A brief overview of the recent alterations in the Portuguese legislation

The recent years have brought material and significant reforms into the Portuguese company legislation, with some amendments aiming to simplify company governing acts and procedures as well as diminishing bureaucratic aspects that so often stem the economic development of a company.

Thus, 2009 continued the trend and brought such important novelties as the new regime on cross-border mergers and a number of various other amendments that simplify and speed up internal mergers and acquisitions; annual corporate reporting – modernizing the Portuguese company law and increasing the compatibility annual accounts with the European standards; simplifying the application procedure for fiscal benefits, simplifying communication between companies and the state and establishing an obligation to register all the irrevocable powers of attorney. This quite impressive list would not be complete without mentioning the creation of the Company Card and the program called SIR (Soluções Integradas de Registo – Integrated Registrar Solutions) that allows registering commercial registrar acts, corporate real estate, company cars, IP matters, companies in one unique place instead of visiting dispersed institutions and thus, enabling an easier business running and making Portugal more attractive for foreign investors.

This done, the Government in 2010 got hands free for other matters and certainly for the ones of the vital importance at this moment – taxes. Indeed, it is not so easy to balance out the incentives and benefits and the income to the state treasury, especially with the heavy load of the budget deficit that Portugal tries to fight in various ways.

Thus, Labour Law, Decree-Order No. 125/2010, of 1 March 2010, sets up extraordinary hiring incentives for the year 2010 that includes incentives for employers hiring young first-time job seekers, beneficiaries of social reinsertion subsidy or invalidity pension, unemployed persons over 40 and with registered unemployment for the past 9 months, persons under 35 that have been providing services to the company on a free-lance basis or whose fixed term labour contract has elapsed. Also, the contributions to Social Security Fund paid by the employer are reduced by one percentage point.

On the other hand, the Individual Income Tax Code enacts the table of high added value activities that include architects, engineers, art professions, auditors, medical doctors and dentists, psychologists, some liberal technical professions, and investors and managers; these professionals will be subjected to a new tax for non-permanent residents.

The most important legal act of the year, so far, is the 2010 State Budget Law (SBL), that took effect on the 29th of April, 2010, only and represents a set of various fiscal alterations – some good, some reasonable, and some dubious but that could bear a common name "Squeeze again". Some brief observations:

  • The tax subject to double taxation and fiscal benefits cannot be lesser than 75% (and not 60%, as before) of the taxable base if the fiscal benefits would not be applied.
  • Business Angels will be able to deduct 20% of the invested amount from their tax base if declaring as private persons and up to 15% if declaring as partners of a ole proprietorship company.
  • Any bookkeeping software used in a Portuguese company should be certified in the terms of the IRC Code; otherwise the infringement incurs a fine as heavy as up to € 12.500.
  • Individual entrepreneurs working with a simplified invoicing system, so-called recibos verdes, will be able to issue invoices electronically.
  • The approval of the SBL enables establishing of a new Fund for Globalization and Exports Support in the amount of 250 billion euros. Together with the credit line specially created for SME needs this totals in 1000 billion euros available for Portuguese registered companies to launching or increase their export activities. In parallel to this, the Decree-Law of the 30th of April establishes The Portuguese Fund to Support Investments in Mozambique. This was immediately noticed by Spanish entrepreneurs that started looking for partnerships in Portugal, as a possible gate to the Portuguese speaking markets in Africa.
  • Property Transfer Tax update:

Taxable Value of the Property

Tax percentage



Up to 89.700

Up to 90.418


89.700 – 122.700

90.418 – 123.682


122.700 – 167.300

123.682 – 168.638


167.300 – 278.800

168.638 – 281.030


278.800 – 557.500

281.030 – 561.960


Over 557.500

Over 561.960


However, the most discussed amendment in the State Budget Law is introducing a new rate of 45% for Individual Income Tax applicable for amounts of 150.000 euros and above. This new rate lines up Portugal together with Holland (52%) and Belgium (50%) but very far from Austria (25%) and the Czech Republic with their flat rate of 15%. Will it finally satisfy low-earning population or will it push investors out of Portugal, together with jobs for the same population, it is yet to be seen.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.