THE OLDEST COUNTRY IN EUROPE
Learn the most significant aspects about Portugal, the most western country in Europe
Portugal, officially the Portuguese Republic, is a state of Southern Europe, founded in 1143, which occupies a total area of 92,212 Km2. The continental part lies at the southwest end of the Iberian Peninsula, bordering on the north and east with Spain, and on the west and south with the Atlantic Ocean.
The Portuguese territory also includes two autonomous regions: the archipelagos of Madeira and the Azores, located in the Atlantic Ocean. The archipelago of Madeira is made up of the islands of Madeira, Porto Santo, Desertas, and Selvagens, and the archipelago of the Azores is made up of nine islands and some islets: Santa Maria, São Miguel, Terceira, Graciosa, São Jorge, Pico, Faial, Flores, and Corvo.
The Portuguese climate is characterized by mild winters and summers, however, varying from region to region. In the north, there are higher precipitations and lower temperatures, but inland there are the highest thermal amplitudes. South of the Tejo (Tagus), the longest river in the Iberian Peninsula, the Mediterranean influences are felt, with very hot and long summers, and short winters with little rainfall. Madeira has a Mediterranean climate with mild temperatures all year round, while the Azores have a temperate maritime climate with abundant rainfall.
Portugal is a country with 10.23 million inhabitants (2019) and a demographic density of 111 inhabitants / km2, with a greater population concentration along the coast.
Portugal was founded in 1143, the year of the celebration of the Treaty of Zamora. The Treaty, signed between D. Afonso Henriques, Portugal's first king, and Alfonso VII of León and Castile, recognizes Portugal's legal status as an independent kingdom. In 1179 this status was confirmed by Pope Alexander III.
During the 12th and 13th centuries, the Portuguese kings widened the borders, until the conquest of the Algarve, consolidating a territory practically unchanged until today.
With its borders defined, Portugal began to look inward. At the end of the 13th century, King D. Dinis created the prestigious University of Coimbra, one of the oldest in Europe. In the most important centers castles, palaces and cathedrals were built, and the territorial administration was established.
In 1385, following a popular movement, D. João I was acclaimed king, beginning the 2nd dynasty. The sons of D. João I and D. Filipa de Lencastre would be dubbed in Luiz Vaz de Camões's "Os Lusíadas", "Illustrious generation, high Infants", for the instruction, humanism and governing qualities they demonstrated.
Among them, one became known to history as visionary and chief worker of the Discoveries, one of the great adventures of Humanity. Thanks to the impetus of Prince Henrique, also known as “Henrique o Navegador” (Henry the Navigator) the Portuguese caravels crossed the seas, making use of the best scientific and practical knowledge of the time. During the 14th, 15th and 16th centuries sailed to Africa, the Far East, and the depths of the South American continent. They conquered land, gathered wealth, and brought to Europe things never seen before.
In 1498 Vasco da Gama discovered the sea route to India, and in 1500 Pedro Álvares Cabral arrived in Brazil. The Portuguese would also reach Oman (1508), Malaysia (1511), Timor (1512), China (1513), and Japan (1543). It was also a Portuguese, Fernão de Magalhães, who planned and commanded, between 1519 and 1522, the first circumnavigation voyage of the globe.
Perhaps it was the beginning of globalization. To celebrate this era, and in particular the arrival in India, King Manuel had the Jerónimos Monastery erected - a unique work in which nautical motifs stand out, and integrated the armillary sphere into the Portuguese flag.
The small kingdom was then the largest Empire in the world. Portugal brought together wise men and mercenaries, scientists and painters, businessmen and poets, slaves and princes. Such power and wealth awoke the jealousy of other peoples and after the tragic death of the young King D. Sebastião, in a battle at Alcácer Quibir, in the North of Africa, the resultant vacant throne was occupied by Spanish Kings, who united the two states under the same government for 60 years.
In 1640 Portugal had once again a Portuguese King, D. João IV, who restored the country’s independence. In the 18th Century art-lover, absolutist King D. João V ordered the construction, in Mafra, of a giant Convent and palace and, in Lisbon, the Aqueduct of Águas Livres.
However, the luxurious and exotic capital of the kingdom almost completely vanished in 1755 due to a devastating earthquake. It was Marquês de Pombal, Prime Minister of King D. José, who recreated a new Lisbon, monumental and ready to take on the furies of nature.
