Company Formation & Tax in Portugal
A western-EU gateway with same-day incorporation — the Lda, a falling corporate tax, an SME rate, and the Madeira 5% regime.
Portugal offers full EU market access, English widely spoken in business, and one of Europe's fastest incorporation routes — a company can be set up in about an hour in person. Its headline corporate tax has been falling in stages, and the Madeira free-zone regime offers a notably low rate for qualifying activity.
Choosing an entity
The standard vehicle is the Lda (Sociedade por Quotas, private limited company), which can be formed with €1 of capital (more is advisable in practice). Larger ventures use the S.A. (Sociedade Anónima, €50,000). Incorporation runs through Empresa na Hora (same-day, in person) or the Portal da Empresa online (around 5–15 days); the company is entered in the Commercial Registry (Conservatória), receives its tax number (NIPC), and is registered with the tax authority — the Autoridade Tributária (AT) — and social security. There are no nationality or residency restrictions on owners, though non-EU shareholders may need a fiscal representative for VAT.
Corporate tax and VAT
| Tax | Rate |
|---|---|
| Corporate income tax (IRC) | 19–20% (see note) |
| SME rate (first €50,000) | ~15–16% |
| Madeira IFTZ (qualifying) | 5% |
| VAT (IVA, standard) | 23% |
| VAT (reduced) | 13% / 6% |
Portugal has been cutting its headline corporate tax (IRC) in stages — from 21% to 20%, with a further reduction toward 19% legislated in the 2026 budget — so confirm the exact rate for the current year. A reduced rate (around 15–16%) applies to SMEs on the first €50,000 of taxable profit, and municipal (derrama) and state surtaxes can apply on top for larger profits. The Madeira International Business Centre offers a 5% IRC rate for approved, substance-backed companies (through 2027). VAT (IVA) is 23% standard with 13% and 6% reduced rates. Dividends to non-residents carry 25% withholding, reduced to nil for qualifying EU parents under the Parent-Subsidiary Directive.
Frequently asked questions
What is the corporate tax rate in Portugal?
The standard IRC has been reduced in stages toward 19–20% (confirm the current year), with a reduced ~15–16% rate on the first €50,000 of taxable profit for SMEs; the Madeira free zone offers 5% for qualifying companies.
How much capital do I need for an Lda?
€1 minimum, though a larger amount is advisable in practice.
What is the Portuguese VAT rate?
23% standard, with reduced rates of 13% and 6%.
Official sources
This guide is general information prepared by ARM Management and is current as at June 2026. It is not legal or tax advice; rules and rates change, and the IRC rate is mid-transition. Confirm against the Autoridade Tributária, or with an advisor, before acting.
Set up in Portugal with confidence.
ARM Management advises international companies on Portuguese entity formation, the Madeira regime and tax compliance, alongside wider EU structuring. Begin with a confidential conversation.