Should You Launch Your Startup in Portugal?

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With a well-educated workforce that speaks English to a near-native level, as well as Portuguese, obviously, and near-fluent Spanish in many cases, Portugal potentially has a lot to offer the startup world. 

It also has good connections to Brazil, as well as to parts of Africa and is in a good timezone for dealing with both Europe and the US. Its position on the West of Europe means, geographically, it’s one of the closest places to the US too. The internet quality is good too. 

And, one benefit that doesn’t get mentioned enough: a matching fund for high growth startups where the Portuguese government will match the investment of private investors. That alone is worth looking into. 

Lisbon even looks like San Francisco. Its main bridge, the 25 of April Bridge, was modelled off the Golden Gate and its iconic yellow trams came from there. Like San Fran, it’s incredibly hilly too. It’s hard not to draw comparisons. 

But despite the obvious comparisons to San Francisco, and despite the potential the country has to offer, Portugal has jet to become the Silicon Valley of Europe that it once promised to become. 

There are startups here as well as accelerators, particularly in Lisbon, but a quick look at the founders’ names shows the scene is much more local than international. Scared off by high taxes and confusing bureaucracy, many international founders have stuck to more familiar places like London and the original Silicon Valley. 

What’s much more common is that companies will open an office in Portugal, usually Lisbon, but keep their HQ elsewhere. Again, usually that’s the USA or UK. Even many of the touted most successful Portuguese startups often have their main business address registered outside of Portugal. 

It’s hard to compete with places like Silicon Valley, after all. Even though it’s one of the most expensive places in the world to live, and companies have to offer salaries of $100k or more just to get applications from developers, it’s still the place to have your startup. It’s where the talent pool is located and, even in an age where remote work is possible, that is still important. 

Then, there are the tax and bureaucracy issues. The second problem, bureaucracy, is perhaps the bigger issue as startups need to be able to move quickly without constantly getting tangled in confusing red tape — especially if they want to compete with startups in other countries that won’t be facing the same hurdles. 

But, despite these challenges, there are a few reasons to look into launching your startup in Portugal. 

Reasons to run a startup in Portugal

The following are just a few of the main reasons to launch or move your startup to Portugal.

Lifestyle

The main reason to move to Portugal, regardless of whether you’re launching a startup, moving for a job, or retiring here, is always lifestyle. There’s always somewhere that’s less complicated, and has a more enticing tax system, but Portugal is just a great place to live. 

It has great weather, a low cost of living, a large international scene including a growing startup scene, and the Portuguese are incredibly welcoming of foreigners as well. It’s considered one of the safest countries in the world too. 

Residency Visas

Portugal has several visas aimed at startups – both the startup visa and tech visa – which allow both founders and employees from outside of the EU to easily move to Portugal and take up residency here. During that 5-year period, you have freedom to move within the Schengen area and, after 5 years of living here, you can apply for permanent residency as well as a Portuguese passport. 

Portugal recognised dual citizenship, so it’s an ideal country for those that want a second passport. 

Matched Funding

There are many reasons that startups fail, but one of the simplest is that they run out of money. Capital is everything when you’re a startup and so the promise of matched funding offered by the 200m fund could be very alluring.

Taxes 

While there are usually more appealing places to pay taxes than Portugal, Portugal does have a few tax schemes which, in certain cases, may make moving to Portugal an attractive proposition. 

Madeira, a small Portuguese island located off the coast of Africa, offers an EU-approved 5% corporation tax rate if certain conditions are met, making it one of the lowest corporation tax rates in Europe. 

Then there are programs aimed at freelancers and small companies. 

The 10-year NHR (non-habitual resident) program, for example, typically allows you to pay a flat rate of 20% (+ social security) on certain types of income up to a limit of €200,000 per year while the simplified regime, a method of accounting, means you pay Portuguese tax rates and social security but only on a percentage of your income (say 65%). 

Depending on the type of income you receive, dividends and royalties, for example, and which country the income comes from, you may be able to significantly reduce your tax bill or avoid paying tax at all. Those cases are the exception rather than the rule though. 

NHR doesn’t make sense for everyone, particularly those earning small or average-sized salaries, but it can offer good savings for high earners (€100-200k for example). 

Conclusion

Portugal is growing as a startup hub, particularly for locally-grown startups, and there are definitely a few compelling reasons to consider Portugal over the more obvious choices like Berlin, London, and Silicon Valley.

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  1. This article feels short in details, e.g. there are incubators in other cheaper cities then Lisbon like Porto , Coimbra https://ipn.pt/ , Leiria https://startupleiria.com, Braga https://startupbraga.com/ a bit outdated, of course Azores http://www.azores.gov.pt where because you are close to the US timezone makes most sense to move if you are targeting the us market.

    There are several co-working places in Lisbon, Coimbra and Leiria that i am aware of.

    All these cities have a ready talent pool of engineering colleges where a ready talent pool is available.

    Reply

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