In the early 19th Century, Napoleon's troops invaded Portugal and the court moved to Brazil, in order to ensure the Portuguese dynastical continuity and independence. Returning 14 years later, in 1821, King João VI found a different country: besides the scars of years of war, the liberal movement had transformed the political landscape. The king’s power was no longer absolute and the first Constitution was close to being approved.
After D. João VI’s death, civil war broke out (1828) between his two sons: D. Miguel, supported by the courts, who opposed the Constitution, and D. Pedro, who defended it, along with a liberal vision of the State, but was legally prevented from taking the Portuguese crown as he had declared Brazil’s independence 6 years earlier.
The quarrel would be settled in 1834 with the signing of the “Convenção de Évora Monte” that put an end to military operations and determined a return to a liberal and constitutional version of the monarchy.
Republican ideas started gaining ground and momentum from the end of the 19th century onwards. After the King’s assassination in 1908 and the revolution of October 5th, 1910, a Republic has established. D. Manuel II was the last King of Portugal and Teófilo Braga the first republican Head of State. Manuel de Arriaga was the first elected President of the Portuguese Republic.
After a troubled period and the Portuguese participation in the First World War, a military coup caused the “Estado Novo” to emerge. This was an authoritarian, one-party regime dominated by António Oliveira Salazar, who governed the country for almost half a century.
However, on 25 April 1974 the «Carnation Revolution» returned freedom and democracy to the Portuguese, swiftly recognizing the independence of the former African colonies.
Once again inside its original borders, Portugal turned round and faced Europe. In 1986 the country joined the CEE and, since then, the Portuguese have been enthusiastic participants in the construction of a new Europe, without however forgetting their History, their character, and their traditions.
Through a short review, stay abreast of recent economic developments
The Portuguese economy has undergone profound changes over the past 50 years. From the colonialist corporative and protectionist model of the Estado Novo’s, based on agricultural and industrial production, Portugal progressively began (from the 1970s onwards) to lift restrictions and open its economy. With the 1974 revolution, the country underwent a period of adjustment and continuous modernization of its economic model.
During the 1990s Portugal followed an economic policy determined by the Economic and Monetary Union’s (EMU) convergence criteria. The nominal convergence process was successfully completed and the country integrated the Eurozone from its debut in January 1999. This entailed the fulfillment of a set of quantitative criteria aimed at pursuing a rigorous and credible macroeconomic policy.
The structure of the economy has since changed, with a growing dominance of the services sector, similarly to other European partners.
In 2011, agriculture, forestry, and fisheries accounted for only 2.1% of GVA (compared to 24% in 1960) and 9.9% of employment; while industry, construction, energy, and water accounted for 23.3% of GVA and 27.3% of employment. In that year, services contributed 74.5% to GVA and accounted for 62.8% of employment. In 2016 this trend was even more prominent: the services sector accounted for 75.4% of the GVA and employed 68.6% of the population. Agriculture, forestry, and fisheries accounted for 2.2% of GVA and 6.9% of employment, while industry, construction, energy, and water accounted for 22.4% of GVA and 24.5% of employment.
In addition to a higher incidence of services in economic activity, there has been a significant change in the standard of specialization of the manufacturing industry in Portugal in the past decade: it has modernized, departing from a dependence on traditional industrial activities to a situation in which new, more technological, sectors, have gained weight and a dynamic of growth. In this respect, the automotive and components sector, electronics, energy, pharmaceutics, and new information and communication technologies should be highlighted. In what concerns services, Portugal's geographic position, enjoying the Mediterranean climate moderated by the influence of the Atlantic, as well as its extensive coastal strip, allied to history and culture, supports a relevant and growing tourism industry.
In recent years the Portuguese economy has been undergoing a new period of structural adjustment and consolidation of public finances, in the sense of greater budgetary and commercial balance sustainability. In May 2014 the Government announced the completion and exit of the Economic and Financial Assistance Program (EFAP) agreed with the EU and the International Monetary Fund (IMF) in May 2011), regaining access to financing through international markets. According to the Bank of Portugal, the objectives of the EFAP have been generally fulfilled, with some characteristics of the Portuguese economy (such as the external net borrowing capacity, the primary structural adjustment, the ongoing fiscal consolidation, as well as the transfer of resources from the non-tradable to the tradable sector) constituted some of the positives contributing to the process of sustainable growth. In recent years the Portuguese authorities have made early repayments of the loan granted by the IMF under the EFAP (approximately € 8.4 billion in 2015 and € 4.5 billion in 2016), according to the IGCP - Treasury and Debt Management Agency.
