2013 Investment Climate Statement - Portugal

2013 Investment Climate Statement
Bureau of Economic and Business Affairs
March 2013

Openness to, and Restrictions upon, Foreign Investment

The Government of Portugal recognizes the value of foreign investment and sees such investment as an important engine of economic growth. Portugal is in its third consecutive year of economic recession and is currently in the process of implementing many structural reforms associated with its receipt of a €78 billion bailout from the European Union and the International Monetary Fund in 2011. The Portuguese Agency for Foreign Investment and Commerce (AICEP) is the lead agency for economic development policy. AICEP is responsible for the promotion of global Portuguese trademarks, export goods and services, and attraction of foreign direct investment (FDI). It is the point of contact for investors with projects over €25 million or companies with a consolidated turnover of more than €78 million. For foreign investments not meeting these thresholds, AICEP will make a preliminary analysis and direct the investor to assistance agencies such as the Institute of Support to Small- and Medium Sized Enterprises and Innovation (IAMPEI), a public agency within the Ministry of Economy that provides technical support, or to AICEP Capital Global, which offers technology transfer, incubator programs and venture capital support.

The Bank of Portugal (Portugal’s central bank) defines FDI as “an act or contract that obtains or increases enduring economic links with an existing Portuguese institution or one to be formed.” A non-resident who invests in at least 10% of a resident company’s equity and participates in the company’s decision-making is considered a foreign direct investor. The Portuguese legal system is based on non-discrimination with regard to the national origin of investment, and foreigners are permitted to invest in all economic sectors open to private enterprise. However, there are limitations on both foreign and domestic investments with regard to certain economic activities. Portuguese government approval is required in the following sectors: defense, water management, public telecommunications operators, railway, maritime transportation and air transport. Any economic activity that involves the exercise of public authority also requires government approval. Private sector companies can operate in these areas only through a concession contract.

Investors wishing to establish new credit institutions or finance companies, acquire a controlling interest in such financial firms, and/or establish a subsidiary must have authorization from the Bank of Portugal (for EU firms) or the Ministry of Finance (for non-EU firms). In both cases, the authorities carefully consider the proposed transaction, but in the case of non-EU firms, the Ministry of Finance especially considers the impact on the efficiency of the financial system and the internationalization of the economy. Non-EU insurance companies seeking to establish an agency in Portugal must post a special deposit and financial guarantee and must have been authorized for such activity by the Ministry of Finance for at least five years.

EU workers are not required to have work permits. Non-EU workers are required to have both legal residency and a work permit. Authorization for permanent residence is granted when an employee has a labor contract, rent contract, or a permanent resident document and is registered with the Social Security Services. Requests are processed by the Serviços de Estrangeiros e Fronteiras (SEF) Branch and regulated by Decree-Law 23/2007 dd4/07 and Decree-Law 84/2007 dd 05/11. For more information, visit www.sef.pt.

The following are Portugal's rankings on five widely accepted measures of the business and investment environment:




TI Corruption Perceptions Index


33 of 176

Heritage Economic Freedom


68 of 179

World Bank Ease of Doing Business


30 of 185

World Economic Forum Global Competitiveness Report


49 of 139

Innovation Union Scoreboard


12 of 27

For more information about these measures visit:

Conversion and Transfer Policies

Portugal is a member of the European Monetary Union and uses the euro. Portugal does not have exchange controls and there are no restrictions on the import or export of capital. Both residents and non-residents may hold bank accounts in any currency. However, any party that transfers €10,000 or more outside of Portugal in foreign banknotes, gold, travelers’ checks, or bearer securities must declare it to the Portuguese customs authorities.

Expropriation and Compensation

There have been no cases of expropriation of foreign assets or companies in Portugal in recent history.

Dispute Settlement

The Portuguese judicial system is relatively independent but lacks efficiency. According to the World Bank’s 2013 Doing Business report for Portugal, enforcing a contract takes 547 days, costs 13.0% of the value of the claim, and requires 32 procedures. This is well above the EU average. Recognizing that this is a deterrent to investment, Portugal has agreed, as part of its EU bailout plan requirements, to institute reforms in three areas: 1) timely enforcement of contracts and competition rules, 2) restructuring of the court system to reduce the number of jurisdictions, and 3) eliminate backlogs. Implementation of this process has begun, and several thousand cases in the backlog have already been closed, but a structural overhaul of this magnitude will take years to fully implement and to produce results. In the meantime, resolution of cases remains sluggish.

