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Legal Considerations for New Businesses in Portugal

By Rauva

Published on 8 December 2023

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This article provides a comprehensive overview of key legal considerations for new businesses, encompassing the selection of legal structures, the intricacies of business registration, licensing requirements, tax obligations, and the crucial steps to protect intellectual property. Entrepreneurs are encouraged to navigate this complex landscape with the assistance of legal professionals to ensure a smooth and legally sound establishment of their business in Portugal.

Sole Proprietorship

A sole proprietorship is the simplest and most common form of business structure in Portugal. Is owned and operated by a single individual, who is personally responsible for all aspects of the business. This type of business does not require a separate legal entity, which means that the owner has unlimited liability for any debts or legal obligations. It offers the advantage of complete control and flexibility. If you choose to operate as a sole proprietorship, you will need to register your business with the Commercial Registry and obtain a Tax Identification Number (TIN). Note that as a sole proprietor, you will be taxed on your personal income, rather than the business's income. It is recommended to consult with a legal professional to ensure compliance with all legal and tax obligations.
Explore more about choosing the right legal structure in our comprehensive guide.

Partnership

In a partnership, two or more individuals come together to run a business and share the profits and losses. This type of structure offers flexibility and shared responsibility among the partners. Partnerships are legally binding and must follow the regulatory standards for invoicing in Portugal. Partnerships allow for seamless integration between multiple platforms, providing a centralized place to handle business accounts, manage invoicing and accounting needs. This integration leads to increased efficiency and productivity for partners, allowing them to focus on growing their business without worrying about the complexities of invoicing and compliance. 

Limited Liability Company

Offers the advantage of limited liability, meaning that the owners' personal assets are protected in case of business debts or legal claims. To form an LLC, you need to draft and sign a memorandum of association and articles of association, which outline the company's structure and operations. You must register the company with the Commercial Registry and obtain a tax identification number. An LLC is subject to corporate income tax and value-added tax. Starting an LLC in Portugal can provide the legal protection and flexibility that many new businesses seek, but it is essential to carefully consider the formation process and tax implications.

Registering Your Business

Obtaining a Tax Identification Number

This unique identification number is required for all businesses operating in the country. To obtain a TIN, you will need to submit an application to the Portuguese Tax Authority (AT). The application process can be completed online or in person at an AT office. Provide accurate and up-to-date information in your application to avoid any delays. After submitting your application, you will receive your TIN within a few days. Note that the process could take longer during peak times. Once you have your TIN, you can proceed with the next steps of registering your business and fulfilling your tax obligations.

Here is an example of the information required for the TIN application:

InformationDescription
NameThe legal name of your business
AddressThe registered address of your business
ActivityThe main activity of your business

Registering with the Commercial Registry

The process involves submitting the necessary documentation and paying the required fees. The Commercial Registry will then review your application and verify the information provided. Once approved, your business will be officially registered and you will receive a registration number. It is important to ensure that all the information provided is accurate and up-to-date to avoid any delays or complications.

To help you navigate the registration process, here is a table outlining the required documents:

DocumentDescription
Identification DocumentA valid identification document for the business owner(s)
Proof of AddressA document that verifies the business owner's address
Proof of Business NameA document that confirms the business name

Applying for Licenses and Permits

Can vary depending on the type of business you are starting and the industry you are operating in. Research the specific requirements for your business and ensure that you comply with all regulations. Certain industries, such as food service or healthcare, may have additional permits and certifications that need to be obtained. It is recommended to consult with a lawyer or a business consultant to navigate through the licensing process smoothly. Note that failing to obtain the required licenses and permits can result in fines or even the closure of your business. 

