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Portugal, formally the Portuguese Republic (Portuguese: República Portuguesa [ʁɛˈpuβlikɐ puɾtuˈɣezɐ]), is a nation in Southwestern Europe with a mainland on the Iberian Peninsula and the Atlantic archipelagos of the Azores and Madeira. It has the westernmost point in continental Europe, and its Iberian section is bounded by the Atlantic Ocean to the west and south, and Spain to the north and east, the only nation having a land border with Portugal. Its two archipelagos are divided into two independent areas, each with its own regional administration. The capital and biggest city is Lisbon.
Portugal is the Iberian Peninsula's and Europe's longest continuously existent nation-state, with its land constantly populated, conquered, and fought over since ancient times. It was inhabited by pre-Celtic and Celtic peoples, visited by Phoenicians, Carthaginians, and Ancient Greek merchants, and governed by the Romans, who were followed by Suebi and Visigothic Germanic invaders. Following the Moorish conquest of the Iberian Peninsula, the majority of its area became part of Al-Andalus. Portugal was founded as a nation during the early Christian Reconquista. The County of Portugal, founded in 868, rose to prominence with the Battle of So Mamede (1128). Following the Battle of Ourique (1139), the Kingdom of Portugal was established, and independence from León was confirmed by the Treaty of Zamora (1143).
Portugal developed the first worldwide maritime and commercial empire in the 15th and 16th centuries, becoming one of the world's leading economic, political, and military powers. During this time, known now as the Age of Discovery, Portuguese explorers pioneered marine exploration by discovering what would become Brazil (1500). During this period, Portugal monopolized the spice trade, divided the globe into four hemispheres with Castile, and extended the empire with military conquests in Asia. However, by the 18th century, events such as the 1755 Lisbon earthquake, the country's occupation during the Napoleonic Wars, and Brazil's independence (1822) had resulted in a considerable decline in Portugal's previous affluence. This was followed by a civil war over royal succession between liberal constitutionalists and conservative absolutists that lasted from 1828 until 1834.
The 1910 revolution ousted Portugal's several centuries-old monarchy, establishing the democratic but unstable Portuguese First Republic, which was ultimately replaced by the authoritarian Estado Novo administration. After the Carnation Revolution (1974), which ended the Portuguese Colonial War, democracy was restored. Almost all of its foreign possessions gained independence soon after. The surrender of Macau to China in 1999 marked the end of one of history's longest-running colonial empires.
Portugal has left a strong cultural, architectural, and linguistic impact over the world, with around 250 million Portuguese speakers worldwide. It is a developed nation with a sophisticated economy and good living standards. It also rates well in terms of tranquility, democracy, press freedom, stability, social growth, prosperity, and English competence. Portugal is a member of the United Nations, the European Union, the Schengen Area, and the Council of Europe (CoE), as well as NATO, the eurozone, the OECD, and the Community of Portuguese Language Countries.
The employee is entitled to two business days off every month of work done after six months of employment. Employees are not permitted to take more than 20 business days off during their first year of work. The employee may not take more than 30 business days off in the following year. From January 1st of each year forward, the employee will be entitled to 22 business days off plus the proportionate of the previous year.
Portugal has 13 mandatory public holidays.
The minimum requirement is 4 days leave and is paid by Social Security as follows:
55% – for first 30 days
60% – between 31 and 90 days
70% – between 91 and 365 days
75% – up to 366 days
The maternity leave is paid by social security.
120 days (just mother) – pay 100%
150 days shared leave (120 for mother +30 for father) – pay 100%
180 days shared leave (150 for mother +30 for father) – pay 83%
150 days – pay 80%
Paternity leave is necessary for 20 days, with an extra 5 days available as an alternative. Social security pays leave at 100% of the employee's average wage for the previous six months.
The pair can choose who takes the next 78 or 108 days after the mandatory 6 weeks of maternity leave and 15 days of paternity leave. If the pair takes a total of 150 days off, they will be paid 80%, and if they take 120 days off, they will be paid 100%.
Employees are entitled to five days of paid bereavement leave after the loss of a spouse, parent, stepparent, child, or domestic partner. Following the death of a sibling, grandparent, or grandchild, they are entitled to two days of paid leave.
Employees are entitled to 30 days of paid leave per year to provide urgent and essential care for a family member under the age of 12 and 15 days for a family member above the age of 12.
Marriage Leave: After getting married, employees are entitled to 15 days of paid leave in a row.
On the day of an exam and the day before, take a study leave.
Collective dismissal, dismissal owing to position abolition, unsuitability for the work, and disciplinary dismissals are all grounds for termination.