Performance Requirements and Incentives

In November 2012, Portugal received EU-permission to reduce it’s the standard corporate tax rate (IRC) to 10% for new investments made in Portugal. On all other investments, the IRC is 25% throughout Portugal, with the exception of the Autonomous Region of the Azores where it is 17.5%. A state surtax is levied at 3% on taxable profits over €1.5 million up to €10 million and at 5% on amounts exceeding €10 million. A municipal surcharge is levied on taxable profits at rates up to 1.5% (depending on the municipality), resulting in a maximum possible aggregate tax rate of 29.5%-31.5%.

The Portuguese Government offers investment incentives which can be tailored to investors’ needs and capital based on industry, proposed size of investment, and project sustainability. A 10-20% tax investment credit is granted for large industrial investment projects. A credit of 32.5-50% of qualifying research and development expenses (limited to €1.5 million) is available. For more information on investment incentives offered by the central government, visit AICEP’s website: http://www.portugalglobal.pt. The Autonomous Regions of Madeira and the Azores also offer investment incentives. For example, profits derived from offshore operations by licensed industrial, shipping, international services, and financial companies established in the International Business Centre of Madeira (a foreign trade zone) are subject to the reduced corporate tax rate of 5%. For more information on the International Business Centre of Madeira’s corporate tax regime, please visit http://www.ibc-madeira.com/.

Since Portugal is an EU Member State, potential investors may be able to access European aid programs, which provide further incentives to investing in Portugal. Portugal received €21.5 billion in EU Structural and Cohesion funds for 2007-2013. These funds have been used by Portugal to co-finance, jointly with EU funds, key investments in the areas of research and development, information and communications technology, transport, water, solid waste, energy efficiency and renewable energy, urban regeneration, health, education, and culture. For more information, visit http://www.qren.pt or http://www.incentivos.qren.pt .

Right to Private Ownership and Establishment

Private ownership is limited to 49% in the following sectors: basic sanitation (except waste treatment), international air transport, railways, ports, arms and weapons manufacture, and airports. The government requires private firms to obtain concessions, contracts, and licenses to operate in a number of sectors (public service television, waste distribution, waste treatment), but grants these on a non-discriminatory basis. Foreign firms have the right to establish themselves in all economic sectors open to private enterprise. Foreign investments affecting public health, public order or security, or relating to the arms industry require approval of the competent authorities.

Law No. 18/2003 (June 6, 2003) governs protection and promotion of competition in Portugal. It specifically prohibits collusion between companies to fix prices, limit supplies, share markets or sources of supply, discriminate in transactions, or force unrelated obligations on other parties. Similar prohibitions apply to any company or group with a dominant market position. The law also requires prior government notification of mergers or acquisitions that would give a company more than a 30 % market share in a sector, or mergers or acquisitions among entities that had total sales in excess of €150 million in the preceding financial year. The Competition Authority has 60 days to determine if the merger or acquisition can proceed. The European Commission may claim authority on cross-border competition issues or those involving entities large enough to have a significant EU market share.

Protection of Property Rights

The government adopted the Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS) and provisions of the General Agreement on Tariffs and Trade (GATT) in 2003. Portuguese legislation for the protection of intellectual property rights has been consistent with WTO rules and EU directives since 2004. In 2012, the government created a court with one judge dedicated to intellectual property rights. Portugal is a participant in the eMAGE and eMARKS projects, which provide multilingual access to databases of trademarks and industrial designs. These international efforts assist participating customs authorities in combating sales of counterfeit goods. Other participating countries include France, Austria, Hungary and Spain.

Trademark Protection: Portugal is a member of the International Union for the Protection of Industrial Property (WIPO) and a party to the Madrid Agreement on International Registration of Trademarks and Prevention of the Use of False Origins. Portugal's current trademark law, the Industrial Property Code, was approved by Decree-Law 143/2008 and went into effect on July 25, 2008. The law is consistent with TRIPS.

Copyright Protection: Portugal has implemented directives on the EU information society and protection of databases through national legislation (Decree-Law 50/2004 and 112/2000, respectively). The software piracy rate in Portugal is slightly higher than the average software piracy rate in the EU. According to a 2010 report of the Business Software Alliance, the software piracy rate in Portugal in 2009 was 40%, compared to the EU average of 35% and the Western Europe average of 34%.

Patent Protection: Patent protection in Portugal is governed by the Code of Industrial Property that went into effect on June 1, 1995. In 1996, new legislation was passed to extend the life of then-valid patents to 20 years, consistent with the provisions of TRIPS. A new industrial property code, designed to bring Portugal into full conformity with EU and international norms, went into effect in July 2008.

