Forming New Horizons – Expanding your Business into Portugal

Country Spotlight:

GDP – 276.43bn

Population – 10.24m

Ease of Doing Business – 39th Ranked, The World Bank

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The Commercial Brief:

Portugal’s GDP is primarily driven by Services, between 2012 and 2022 it accounted for 66% of the economy and approximately 70% of total employment. Portugal's economy experienced a growth slowdown to 2.3% in 2023 from 6.8% in 2022, with future growth projected at 1.2% in 2024 and 1.8% in 2025 according to the European Commission.

Portuguese is spoken by more than 250 million people all over the world and the country has been ranked 7th most proficient when it comes to English as a second language. Labour rates are comparatively low with hourly labour costs being approximately €16 an hour. This is half the EU average. The corporate income tax rate is moderate compared with other EU countries and stands at 21% (although it is lower in Madeira and the Azores at 14.7%).

Businesses seeking to expand their international footprint will find the Portuguese workforce is highly skilled in various sectors including technology, renewable energy, automotive and aeronautics manufacturing and tourism. Portugal has invested in education and vocational training, leading to a talent pool proficient in engineering, software development, and green technologies. The country's emphasis on innovation and digital transformation has also fostered expertise in the tech and start-up ecosystem, making it an attractive destination for technology companies and professionals.

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Portugal is constantly finding new ways to attract highly skilled migrants and entrepreneurs. The country has transformed itself into one of the most attractive destinations for foreign workers and foreign direct investments in the world, according to Boston Consulting Group’s 2021 Decoding Global Talent report.

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In 2023, renewable power sources supplied 61% of Portugal's electricity, marking a significant increase from previous years and setting a new record! Portugal was among the first countries in the world to set 2050 carbon neutrality goals. The country aims to be climate-neutral by 2050 and cover 80% of its electricity consumption with renewables by 2030, allowing for immense growth in this sector.

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In summary, Portugal is an excellent destination for international expansion, scoring well in ease of business and it has a large and skilful workforce, combined with a resilient and stable economy on a cautious growth trajectory.?

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Challenges of Expanding into Portugal

?In our experience setting up a permanent overseas entity in Portugal without Global EOR support can take up to 6 months, including the entity incorporation, setting up the bank account and concluding the local registrations. It can take anywhere between 1 and 2 months after incorporation to complete the registrations, depending on your corporate structure and KYC requirements.

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Whilst Portugal is not an exceptionally difficult jurisdiction to navigate, it is important to pay attention to local corporate requirements and determine the type of company you want to set up. Also consider the residency of your Director, as you will be required to meet social security payments and registrations for these individuals.

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The Portuguese government has a poor reputation for slow-functioning legal systems and dense bureaucracy, which frustrates employers and employees. The Portuguese government faces pressure from investors and European partners to address Portugal’s structural economic problems of a deepening infrastructure gap, poor quality of bank portfolios, and high debt rates. Numerous experts and international bodies have identified Portuguese labour market flexibility as a challenge and the need for structural policy changes.

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To avoid dealing with this frustration, and to enter the market with both speed and compliance utilise a Global EOR in Portugal who has dedicated and extensive in-country personnel, HR, Legal, Compliance & Immigration teams that can support you and your organisation directly.

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Pete Dixon & Laura Isaza, Velocity Global

For any questions pertaining to this article please drop a comment or feel free to directly message us, we will do our best to assist.

(Article sources: Velocity Global, Statista, World Bank, AICEP Portugal Global, PwC, Reuters, European Commission)