In addition to having huge implications for Britain as a nation, Brexit also has significant ramifications for businesspeople. If you’re a British expat with a business in another country, you’re likely wondering about the new restrictions you’ll face on doing business. If you’re looking to move to Portugal or set up a business there after Brexit, it’s important to prepare for the changes Brexit will bring. In addition to needing a passport for travel, you’ll also need to register as a citizen, and if you have a business in Portugal, register your business too. This article will cover the basics of what setting up a business in Portugal will entail post-Brexit for UK nationals.
- Moving to and Living in Portugal after Brexit
- Business Formation in Portugal
- Types of Businesses in Portugal
- How to Register your Business in Portugal
- Opening a Bank Account
- Paying Taxes
- Invoicing in Portugal
- Employing Staff
- Business Culture in Portugal
- Where to Get Help and Other Useful Information
Moving to and Living in Portugal after Brexit: Everything you Need to Know
If you’re planning on staying in Portugal for more than three months, you should register as a citizen at the local Câmara Municipal, or town hall. You’ll need ID and a declaration on oath that you’re employed or self-employed; if you’re self-employed, you may get a special citizens registration card that requires a few extra steps, like tax registration. Once you’ve been living in Portugal for five years, you’ll be able to apply for permanent residence. You’ll need to apply for state healthcare—private insurance is not an adequate substitute—because you won’t be able to use your UK European Health Insurance card in Portugal after Brexit. You’ll also have to register your UK driver’s license in Portugal or exchange your UK driver’s license for a Portuguese one, if you’re already living there when Brexit happens. If you move to Portugal after Brexit, you’ll have 90 days to exchange your UK driver’s license. One of the significant changes you’ll have to make if you’re a businessperson is to register your business in the country.
Business Formation in Portugal
Brexit will change the way self-employed UK expats in EU countries do business, and will mean that anyone with a business outside of the UK will need to register it with the country they are living in. If your business depends on your expertise (such as law or accounting), it’s also important to check that your educational credentials are recognized in Portugal, and that you have the appropriate licenses to operate your business. There are some EEA nationality requirements that may prevent you from providing services in some fields, so it’s important to check these requirements to make sure you’re free to provide your services in Portugal. You’ll also have to make some adjustments to the way you charge and claim VAT, as you won’t be able to use the UK VAT MOSS for sales in Portugal after Brexit.
Types of Businesses in Portugal
If you’re opening a business as an individual, there are three options: you can choose from being classified as self-employed, a sole trader with limited liability, or an individual limited liability company. What type you choose will depend on how much risk you want to take on and how much capital you have to invest. It’s also important to keep in mind that the type of company you choose will determine what accounting records you’ll need to keep, and how your business will be taxed. If you choose the self-employed option, you don’t have to deposit a minimum share capital, although you are personally liable for your business. The other two options require minimum assets of at least €5000, but your personal assets and business assets are legally separate. An individual limited liability company is only different to a sole trader with limited liability in that it’s specific to commercial businesses.
Companies with multiple owners have a few more options—there are limited companies and cooperatives, as well as public limited companies, limited liability companies, and general partnerships. You need at least five partners to operate a public limited company, as well as €50,000 in capital, with the liability of each person limited to the amount of shares they own. Limited liability companies have the same specifications as individual limited liability companies (€5000 in capital, you’re not personally liable), only with two partners; and a general partnership is similar to the self-employed option, in that both partners are personally responsible for the business but don’t need to have an initial investment. It’s advisable to seek out a lawyer for consultation, particularly if you have a high projected growth or have never started a business before.
How to Register your Business in Portugal
First, you’ll need to obtain an admissibility certificate if you want to use a specific company name. This can be found at the Institute of Registries and Notaries (IRN). In Portugal, it’s quick to register a business through an Empresa na Hora, or on the spot firm, which will be able to set up your business in about an hour. Their website has a selection of pre-approved articles of charter if you’re not making your own (you’ll also need bring these to your appointment, along with your ID and admissibility certificate). There’s also an online version, or if you prefer, you can go the traditional route—using a Criação da Empresa—but that will take longer. If you go that route, you’ll have to apply for a business ID through the IRN, open a business bank account, register with your local tax office, register your business at the Commercial Registry Office, then register as an employee at the Social Security office.