Portugal grants health (FDA-equivalent) approval to market new drug products without cross-checking for existing products with unexpired patent protection already in the market. This forces companies to pursue redress through the court system, an expensive and time-consuming process. U.S. pharmaceutical companies have brought a number of cases in Portuguese courts for violation of patent rights by Portuguese companies. One U.S.-owned pharmaceutical company has won five cases and has additional cases pending.

Transparency of the Regulatory System

In the past, businesses frequently complained about red tape with regard to registering companies, filing taxes, receiving value-added tax refunds and importing materials. Decision-making tended to be centralized, and obtaining government approvals/permits was often time-consuming and costly. In the past few years, Portugal has undertaken efforts to improve government efficiency.

The Ministry of Economy has promoted various initiatives. In 2007, it worked with the Ministry of Justice to launch the "Cutting Red Tape" website, a repository of information for all measures taken since 2005 to reduce bureaucracy in the incorporation, registration, certification, liquidation, dissolution and merging of businesses in Portugal. Other initiatives include the "Empresa na Hora" (Business in an Hour), which allows for the incorporation of companies in less than one hour at Corporate Formalities Centers and Business Registration Offices. Other services provide online company incorporation, labor mediation, bilingual commercial registration, and patents and trademarks. Between January and November 2010, a total of 17,040 companies were incorporated under the "Empresa na Hora" program. Since its inception, more than 100,000 companies have been incorporated under the “Empresa na Hora” program.

In an effort to promote small and medium-sized businesses, on December 30, 2010, the Portuguese Council of Ministers approved new measures to simplify further company formation procedures. It eliminated the €5,000 minimum share capital to establish limited liability companies, individual shareholder limited companies, and limited liability sole proprietorships, giving entrepreneurs the flexibility to determine the share capital of their companies without any restrictions and to deposit the share capital, as little as €1, by the end of the first year of operations rather than prior to initiation of economic activity. The minimum share capital for public limited companies remains €50,000.

Efficient Capital Markets and Portfolio Investment

One result of Portugal's participation in the European Monetary Union is the country's increasing integration into a European-wide financial market. As a member of the eurozone, Portugal offers low exchange rate risk for foreign investors; however, with Portuguese banks resorting to the European Central Bank (ECB) for liquidity, the Bank of Portugal anticipates increased bank spreads and more limited access to credit for individuals and companies. In January 2013, the average interest rate on new corporate loans was approximately 6.8%, well above the eurozone average of 3.9%. The Bank of Portugal regulates the effective annual interest rate (TAEG) on loans in accordance with Decree-Law No. 133/2009 (June 2009), which established the maximum TAEG. In addition to bank lending, the private sector has access to a variety of credit instruments, including bonds. Legal, regulatory, and accounting systems are consistent with international norms.

The Portuguese capital markets code (the CVM) went into effect on March 1, 2000, and has rationalized and streamlined Portuguese capital markets legislation. The Lisbon stock market is part of Euronext, which also includes the Paris, Brussels and Amsterdam markets. Yields on long-term government bonds remained among the highest in the eurozone. The sovereign debt crisis led to a loss of access to wholesale debt markets in 2010. Portugal returned to the bonds market in October 2012 and successfully conducted a short-term bond exchange. Government authorities hope to regain full access to the medium- and long-term debt markets in 2013.

Portugal has 44 banking institutions, with the four largest bank groups accounting for over 70% of the sector’s total assets. Debt redemptions in 2012 total €17 billion. The country's largest bank, Caixa Geral de Depositos (CGD), is state-owned. Despite economic challenges due to the global and eurozone financial crises, Portuguese banks have maintained a Tier 1 capital ratio over 8%, as required by the Bank of Portugal. However, they have had to resort to the ECB for liquidity. In June 2012, ECB borrowing reached an all time high of €60 billion which has decreased when banks returned to bond markets.

In addition to banks and stock markets, Portugal has taken specific steps to ensure that the financial needs of SMEs are met. IAPMEI has a program of mutual guarantees so that SMEs do not have to use their assets or those of their shareholders to collateralize debt. The companies pay an initial evaluation fee and an annual fee equal to 0.75 - 3.00% of the guarantee. IAPMEI has also supported the creation of venture capital funds and venture capital firms to channel capital to SMEs. In 2008, the European Investment Fund, together with private financial institutions, public bodies, and select foundations, launched the Portugal Venture Capital Initiative (PVCi), a €111 million private equity/venture capital fund of funds, to invest in Portuguese and international funds focused primarily on Portugal and to accelerate growth of Portugal’s SME sector. PVCi investors include the Portuguese government, state-owned Caixa Geral de Depositos, the Gulbenkian Foundation, and major private banks.

