How to start up a food business company in Portugal

If you’re thinking of starting up a food business in Portugal you are probably searching for the process of setting up a company in Portugal. Although the level of entrepreneurship in Portugal is still relatively low, the number of entrepreneurs has been increasing in recent years. The process of starting a business in Portugal can raise some doubts, especially if you are not yet familiar with some legal and financial terms, especially in Portuguese. The process of starting a business in Portugal is not complicated but for the untrained eye, it can look like an overwhelming amount of work and trouble.

In this article we explain how much it costs to start a food business in Portugal and what expenses and procedures you should consider beforehand.

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First and since this article is written in English, can foreigners start up a business in Portugal?

Differences for foreigners to start up a food business in Portugal

There are no major differences to setting up a company in Portugal if you are foreigner or Portuguese. The company setting up process itself is very similar. The main difference is in what it takes to live in Portugal as an entrepreneur.

To live in the country and be an entrepreneur, you must have Portuguese or European Union citizenship or have the proper visa to start a business.

One of the main challenges for non EU residents who undertake is to get a residence visa.

Residence visa: is it mandatory to start a business?

Theoretically it is not mandatory to have a residence visa to start a business in Portugal, but you will need a tax number (NIF). And if you are not a European citizen, you must have a visa to stay in Portugal. Or, appoint an individual or entity residing in Portugal for the purposes of representation before the Portuguese tax authorities.

Visa D2

The D2 visa is specifically intended for enterprising emigrants (in the official name: residence visa for the exercise of independent professional activity or for enterprising emigrants).

It can be requested at Portuguese consular posts and has a cost of €90. Entitles you to stay in Portugal for four months, after which you can apply for a residence permit.

To apply for your visa you will need the following documentation:

• Completed visa application form;
• Passport or other valid travel document;
• Two identical photographs (pass type) updated and in good condition;
• Transport ticket that ensures your return;
• Valid travel insurance, which allows you to cover expenses necessary for medical reasons, including urgent medical assistance and possible repatriation;
• Authorization to consult the Portuguese criminal record by the Foreigners and Borders Service (SEF);
• Criminal record certificate from the country of origin or the country where you reside for more than one year;
• Proof of accommodation conditions;
• Evidence of the existence of livelihoods;
• Additional documentation varies depending on whether you plan to start a business or work as a self-employed professional.

Start up Visa

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StartUP Visa is a program aimed at entrepreneurs from outside the European Union and developed by IAPMEI (Portuguese state agency dedicated to competitiveness and innovation).

Start up Visa was designed for entrepreneurs with innovative business ideas that can be scalable with some speed, especially linked to the area of technologies. This program includes not only the visa and residence permit, but also the connection to incubators based in Portugal, which will receive and support these companies in training.

Registration and application are made directly through the SEF Website or the IAPMEI website.

Gold Visas: Residence Permit for Investment Activity

The Residence Permits for Investment Activity (ARI), popularly known as “gold visas”, are special residence permits, granted to those who make large investments in Portugal, eliminating the need for a visa.

The Gold Visas are aimed at citizens outside the European Union but are about to end in February 2022.

Setting up a food company in Portugal

One of the first things you should consider is the type of business you want to create. It is very common for people to have doubts about the legal form of their company, as there are some possibilities. In this article we take a deeper dive into the food business company starting up process.

For example, if you are going to be the sole partner of the company, you should carefully analyze the pros and cons of a Sociedade Unipessoal por Quotas (Sole Personal Partnership) or if it is preferable to be a Empresário em Nome Individual (Sole Entrepreneur). If there is more than one partner, they must jointly analyze the most advantageous legal form for all.

When you want to open a company all by yourself, the first two legal forms below are for you consider. The third one is for more than one partners:

Empresário em Nome Individual (Sole Entrepreneur)
Sociedade Unipessoal por Quotas (Single-Personal Society)
Limited Liability Individual Establishment

The choice between these three legal forms should be carefully considered and, ideally, you should speak to an accountant to help you with this decision because there are different tax and financial responsibilities and advantages that you will have depending on the type of company and food business you intend to start.