The procedure varies depending to the cause for dismissal, but in each case, the employee should be informed of the reason for dismissal prior to discharge. In the event of dismissal for misconduct, a hearing should be held to allow the employee to respond.
Notice of dismissal should be in writing. Notification of dismissal shall be sent to the competent Ministry of Labour service (except in cases of discipline dismissal) and to the workers' representative.
Accrued and unused vacation time is also owed to the employee, regardless of the reason for and manner of termination.
A fixed-term employment contract terminates at the end of the specified term or at the end of its renewal period, whichever occurs first, provided that either the employer or the employee notifies the other party in writing 15 or 8 days before the deadline expires, respectively. Unfixed-term employment contracts expire when the employer anticipates the end of the term and notifies the employee at least seven, thirty, or sixty days in advance, depending on whether the contract is for up to six months, six months to two years, or a longer period of time.
Each contract includes an evaluation period. The duration of the contract varies according to the type, ranging from 30 days to 8 months. The trial period for an indefinite employment contract may be as follows. 90 days for the majority of employees, 180 days for those in positions of technical complexity, high level of responsibility, or requiring a special qualification in trust positions, and 240 days for senior management employees. The trial period for a fixed-term employment contract may be as follows. 30 days if the contract is for six months or more; 15 days if the contract is for less than six months.
When a fixed-term contract expires as a result of an employer declaration, the employee is entitled to compensation equal to 18 days of base salary and seniority for each full year of work.
The standard workweek is 40 hours and the day is eight hours. Work hours and overtime restrictions vary by business size and may be governed by collective bargaining agreements.
Overtime should not exceed two hours in a day and 48 hours in a week. Employees at companies with at least 50 employees may perform overtime work for a maximum of 150 hours per year; employees at companies with fewer than 50 employees may perform overtime work for a maximum of 175 hours per year.
The first hour of overtime is compensated at a rate of 25% above the regular rate, and the subsequent hours are compensated at a rate of 37.5 percent above the regular rate. On rest days or holidays, overtime is paid at 150 percent of the regular rate.
Portugal's minimum wage is now 665 EUR per month as of 2021. However, if an employee is protected by a collective bargaining agreement, their necessary minimum pay may vary.
The national system provides basic insurance. Employees may be offered supplemental health insurance as a perk. Most top executives seek additional health and life insurance, although smaller businesses may choose to give a stipend instead of arranging insurance.
Many companies in Portugal provide meal and transportation subsidies.
Companies based in Portugal are taxed on their global revenue.
Profits and losses assigned to a Portuguese company's overseas permanent establishment (PE) are exempt from taxes under an optional system. The regime applies if I the profit allocated to that PE is subject to and not exempt from a tax specified in Article 2 of the EU Parent/Subsidiary Directive (Council Directive 2011/96/EU), or a tax similar to the Portuguese CIT, with a legal rate not less than 60% of the standard CIT rate, and (ii) the PE is not located in a black-listed jurisdiction. The regime does not apply to the profit assigned to the foreign PE up to the amount of losses related to that PE that were taken into account by the Portuguese taxpayer while calculating the relevant taxable income for the preceding five tax years (12 tax years in case of small and medium-sized enterprises [SMEs]). This is an optional regime that must encompass at least all PEs in the same jurisdiction and is required for a minimum of three years.
CIT is also applicable to income derived in Portugal that is due to a PE of a non-resident business in Portugal. WHT rates are reduced for revenue produced in Portugal that is attributed to non-residents who do not have a PE in Portugal.
A flat CIT rate of 21% is applied to the whole amount of taxable income realized by businesses based in mainland Portugal for tax purposes (also applicable to Portuguese PEs of foreign entities). The normal CIT rate in the Autonomous Regions of Madeira and the Azores, including PEs of international companies registered there, is 14.7 percent.
On the first EUR 25,000 of taxable income, SMEs pay a lower CIT rate of 17% (11.9 percent in the Autonomous Region of Madeira and the Autonomous Region of the Azores) (the standard CIT rate shall apply on the excess). Furthermore, SMEs in the Portuguese inland areas benefit from a 12.5 percent CIT rate on the first EUR 25,000 of taxable income, with the excess subject to the normal CIT rate. In all instances, the notion of micro, small, and medium-sized businesses is mentioned, as specified in the EU Commission Recommendation 2003/361 on the definition of micro, small, and medium-sized firms.
Entities that do not engage in a commercial, industrial, or agricultural activity as their primary business are subject to a CIT rate of 21% on the total amount of their taxable income (14.7 percent in case the Autonomous Region of Madeira and the Autonomous Region of the Azores).
Personal income tax must be paid by Portuguese citizens on their earnings. Although most employees are taxed automatically via their pay stubs, everyone is required to file an annual tax return.