Opening a Bank Account
The central bank account in Portugal is the Banco de Portugal, which is also regulates banking activity among other banks in the country. The types of documents you’ll need will vary depending on what type of business you have; if you’re a freelancer, for example, you’ll just need the same ID you would to open a regular bank account—however if you’re a limited company or corporation, you may need your business registration documents. What bank you choose is up to you, but it’s useful to compare fees and interest rates offered by different banks, particularly since business accounts can get expensive. A significant number of Portuguese people speak English, but if you’re not fluent in Portuguese, it’s still a wise idea to make sure the bank you’re dealing with offers English services.
Another important thing to consider when opening a bank is accessibility, particularly if you’re new to the country. If you’re a freelancer and planning to travel, it may be important to you to choose a business account with a bank that has a lot of locations, so you don’t have to travel as far if you think you may need to do some transactions in person.
Portuguese tax returns are filed in April for the previous year. If you’re a sole trader, freelancer, or partnership, your income is considered personal earnings, and you’ll file regular tax returns and pay personal income tax rates. Under Portugal’s simplified tax regime, those earning below a certain threshold have 20% of their sales income or 80% of their professional service income taxed, with no expense deductions allowed.
If you have a limited or incorporated company, however, you’ll have to pay corporate tax. The corporate tax rate is a flat 21% as of 2019, with surcharges based on the regional municipality you operate from and the amount of taxable profits you make. However, smaller businesses may pay a reduced rate of 17% on their first €15,000. Keep in mind that after Brexit, you’ll no longer be able to use a UK VAT MOSS for EU countries—you will have to apply for a Portuguese one; however, if you already have one, you won’t be able to do this until after Brexit.
Invoicing in Portugal
All VAT registered businesses in Portugal are required to issue their invoices using a software certified by the local Tax Authority (Autoridade Tributária). A certified invoicing software allows the export of the SAF-T file, which in a structured data format to send electronically your VAT return. The electronic VAT return in SAF-T format must be submitted by the 25th of each month (Please note: invoices issued from January 1st, 2020, must be submitted to the Autoridade Tributária by the 12th of the following month, according to the Article 16 of the Decree Law no. 119/2019).
If you’re employing staff in Portugal, be prepared for the cost—employees are entitled to 14 months’ salary per year, as two extra months’ equivalent in wages is given as a holiday bonus and as a Christmas bonus. Minimum wage as of 2019 is €600 per month (based on 14 payments of €600 per year) and is updated annually. The work week in Portugal is 40 hours per week, with any additional hours counting as overtime. Employees are also entitled to 22 vacation days a year, and 10 paid sick days (although these are financed by Social Security). Salaries are usually paid monthly, between the 10th and 20th of the next month. Although there are 13 public holidays in Portugal, whether or not employees have the holidays off will vary by sector—many retail workers, for example, still work on public holidays.
Business Culture in Portugal
Portuguese business relationships tend to be less formal, with less expectation of punctuality—however, it’s a good idea to err on the side of caution and be on time; but if the person you’re meeting with is 15 or 20 minutes late, it’s not out of the norm, so be patient. There tends to be a friendly atmosphere in Portuguese business, with an emphasis on social relationships, so it’s helpful to spend some time getting to know people. Workers in Portugal are often used to long lunch breaks, which often extends their working day to 6 or 7 in the evening.
Business dress, however, tends to be more formal—so make sure your outfit is put together well and that you’re well-groomed. Portuguese business culture also uses employment contracts as a standard practice, so if you’re not used to drafting them, it’s a good idea to get a lawyer with an understanding of Portuguese employment law to help you. If you’re unsure about whether or not you’re making a social faux pas, it might be helpful to find someone you trust—a friend, colleague, or even a consultant—to ask about what standard social practices are. If you’re worried, being polite, well-groomed and professional is always a good idea.
Where to Get Help and Other Useful Information
For general information on moving to Portugal after Brexit, you can visit the UK government’s website on living in Portugal, or attend one of the British Embassy’s outreach events for UK nationals living in Portugal if you’re there already.
For business planning, you can take a look at more online guides on how to set up your business; however, it’s best to speak with a professional about how to best set up your business, particularly if you’re offering professional services or a business that may need a license. Although it may seem like a huge undertaking, once you break things down into manageable steps, it may not be as daunting as it seems! The best way to prepare for Brexit is to start early—if you do, it will save you a lot of hassle down the road.