How to succeed and stay tax-efficient in Portugal’s business ecosystem

Portugal is trending in the tech business scene. No news there! So, no wonder that companies and professionals now want to learn as much as they can to make sure they’ll thrive in Portugal’s competitive business ecosystem while staying tax efficient.

For those of you now researching how to do so, stay put — we have what you need.

Hit the road to success  

Yes, Portugal is now undoubtedly a destination of choice both for companies and professionals.

In recent years, Portugal has been attracting digital nomads, remote workers, entrepreneurs, and businesses (mainly tech).

Why? For a number of reasons that go far beyond the welcoming vibe, the culture or the sunny dreamy weather. There’s more to it. The skilled workforce, favourable business environment, the favourable tax regime for foreign residents and businesses with tax incentives (because yes, Portugal is also a tax-friendly country) are making this tiny rectangle of land quite attractive.

But, of course, with new businesses and entrepreneurs entering the market every day, the Portuguese business ecosystem is becoming increasingly competitive.

However (and obviously!), whether you are wanting to start or expand your business in Portugal, there are things you must know. In addition to being innovative, adaptable, and well-connected, you must also be fully aware of the specifications of Portugal’s tax system and what you have to do to stay tax-efficient. That makes sense, right?

With this in mind, Landing.Jobs promoted a webinar solely focused on helpful tips for both new business owners and experienced entrepreneurs looking to succeed in the Portuguese competitive business landscape and learn all the hacks about staying tax-efficient.

The event gathered Andre Pimentel (from Landing.Jobs, hosting), Pedro Moura (Co-Founder of the Portugal Tech Hub and CMO at Landing.Jobs), Stephanie de Freitas (Research and Reporting Officer from Startup Portugal) and Tiago Vieira da Silva (Managing Partner at from Royal Tax), speaking about latest trends and technologies, as well as best practices for building a strong network, hiring local talent, and taking advantage of government incentives.

How to succeed in Portugal’s competitive business ecosystem while staying tax efficient?

Portugal is betting its chips to attract businesses from all over the world. As you’ll understand from this webinar, the government has several benefits in line for them, but they must know all the key strategies for succeeding in Portugal’s competitive business ecosystem. That’s when organizations such as Portugal Tech Hub, Startup Portugal and Royaltax come into scene, by providing services, training and intel on the Portuguese ecosystem to help businesses succeed.  

Stephanie de Freitas starts by stressing that “in terms of how the economy has been quite competitive to the rest of Europe, we have a really strong relationship, and as many people know, Portugal is a gateway into the region, in terms of financial support, and the socio-political kind of situation that’s going on with the EU (European Union) at the moment. So, we are very competitive when you are looking at our market. We have an amazing talent system and a talent pool. We have really competitive rates going around in terms of wages, and we have an amazing infrastructure that’s available. (…) we have a really strong impact that we are making across the region”.

While attractive, the Portuguese business scene also has some challenges, as Pedro Moura highlights, namely the “war for talent”. “It has been exacerbated by the advent of the normalization of remote work after the, the, the covid pandemic. So, there are lots of structural changes in the work marketplace that are still undergoing”, he says, adding also that “the discussion between full remote and hybrid is something that is too raging on and will continue. And, this has huge impacts in the lives of both professionals from all areas and also companies”. For Pedro Moura the other big challenge is “the retention of this talent and how to make them productive, (…) the tech sector, is a very odd market, let’s say. A lot of people change jobs, from six-to-six months. And this is not good because this is not really enough, let’s say, to even warm the seat, in terms of being able to know the business to be productive and to add value with their work”.

Why has Portugal become so attractive? For Tiago Vieira da Silva there’s a clear relation with Web Summit. “People started looking to Portugal, and then they started discovering the tax incentives we have and the environment we have. Yes, we are a bit bureaucratic country, but it’s very easy to settle a company. It’s very easy to get a visa. It’s very easy to work with people in Portugal”, he says.

Look in the right place!