In Portugal, married couples must file a combined tax return. To get the applicable tax rate, split the couple's total income in half.
Individual tax rates in Portugal for the fiscal year 2020 are as follows:
For an annual taxable income of up to up to €7,112, the tax rate is set at 14.5%.
For an annual taxable income between €7,113 and €10,732, the tax rate is set at 23%.
For an annual taxable income between €10,733 and €20,322, the tax rate is set at 28.5%.
For an annual taxable income between €20,323 and €25,075, the tax rate is set at 35%.
For an annual taxable income between €25,076 and €39,967, the tax rate is set at 37%.
For an annual taxable income between €39,968 and €80,882, the tax rate is set at 45%.
There are three VAT rates: the normal rate of 23% (22.5% in the Autonomous Region of Madeira; 18.5% in the Autonomous Region of the Azores), the intermediate rate of 13% (12.5% in Madeira; 9% in the Azores), and the reduced rate of 6%. (5 percent in Madeira; 4 percent in the Azores).
The intermediate rate applies to the provision of some food items, certain food and beverage services, musical instruments, agricultural equipment, and beautiful flowers.
The lower cost applies to the delivery of some important food items, periodic publications, books, pharmaceutical products, hotel accommodations, agricultural products, passenger transportation, and respiratory protection masks and disinfection gel, among other things.
Exports and intra-EU supply of products are tax-free.
Foreigners staying in Portugal for more than six months must get a Residence Certificate (Certificado de Registo). Most non-EU citizens will additionally need a Portuguese work visa before they may work in Portugal. In most circumstances, a Portuguese work permit is only provided after a job offer has been verified, and once authorized, they may proceed with the process of getting a Portuguese work visa or residence permission. After five years in Portugal, you may apply for Portuguese permanent residency, and after six years, you can apply for Portuguese citizenship.
Portugal has quotas in place to restrict the amount of jobs available to third-country nationals in order to boost employment possibilities for EU citizens. Most positions must be advertised for 30 days to Portuguese and EU/EFTA nationals before the Institute for Employment and Vocational Training in Portugal (IEFP) classifies them as employment that non-EU workers may freely fill.
Employment agreements might be written or conversational. It must be written in the local language and include the following requirements, among others imposed by law or both parties:
The work environment
Specifics about the termination
Notice period duration
A pre-employment medical examination is essential. The doctor is expected to transmit the medical report immediately to the employer. The employer may conduct remote monitoring after obtaining authorisation from the National Commission for Data Protection.
The following are some examples of popular contract types:
Fixed-term employment contracts with a maximum duration of three years
Contracts for an indeterminate period of time or for an indefinite period of time
Unspecified length contract to replace an absent employee
Contracts with a term of no more than 70 days for seasonal or event labor
Contract for intermittent full-time, irregular labor
Part-time employment with less hours than full-time employment.
In general, Portugal welcomes international investors, and the incorporation procedure is comparable to that of a local firm. As you explore relocating to Portugal, you should evaluate numerous business aspects that may influence your choice, such as the kind of company, industry, nationality of your headquarters, and others.
Two critical elements to consider are location and language. Varying cities and regions may have different prices and availability. So, if you are unfamiliar with the Portugal region, it is a good idea to consult with legal experts or other business specialists in Portugal. Keep in mind that the language varies depending on the locale. The majority of workers in Portugal speak English, French, and Spanish, however additional languages are used in specific locations.
Following that, you must pick what form of firm you wish to incorporate. The procedure for establishing a subsidiary in Portugal differs depending on the kind of subsidiary you want to run. Limited liability corporations, partnerships, and branches/representative offices are the three primary forms of subsidiary.
The majority of subsidiaries are formed as either private or public limited liability firms. The stages for incorporation are as follows:
1. Register the name of your firm with the National Registry of Collective Entities.
2. Establish a bank account in Portugal
3. Obtain a Certificate of Registration Identify and register workers
4. Notify the Labor Inspectorate Register of your need for insurance.
Smaller businesses with modest initial capital investment and expenditures often incorporate as a private limited liability company (LDA), which is the most common kind of subsidiary structure. An LDA requires at least two founders and a minimum share capital of 5,000 EUR. Each shareholder is only liable for what they give.
An LDA also necessitates the appointment of a single director, who serves as the ultimate authority in the Portuguese LDA and is elected at a general meeting of shareholders. With this configuration, an incorporated LDA firm does not need to undertake an annual audit if it has satisfied two out of three standards in the previous two years.
According to Portugal's subsidiary legislation, an LDA must additionally have:
1. Assets totaling less than 1.5 million EUR
2. Revenue totaling less than 3 million EUR
3. Less than 50 workers