Competition from State-Owned Enterprises (SOEs)

The Portuguese system is based on non-discrimination regarding national origin of investment. Foreign and domestic private companies are limited in certain economic activities, such as water utilities, postal services, rail transport, and maritime ports. Private sector companies, regardless of national origin, can operate in these restricted fields only through a concession contract. As part of its financial bailout agreement, Portugal will privatize several SOEs. Privatization has begun in Portugal’s energy and aviation industries. Further sales of Portuguese assets in the sanitation and telecommunications sectors are planned. There is no sovereign wealth fund in Portugal.

Corporate Social Responsibility (CSR)

There is strong awareness of corporate social responsibility in Portugal and broad acceptance of the need to consider the community among the key stakeholders of any company. GRACE (Group of Reflection and Support for Business Citizenship) Association was founded in 2000 by a group of companies, primarily multinational corporations, to expand the role of the Portuguese business community in social development. It was the first non-profit organization in Portugal dedicated to corporate social responsibility. Since its founding, GRACE has engaged in various community projects, participating in the International Day of Volunteers and partnering with local civic groups to rehabilitate public spaces and facilities, create community gardens, and improve the environment. GRACE’s GIRO project, the largest corporate volunteer project in Portugal, has organized over 3100 volunteers to the benefit of more than 50 institutions and 13,000 people throughout Portugal. There are several other prominent organizations, such as the Portuguese Business Ethics Association, dedicated to corporate social responsibility in collaboration the Ministry of Economy’s General Directorate of Economic Activities.

Political Violence

Portugal has a long history of peaceful social protest. Portugal experienced its largest political rally since its revolution in response to budgetary measures in 2012. Subsequent demonstrations against government austerity measures and economic policies have resulted in isolated and low levels of vandalism, generally directed at parliamentary facilities. Public workers, including nurses, doctors, teachers, aviation professionals and public transportation workers have organized strikes periodically in protest of privatization, salary cuts and other government measures throughout 2012. A prolonged port worker strike is estimated to have impacted Portugal’s import/export trade by €1.2 billion.


Corruption plays a limited role in Portugal's business culture. Although U.S. firms occasionally encounter limited degrees of corruption in the course of doing business in Portugal, they do not identify corruption as an obstacle to foreign direct investment. Portugal has ratified the OECD Anti-bribery Convention and has passed legislation to bring its criminal code in compliance with the Convention. Tax evasion remains a problem for the government, which has implemented several initiatives to improve collection rates. In July 2010, Portugal passed a series of laws to combat corruption that included increased penalties for bribery (both active and passive) and extended statutes of limitations for certain corruption-related crimes, such as bribery and abuse of official function.

Bilateral Investment Agreements

Portugal has signed investment agreements with the following countries: Albania, Germany, Angola, Algeria, Argentina, Bosnia Herzegovina, Brazil, Bulgaria, Cape Verde, Chile, China, South Korea, Croatia, Cuba, Egypt, Slovakia, Slovenia, Philippines, Gabon, Guinea-Bissau, Hungary, India, Kuwait, Latvia, Libya, Lithuania, Macao, Morocco, Mauritius, Mexico, Mozambique, Pakistan, Paraguay, Peru, Poland, Qatar, Czech Republic, Romania, Russia, Sao Tome and Principe, Timor, Tunisia, Turkey, Ukraine, Uruguay, Uzbekistan, Venezuela and Zimbabwe.

OPIC and Other Investment Insurance Programs

Portugal is a country with low political risk, and the potential for significant OPIC insurance programs in Portugal is limited. Portugal is a member of the Multilateral Investment Guarantee Agency (MIGA) of the World Bank.


