of new programs for specific sectors and the maintenance and reinforcement of support that already exists for the main sectors of economic activity and for the qualification of the workforce.

According to recent studies, namely those of the European Central Bank, restrictions on foreign investment in the EU are, on average, lower than those imposed in other OECD countries, and within the EU, Portugal is one of the countries with the fewest restrictions.

It is, therefore, possible to state that in Portugal there are no restrictions on the entry of foreign capital. The guiding principle of the national legal regime is that of non-discrimination of investment on the grounds of nationality.

Therefore, it is not mandatory to have a national partner, nor is it compulsory for the directors of the companies (or parts thereof) to be nationals, nor are there any limitations on the distribution of profits or dividends abroad.

The rules governing foreign investment are like those applicable to domestic investment.

Of course, there are special requirements for specific activities and rules on financial transactions and capital flows, and the restrictions imposed at this level stem mainly from rules aimed at preventing money laundering and terrorist financing.

Key Points

Portugal’s track record

  • Portugal is considered the second-largest power plant in the world
  • The total FDI stock recorded in 2018 in Portugal was USD 135,777 million
  • Attractive investment fields in Portugal (among those with the highest potential for receiving FDI, we can list the following: tourism, biotechnology, the electric and electronics sectors, the new information and technology sectors, parts of the chemical manufacturing sector and the shared services centres – BPO)


  • Prepare to find knowledgeable, young, capable, English speaking, highly adaptable, educated, flexible, productive, innovative and most committed to achievement workforce
  • Recognized experienced senior management

Political stability and safety

  • Portugal’s political stability is “Europe’s rare pleasant surprise”, by Thomson Reuters
  • Portugal has among the lowest crime rates in Europe


  • Strong and diverse multilingual skills – 42% speak two languages (mainly English), and 23% speak at least three languages
  • One of the highest percentage proportion of graduates in math, science, engineering and computing in the EU


  • Fixed corporate tax rate, attractive R&D credits, beneficial holding company location
  • Attractive intellectual property regime
  • Extensive double tax treaty network

Ease of doing business

  • Consistently ranked as one of the best countries in the world to do business, ranked 39th (among 190 economies) of Ease of Doing Business ranking in the World Bank’s Doing Business 2020 report
  • According to the 2010 Global Benchmark Report, Portugal is the 7th country in the OECD with the lowest level of costs and taxes

Strategic localization

  • Gateway to Europe and beyond
  • Free movement of goods and services within EU and its 500 million plus consumers
  • Foreign languages, namely English speaking, and member of EU / Eurozone
  • Large number of cities and regions with proven ability to attract FDI Innovation and BPO platforms
  • Technologically advanced telecommunications infrastructure network – 9th in the OECD and 4th in the EU