Portugal is among the 50 largest economies in the world and enjoys positive growth prospects, as the macroeconomic data shows.
Source: AICEP, Banco de Portugal e Portal Diplomático.
How to do Business in Portugal
start your activity in Portugal
Establish a company in Portugal
In Portugal, there are no restrictions on foreign capital inflows. The guiding principle of the Portuguese regulatory framework is the non-discrimination of investment on grounds of nationality. There is no obligation to have a national partner or limitations on the distribution of profits or dividends abroad.
The rules governing foreign investment are similar to those applicable to domestic investment and there is no need for any special registration or notification to any authority regarding foreign investment (subject to any mandatory registration provided for specific activities).
Notwithstanding the foregoing, holders of a shareholding of a Portuguese company who are not resident in Portugal will, for tax purposes, have to obtain a Portuguese tax identification number (“NIF”). For EU residents, this NIF may be obtained directly from the competent tax authorities (in person or through appointed representatives); Non-EU residents must nominate an individual or entity resident in Portugal for representation with the Portuguese tax authorities.
Portuguese law offers different possibilities for individual or joint investment. The investment may take on one of the following structures:
* Individual Investment Structures
** Shared Investment Structures
For more information regarding the Fiscal and Labour System as well as How to do business in Portugal please contact us here.
Personal investor(s) or corporation(s)
Sub-type of the company: holding companies are used to hold participations through a corporation (incorporation required) | Limited liability: holding companies shall assume the form of limited liability company by quotas or by shares | Share capital required (minimum €1 or €50,000 depending on the type of company adopted) | Articles of association required | Commercial name required: choice of name + SGPS (which stands for “participations’ management company” + Lda. or S.A. (depending on the type of company adopted)
Business through a grouping (incorporation required) | Unlimited liability | No share capital required | Articles of association required | Commercial name required: commercial name + ACE (which stands for Enterprise Grouping)
No legal entity is created; the Joint Venture is incorporated through the execution of an agreement by the participating entities | Unlimited liability | No share capital required | Joint venture agreement required | Commercial name not required
Company: business through a corporation (incorporation required) | Limited liability | Minimum 2 founders/shareholders | Share capital required (minimum € 120,000) | Articles of association required | Commercial name required: choice of name + reference to the scope of activity + SE (which stands for “European Company”) | Observation: European Companies requires their shareholders to be linked to more than one EU State
Public Limited Liability Company**
Personal investors or Corporations
Company: business through a corporation (incorporation required) | Limited liability • 5 shareholders minimum | Share capital required (minimum € 50,000), only capital contributions allowed (in cash or in-kind) | Articles of association required | Commercial name required: choice of name + reference to the scope of activity + S.A. (which stands for “Public Limited Liability Company”)
Private Limited Liability Company**
Personal investors or Corporations
Company: business through a corporation (incorporation required) | Limited liability | 2 shareholders minimum | Share capital required (minimum € 2), only capital contributions allowed (in cash or in-kind) | Articles of association required | Commercial name required: choice of name + reference to the scope of activity + Lda. (which stands for “Private Limited Liability Company”)
Individual business through a local representation (no legal entity incorporated, branch subject to mandatory registration) | Liability in accordance with the investor’s legal statute | Share capital not required | Articles of the association are those of the investor | Commercial name is that the investor + Sucursal or Sucursal em Portugal (which stands for “branch” or “branch in Portugal”)
Public Limited Liability Company with a sole shareholder*
Company: business through a corporation (incorporation required) | Limited liability | Share capital required (minimum € 50,000) | Articles of association required | Commercial name required: choice of name + reference to the scope of activity + S.A. (which stands for Public Limited Liability Company)
Sole Shareholder Private Limited Liability Company*
Personal Investor or Corporation
Company: business through a corporation (incorporation required) | Limited liability | Share capital required (minimum € 1) | Articles of association required | Commercial name required: choice of name + reference to scope of activity + Unipessoal (which stands for “sole shareholder”) + Lda. (which stands for “Private Limited Liability Company”)
Individual Limited Liability Establishment*
Individual business, no legal entity is incorporated | Liability is limited to the assets autonomously brought to the business | Share capital required (minimum € 5,000) | No articles of association | Commercial name required: personal name of investor + reference to activity (not required) + EIRL, which stands for the Portuguese initials of this business structure (required)
Individual Sole Trader*
Individual business, no legal entity is incorporated | Unlimited liability | No share capital required | No articles of association | Commercial name required (personal name of investor may be used)