Portugal

Ease of Doing Business Rank: 39

Overview

 

Geographic location

Portugal is located on the Iberian Peninsula and is the most westerly country in Europe. Spain wraps around Portugal in the north and east, Morocco lies to the south and the North Atlantic lies to the west.

Spoken language

The official language of Portugal is Portuguese spoken by 96% of inhabitants.

English is the most commonly spoken foreign language (27%), followed by French (15%) and Spanish (10%).

 

Population

The 2019 population estimate is 10.22 million.

Lisbon is the largest city (547,631), followed by Porto (237,559). The country also has many cities with populations under 200,000.

Popular industries

The top industries in Portugal are clothing, textiles, footwear, food processing, wood pulp, paper and cork, metal working, oil refining, chemicals, fish canning, wine, technology and tourism.

Education

The Times Higher Education World Rankings includes 13 Portuguese universities in the top 1,000 in the world.

The Legatum Prosperity Index ranks Portugal’s education system 42nd out of 149.

Popular entity types

The most common type of business entities in Portugal are the individual company, public limited company, private limited liability company, partnership company, limited partnership company and European limited liability company.

The overwhelming majority of businesses are in the form of a private limited liability company.

Portuguese incentives for business

Portugal offers a foreign investment incentive based on the type and amount of the investment, contribution to the area and job creation or training. This includes a 50% reduction of salary expense for employment of those less than 30 years of age.

In certain areas, companies may qualify for a 15% corporate tax reduction for five years after establishing their business. Should the company create permanent jobs, they may be entitled to an additional 50% social security contribution reduction.

Portugal also has free trade zones on the islands of Madeira and Santa Maria. Companies receive significant fiscal concessions when licensed to operate in these areas. The islands permit light and heavy industry and service industries such as banks, insurance, shipping and trust companies. Companies enjoy a reduced corporate tax rate of 5% on income.

In some cases, companies are also exempt from withholding tax on the distribution of dividends, interest, service fees and royalties paid to non-residents as well as stamp duty, property tax, property transfer tax and regional and municipal surcharges.

Portugal also offers R&D incentives including depreciation of expenses over 3 years and a 20% tax credit on newly purchased fixed assets. Should expenses exceed the previous two years, companies can deduct 50% on the additional amount.

History & Features

 

Main cities for business

Lisbon is the capital city and main center for business. Porto is the economic center of the industrialized northwest area focused on international trade.

Popular historical & tourist attractions

Portugal might be small geographically, but it has a lot to offer. It includes prehistoric rock art sites, Roman ruins, outstanding Christian and Moorish architecture, palaces and spectacular wine regions. The country also has some of the best beaches in Europe.

Portugal has 17 UNESCO World Heritage Sites including the fairy tale Pena Palace, Monserrate Palace, the Castle of the Moors, and the Palace of Sintra. They are fine examples of Moorish architecture as well as the lavish and uniquely Portuguese Manueline style.

In Lisbon, the four-story limestone Belem Tower is the most-recognized icon of the city. It was built in 1515 AD to defend the city and welcome allies. Originally, it held 17 long-range cannons.

Porto is the export center of Portugal, famous for its wines. Port wine traveled the Douro River for centuries in flat-bottomed boats, but today millions of cases reach the market using modern transportation methods.

Visitors can tour port wine cellars throughout the Douro Valley and sample port brands that are often over 200 years old. The British originally discovered port as a means to preserve wine during transportation. However, port wine production thrives in Portugal and the U.K. and Portugal maintain the longest trade union in Europe to this day.

Portugal also includes the island paradises of the Azores and Madeira. The volcanic Azores archipelago lies in the mid-Atlantic Ocean. Its stunning natural landscapes attract countless tourists annually.

Madeira lies between Portugal and the Canary Islands. Its steep, winding roads and unspoiled landscapes attract many cruise ships to the capital city of Funchal.

Cabo St. Vincent near Sagres offers dramatic cliffs at the most southwestern point of Portugal and the most westerly point in continental Europe.

Nearby, the Escola de Sagres is said to have been the educational mecca for Portugal’s greatest explorers including Magellan, Vasco da Gama, Cabral and Dias. Christopher Columbus also studied and sailed with the Portuguese.

History

Portugal was originally settled by the Celts, then Phoenicians and Carthaginians. The Roman Empire ruled Portugal between 45 BC and 298 AD.

In the early 5th century, Germanic tribes invaded the peninsula and remained for several centuries. However, Muslim Moors from North Africa invaded the southern Algarve in 711 AD. Northern Portugal remained under Christian rule.

In 1179, a papal bull officially recognized Portugal’s first king. Christian forces rallied and conquered the Moors in the Algarve in 1249 and Lisbon became the capital in 1255 AD.

From the 14th century onwards, Portugal became a major sea power during the Age of Exploration. Vasco da Gama and Ferdinand Magellan played instrumental roles in colonial expansion. Once, the Portuguese Empire included 17 colonies in in North and South America, Africa and various regions of Asia and Oceania.

Spain and Portugal united under one crown, which led to attacks by Spain’s rivals: the Dutch Republic, England and France. Portugal could not defend its territories and eventually its most valuable colony, Brazil, declared independence in 1822.

By the 19th century, Portugal only maintained a few areas in Africa, the island of Timor in Southeast Asia, enclaves in India and Macau in China. Salazar took power in 1932 vainly tried to cling onto the last colonies, but lost Indian and African lands.

A coup in 1974 led to drastic democratic reforms, including African colony independence. Indonesia annexed Timor in 1975 and the last colony of Macau was returned to China in 1999.

Today, Portugal is a democratic republic and member of the European Union. They have a service-based mixed economy, currently on the upswing.

Other relevant facts

According to the 2011 census, the majority of Portuguese are Catholic (81.0%), followed by other Christian faiths (3.3%) and other religions (0.6%).

Ethnic Portuguese make up 95% of the population. The remaining 5% are principally Brazilians, Han Chinese and former residents of Portuguese colonies.

Additional Information for Business

According to Forbes’ 2019 Best Countries for Business, Portugal is the 25th best country in the world for conducting business.

The 2019 Index of Economic Freedom rates Portugal 62nd globally and states, “Portugal’s indebted and inefficient public sector has worn away the private sector’s dynamism and reduced the economy’s overall competitiveness.”

World Bank’s “Doing Business” rankings rate Portugal 34th for ease of doing business in the world.

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