Accountancy in Portugal

>> Choice of Legal Form in Portugal

Limited liability company

The Limited Liability Company is the form most frequently adopted by small and medium sized businesses. Share capital is divided into shares (quotas) whose holders are jointly liable for paying the company capital and liable for the total amount of share equity. The word ‘Limitada’ or ‘Lda’ must be in the name of the company.

The company needs a minimum of two shareholders, a minimum capital of 1.00 (one) Euro per quota, and the management is attributed to one or more directors, who must be private individuals. Creditors can claim only against the company share capital.

Limited Liability Companies can be transformed into Individual Stakeholder Companies (“Unipessoal”) by concentrating all the capital shares in a single shareholder.

Holding company (“SGPS”)

Holding Company activities are confined to owning stock in, and supervising management of, other companies. A Holding Company is also allowed to render management services to controlled companies (representing more than 10% of their capital).

Holding companies must be audited by a statutory/external auditor.

General partnership

General Partnership companies are rare in Portugal. These companies bear unlimited liability for company debt.

Branch / Representative office

A branch is not a separate legal entity distinct from its parent. A non-resident company that intends to carry on an activity in Portugal for more than six months must register a permanent representative office; there are no formal restrictions on operating a branch of a foreign company in Portugal. The formalities for establishing a branch requires the appointment of a local manager with the power to represent the company, the filing of an application for a name, and the verification of the parent company’s incorporation documents.

Offshore legal entities

The Madeira Government has a degree of autonomy from Portugal, yet obeys Portuguese legislation. As a Free Trade Zone, Madeira has a special corporate tax regime, applicable to industrial, commercial and financial activities.

Companies are subject to a Corporate Tax rate of 5%, on operations with nonresidents in Portugal, under certain conditions.

The offshore regime follows EU rules and may take advantage of EU directives and Tax Treaties honoured by the Portuguese Republic.

Subsidiary

A subsidiary depends upon another company, either in terms of that company being the holder of shares in the subsidiary, or through any contractual links. A subsidiary is a different legal entity from the parent company with all the implications of having a true and separated liability from the parent. Usually, it is established under the format of a Limited Liability Company or a Public Limited Company.

Public limited company

In a Public Limited Company (“S.A.”) the capital is divided into shares; each shareholder’s liability is limited to value of shares to which they subscribe.

The main characteristics of this kind of company are:

  • The existence of at least 5 shareholders;
  • A minimum amount of capital share of 50,000 Euros, divided into shares with a minimum value of 0.01 Euro per share;
  • Up to a maximum 70% of share capital is payable within five years and the remaining 30% must be paid up when the company is incorporated.

Public limited companies must be audited by a statutory/external auditor.

Joint venture

The most common form of joint venture is the jointly owned company or equityjoint venture. This requires two or more partners to participate in the share capital of a new company to be incorporated, or, in a pre-existing company, the setting up of local holding company.

The contractual joint venture or consortium is a form of joint venture without the need for incorporating a company. This may entail tax advantages, as the tax authorities exert less control over this type of venture than an equityjoint venture.

Another contractual joint venture is “Agrupamento Complementar de Empresas – ACE” which is popular among civil construction consortia for large projects, and the investors are not required to be European Union residents.

Trust

Trusts do not exist in Portuguese law.

Nonetheless, the Madeira Free Trade Zone allows the establishment of offshore trust companies, if the proprietary is nonresident in Portugal and their income is derived from outside the country.


Latest version updated 25th October 2017

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