Portugal

Registrations and Establishing an Entity

If a company wants to set up a legal entity in Portugal and the legal representatives of the company are in Portugal, this is a process that can be done within one to two business days.

If the legal representatives cannot be in Portugal, the process will take longer, between 15 and 30 days and this process will require a POA.
The setup of the legal entity includes the registration with the tax authority and the social security.

There is also the option of non-resident companies, which does not require any legal entity establishment; however, there can be no commercial activity from this entity. This is for employment purposes only.

This process will require POA, and a set of documentation that needs to be checked on a case-by-case basis.

To establish a company in Portugal, a legal entity must be formed. The company must be registered at the Commercial Registry Office and with the Portuguese Tax Authority and Social Security Institute.

Common legal structures for companies include:

• Sociedade por Quotas (Lda. – Private limited company)
• Sociedade Anónima (S.A. – Public limited company)

A local bank account must also be opened to manage payroll and tax payments.

The standard work week in Portugal is 40 hours, typically spread across five days (Monday to Friday). The maximum legal limit is 8 hours per day.

Working time flexibility can be introduced through agreements that allow averaging hours over a reference period.

Rest Periods: Employees are entitled to at least 11 consecutive hours of rest between working days and one day of weekly rest.

Income Tax (IRS)

Portuguese residents are taxed on worldwide income. Non-residents are taxed only on Portugal-sourced income.

The IRS (Imposto sobre o Rendimento das Pessoas Singulares) uses progressive tax rates. Employers must withhold income tax and remit it monthly to the Portuguese Tax Authority.

Social Security Contributions

Employers and employees are required to contribute to the Portuguese Social Security system.

• Employer contribution: 23.75%
• Employee contribution: 11%
• Total: 34.75% of gross salary

Payroll Process

Monthly payrolls must include:

• Base salary
• Bonuses and allowances
• Meal vouchers or subsidies
• Deductions for income tax and social security
• Holiday and Christmas subsidies (typically paid in June and December)

Payslips must be provided to employees, and payments must be made via bank transfer to local accounts.

Payslips

• Online payslips legally accepted

Record Keeping

• Retention period: At least 5 years

Hiring:

A written employment contract is required for fixed-term and part-time employment. Contracts must be filed with Social Security within 15 days of signing.

Termination:

Employers must provide written notice, observe statutory notice periods, and pay severance where applicable. Termination without just cause can result in compensation between 15 to 45 days' pay per year of service, capped at 12 years.

Minimum Wage (2025)

National Minimum Wage: EUR 925/month

Holiday and Christmas Bonuses

By law, employees are entitled to:

• 14 monthly payments: 12 salaries + holiday + Christmas subsidy

Annual Leave

22 working days per year

Pro-rated for first-year employees

Other benefits may include:

• Meal allowance
• Transport subsidy
• Health insurance (optional)
  
  

EU/EEA citizens do not require a visa to work in Portugal.

Non-EU citizens must obtain:

• Work Visa
• Residence Permit

The employer must apply for authorization to hire a foreign worker. The employee must submit a visa application at a Portuguese consulate abroad and register with the Immigration and Borders Service (SEF).

It is mandatory to make payments to the authorities from an in-country bank account.

Banks are generally open to the public from 08:30 to 15:00 hours and closed on Saturdays and Sundays.

Local bank accounts are required for payroll.

Reporting must be done via the Social Security and Tax Authority e-platforms.

Public holidays (13 mandatory + up to 2 local holidays) affect pay and scheduling.

Payroll deadlines: Income tax and social contributions must be paid by the 20th of the following month.

Employment laws are governed by the Portuguese Labor Code (Código do Trabalho).

Further Information

For more information, or assistance with Portugal Tax inquiries please contact: gi@activpayroll.com

About This Payroll and Tax Overview

Please note that this document gives general guidance only and should not be regarded as an authoritative or complete statement of the law, regulations or tax position in any country. You should always seek specific advice for each specific situation. This document should not be relied upon as professional advice and activpayroll accepts no liability for reliance on its contents.