Numerous labor reform packages aimed at improving the productivity of Portugal’s workforce have been implemented in recent years. A package of labor reform laws took effect in 2003 permitting greater geographic and functional mobility for employees. The labor code limits the role of unions and makes it more difficult for workers to strike. It also addresses absenteeism and fraudulent leave. Additional changes were implemented in 2009 clarifying rules concerning intermittent and seasonal employment, specifying leave flexibility regarding parenthood and family support, and other issues. However, low productivity and difficulty in firing workers have hampered Portugal's ability to attract foreign investment. Among southern periphery eurozone countries, Portugal ranks lowest in labor productivity. In 2012, Portugal enacted a series of labor market reforms geared at increasing productivity and flexibility in the Portuguese workforce. Notable reforms include easier dismissals, severance pay decreases, and a reduced number of paid holidays. Changes to work-time arrangements, employment-protection rules, and collective bargaining practices are expected to further aid firms in adapting to changing market conditions.

Labor strikes and work stoppages in Portugal, as in much of Europe, are more common than in the United States. Most strikes, however, are nonviolent and of short duration. In recent years, work stoppages have been more common among public sector workers, including transport sector workers, teachers, and nurses, than in the private sector. In November 2012, Portugal labor unions staged a general strike to protest government austerity measures and economic policies which resulted in low levels of vandalism.

Portugal is a member of the International Labor Organization (ILO) and adheres to the ILO Conventions Protecting Labor Rights. Portugal ratified ILO Convention 138, which establishes a minimum employment age of 15 for all economic sectors. As of January 1, 1997, the minimum age for employment in Portugal is 16.

Unemployment: Portugal’s unemployment rate reached 16.3% in 2012, a near 6% increase from 2010 (10.6 %). Youth employment reached nearly 40% in 2012. The total number of unemployed was estimated at 609,400 individuals, the highest figure in 30 years.

Foreign Trade Zones/Free Ports

Portugal has one foreign trade zone (FTZ)/free port in the Autonomous Region of Madeira, established in 1987. Continued operation of this foreign trade zone/free port was authorized in accordance with EU rules on incentives granted to member states. Industrial and commercial activities, international service activities, trust and trust management companies, and offshore financial branches are all eligible. Companies established in the foreign trade zones enjoy import/export-related benefits, financial incentives, tax incentives for investors, and tax incentives for companies.

As of December 31, 2009 (the latest available figure), the Madeira FTZ had 3,221 active registered companies, including 240 ships registered in the International Shipping Register. Under the terms of Portugal's agreements with the EU, companies in the Madeira FTZ can take advantage of revised tax incentives until 2020. For additional information on Madeira’s tax regime, please visit the International Business Centre of Madeira at: http://www.ibc-madeira.com/Tax_Benefits.aspx?ID=29

Foreign Direct Investment Statistics

According to the Central Bank of Portugal, foreign direct investment (FDI) in Portugal was €84.6 billion in 2012, a slight decrease from 2011 figures. Portuguese investment abroad reached €50.3 billion, a €4 billion decrease from 2011. In 2012, the EU-member states accounted for 92.1 % of FDI to Portugal. According to AICEP, the top countries of origin for FDI to Portugal were Luxemburg, Spain, the United Kingdom, France, the Netherlands, Germany, Austria, Switzerland, Belgium, Ireland, and the United States during the first semester of 2012. The leading industries for receipt of FDI were wholesale and retail services, financial and insurance activities, manufacturing, utilities, and information and communication activities, representing approximately 92% of FDI. According to the U.S. Census Bureau, the United States exported $1 billion in goods to Portugal and imported $2.4 billion in Portuguese goods. For more information on Portugal’s international investment position, please visit: http://www.bportugal.pt/en-US/Estatisticas/PublicacoesEstatisticas/BolEstatistico/Publications/C30.pdf

Prominent U.S. businesses represented in Portugal include Cisco, Johnson & Johnson, Mattel, Oracle, General Electric, and Citibank. For information on other U.S. companies operating in Portugal, please visit the American Chamber of Commerce in Portugal at: http://www.amcham.org.pt.

For those interested in establishing a business in Portugal, information on doing business in Portugal is maintained by the U.S. Foreign Commercial Section at: http://export.gov/portugal/doingbusinessinportugal/index.asp .

Portuguese trade with the U.S.

Major foreign investors in Portugal

Web Resources

Bank of Portugal

Portuguese Agency for Foreign Investment and Commerce

Empresa na Hora

QREN (National Strategic Reference Framework 2007-2013)

EUROSTAT (Statistical Office of the European Union)

U.S. Census Bureau

Technological Plan

"Cutting Red Tape" Investment Incentive Program

Portuguese Government

American Chamber of Commerce in Portugal

IAPMEI (Institute for SME Support and Innovation)

INPI (Portuguese Patent and Trademark Office)

Portuguese Directorate General for Economic Activities

U.S. Commercial Service in Portugal