First things first. Where should businesses look for help to establish themselves in Portugal? For Pedro Moura, it all depends on the business nature: “If you have an industrial company, probably the best that you have to do is talk with AICEP, the foreign investment agency in Portugal, for example, because you are looking to invest a large sum of capital, you need to really know about conditions in the different regions and municipalities of Portugal. (…)”, however, for tech-based companies Startup Portugal and Portugal Tech Hub are definitely options to consider. In addition, for Pedro Moura “every time that the foreign company looks or considers Portugal as a destination”, it’s also essential to “network, or at least try to get into contact with companies that have done the same”.

Stephanie de Freitas adds that “Portugal has such a demand of attention at the moment and a lot of interest from internationals relocating or moving or starting a business in the country that we’ve really adjusted to creating a soft-landing approach at a national level. So, we have venture capital funding and government funding (…) and plenty of agencies that are able to help people relocate and help them to kind of set up shop within the country (…) depending on the different areas or topics that they want to pursue”.

“It’s also quite easy to get visas for the entrepreneurs because some of the people can run the companies remotely, but most really want to move to Portugal. And, basically, it’s easy also to get a residency permit. There are a few options for visas, tech visas, and entrepreneur visas. So, it’s also an advantage to attract investors to Portugal and to live here”, Tiago Vieira da Silva adds.

On the tax side of things

The tax regime is undoubtedly one of the attractive factors for companies when considering having a presence in Portugal.

Tiago Vieira da Silva highlights that “regarding the tax incentives for companies we have, (…) in general, most of the incentives out there are for activities that bring some value to the country”. “For example, if you are investing in R&D, if you are investing in tourism internationalization, so everything that the NHR for value professions. So, anything that adds some value to the economy for sure”, he explains. “There is a tax incentive, and most of them are related to corporate tax reductions. (…) the main is reduced corporate tax and also when you have profits and even if you will pay a reduced corporate tax, you can also have deductions on the investments you make on the corporate tax”.

For Pedro Moura, in terms of costs for companies, salaries must also be considered, mainly, as to optimize them: “Salaries have also ways to be optimized, especially regarding some perks that are predicted by law. You know, there are things that are basically taxed by the work IRS (Portugal IRS it’s the work tax and the social security tax), and some that are not, that might be a part in some way of the salary of the person that can optimize greatly the total cost of an employee”. But to do so, “you need to have the knowledge on how to, for example, build a salary policy in terms of what are the perks that you’re going to provide. And this is not only a question of cost, but it’s also a question of what perks you want to give to your employees, even if it’s only for employer branding, for example, when you are attracting people to work with you”.  

NHR is the answer to many prayers

Portugal offers a Non-Habitual Resident (NHR) status, which is a special income tax regime that enables remote workers to move to the country and have access to some quite favourable tax benefits (you can learn more about it here).

Tiago Vieira da Silva explains how it works: “Basically it’s a tax program (…), the only condition is not being a tax resident in the last five years. That’s the only condition for anyone to get this program. And, it has a flat rate of 20% income tax for 10 years. (…) So this is, uh, only available for anyone that moved to Portugal. So, the first condition, is you must turn in a Portuguese tax resident, and once you have it, you can apply easily online”. “The income tax will be charged at the flat rate of 20%, believing the tech guys have salaries above the average. (…) So it’s a very good tax incentive and it’s applied for granted for 10 years. And the funny part is, let’s say that someone comes to Portugal, stays here for two years, pays the 20% and then decides to (which is very common nowadays with the nomads, tech guys) they want to go to other countries, if they decided, let’s say, five years after to come back to Portugal again, they will have the eight years remaining. They don’t need to stay in Portugal for 10 years straight (…) It’s also a very important advantage. And on top of this, all the passive incomes that anyone has from outside of Portugal are tax-free”, he adds.

Get on board and succeed with us!

Impressive right? But there is so much more to know. Watch the full webinar here.

We’re here to help you. We got all the market insights you need and the ability to help you find the best tech professionals around here. Whether you want to establish roots here or recruit through an Employer of Record (EOR) or a Recruitment Process Outsourcing (RPO), we got you covered. 

Also, don’t miss this one as well: go and check out Portugal Tech Hub, an open alliance of public and private organisations committed to helping you establish in our beautiful country. With 40+ partners, Portugal Tech Hub is the place to turn to if you want to know more about doing business in Portugal.