Here is an example of the licenses and permits you may need for your business:

Type of License/PermitDescription
Health PermitRequired for businesses in the food service industry
Business LicenseRequired for all businesses operating in Portugal
Environmental PermitRequired for businesses that may have an impact on the environment
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Understanding Tax Obligations

Corporate Income Tax

Corporate income tax is levied on the profits of companies and is calculated based on their taxable income. The current corporate income tax rate in Portugal is 21%. Keep accurate records of all business income and expenses to ensure compliance with tax regulations. Businesses may be eligible for certain deductions and exemptions that can help reduce their tax liability. Consulting with a tax professional is recommended to ensure that all tax obligations are met and to take advantage of any available tax benefits.

Value Added Tax

VAT is a consumption tax that is levied on the value added at each stage of the production and distribution process. It is applicable to most goods and services, with some exceptions and reduced rates for certain items. You will need to register for VAT with the Tax and Customs Authority and comply with the reporting and payment obligations. Failure to do so can result in penalties and legal consequences. It is advisable to seek professional advice to ensure compliance with VAT regulations. 

Here is a table summarizing the different VAT rates in Portugal:

VAT RateDescription
23%Standard rate for most goods and services
13%Reduced rate for certain goods and services
6%Super-reduced rate for essential goods

Note: The rates mentioned above are subject to change and may vary depending on the type of goods or services.

In addition to VAT, new businesses should also be aware of other tax obligations such as Corporate Income Tax and Employment Taxes. 

Employment Taxes

As an employer, you will be responsible for withholding and paying taxes on behalf of your employees. This includes social security contributions, unemployment insurance, and work accident insurance. It is essential to ensure compliance with these obligations to avoid penalties and legal issues. 

Note: The rates and thresholds for these taxes may vary and should be verified with the relevant authorities.

Keep up to date with any changes in employment tax regulations to ensure compliance with the law.

Protecting Intellectual Property

Trademark Registration

Trademarks provide legal protection for your company's name, logo, and other distinctive elements. By registering your trademark with the Portuguese Institute of Industrial Property (INPI), you gain exclusive rights to use and protect your brand. This prevents others from using similar marks that could cause confusion among consumers. Registering your trademark also allows you to take legal action against infringers and defend your intellectual property rights. It is advisable to consult with a legal professional experienced in trademark law to ensure a smooth and successful registration process.

Here is a table summarizing the steps for trademark registration:

1. Conduct a trademark search to ensure your mark is unique

2. Prepare and file a trademark application with INPI

3. Pay the required fees

4. INPI examines the application for compliance

5. Publication of the trademark application in the Official Gazette

6. Opposition period for third parties to oppose the registration

7. INPI issues a decision on the trademark application

8. If approved, the trademark is registered and published

Note that the process may take several months to complete, so it is recommended to start the registration process as early as possible.

Trademark registration is an essential step to protect your brand and establish a strong presence in the marketplace.

Copyright Protection

Grants exclusive rights to the creators of original works, such as literary, artistic, or musical creations. Registering your copyright with the Portuguese Intellectual Property Office provides legal evidence of ownership and can help protect your intellectual property from infringement. It is also advisable to include a copyright notice on your works, consisting of the copyright symbol ©, the year of creation, and the name of the copyright owner. 

Here is an example of a copyright notice:

Copyright © 2022 Your Business Name. All rights reserved.

To learn more about copyright protection and other legal considerations for new businesses in Portugal, consult with a qualified legal professional or visit the Portuguese Intellectual Property Office website.

Patent Application

A patent grants you exclusive rights to your invention and prevents others from making, using, or selling it without your permission. To apply for a patent in Portugal, you need to submit a detailed description of your invention, along with any necessary drawings or diagrams. Consult with a qualified patent attorney to ensure that your application meets all the requirements and increases your chances of success. The patent application process can be complex and time-consuming, so it's best to start early and seek professional guidance.

Below is a table summarizing the key steps involved in the patent application process:

1. Conduct a thorough patent search

2. Prepare a detailed patent application

3. File the application with the Portuguese Patent Office

4. Wait for the examination process

5. Respond to any objections or requests for amendments

6. Receive the patent grant or appeal the decision

If you have a groundbreaking invention, don't hesitate to protect it with a patent application in Portugal. 

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Written by Rauva

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