Sole Entrepreneur (Empresário em nome individual)

If you choose to be a Sole Entrepreneur, you should know that:

• You will have to complete your Declaration of Initiation of Activity;
• You need to apply for Social Security;
• If the annual net income does not exceed € 200 000, you can opt for simplified accounting. Your taxation will be done through category B, of the IRS. In this case, you are not required to hire an accountant.
• If the income does not exceed € 10 000, you can apply for VAT exemption, which can be beneficial in the first year of activity in small businesses, when incomes are low.
• The sole proprietor is not required to have a minimum share capital to start his business. However, it is important to know that if you choose this legal form, your personal assets may be liable for the debts incurred by your company, if it is unable to pay them.
• The company name must be the founder’s full or abbreviated name. In addition to the name, you can add an expression related to the type of activity. (Remember that brand and company names are different things).

Single-Personal Society (Sociedade Unipessoal)

In case you want to open a Single Person Society, you should know that:

• You will be the only partner in your company, but your liability is limited, as your personal assets will not answer for the company’s debts;
• This type of company is taxed under IRC,
• You will need to hire the services of a Chartered Accountant (TOC);
• You will have to define your share capital, with a minimum of one euro, and open a bank account for your company;
• You will have to obtain the admissibility certificate, make the deposit of the share capital and carry out the incorporation act of the company;
• To open your company you will have to register it, and after the name it must contain “Unipessoal” or “Sociedade Unipessoal”, followed by “Limitada” or “Lda.”
• Open activity in a tax office and register with Social Security;
• After your company’s registration process, you can request your company card.
• A sole proprietorship for shares is a more complex regime, but it can compensate for being a sole proprietorship when the invoicing level is higher and the business is at higher risk.

More than one partner (Sociedade por quotas)

It can be formed by two or more partners, who share the company’s share capital. However, in a private limited company, the minimum value for the share capital is only € 1 per partner, and the partners’ liability is limited to the value of the share they hold. In addition to the trade name and expression that can be added, it must then contain “Limitada” or “Lda.”

To simplify the procedures for starting a business in Portugal, the Empresa na Hora service was created, which can be found in citizen shops (Lojas do Cidadão) and branches of the registry and notary office. This service helps simplify the entire process, as it has previously approved company lists and social pacts that speed up the creation of a company.

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To create a company, the first step, after having decided on the legal form, is to consult the Empresa na Hora website, and see the lists of previously approved companies and social pacts. This way you get an idea of the names and agreements that already exist, so that when you arrive at the counter you will have several options selected. However, the name of the firm will only be reserved when registering at the counter.

At the counter, you will then choose the name of the firm, which is different from the commercial name of your company, and will be followed by the designation of the legal nature of the company (Unipessoal, Limitada, SA, etc). Then you will have to indicate the previously approved social pact you want. A social pact is the contract of your society. It is in this that the rules, partners, the value of the shares, headquarters, activity, share capital, among other norms, are defined.

VERY IMPORTANT – Chosing your company CAE

During the process you you’ll be required to present one or more CAE (Code of Economic Activity). During this process we highly recommend you to choose more than one and think ahead. For example if you think that you might open a traditional restaurant in the future, choose that CAE. If one of the partners thinks she will be the next Beoncé, by all means, choose organizing concerts as an Activity. There are no extra costs for picking more than one CAE, but down the road, if you want to add a CAE to your operations that will cost at least € 400 in legal fees.

What can you do after creating the company?
It’s important to know that not everything has to be done on the same day. After opening your company, you have 15 days to deliver the Declaration of Start of Activity to the Finance Department, which must be signed by your Accountant. In addition, you have 30 days from the incorporation of the company to request the Central Register of the Effective Beneficiary. (Registo do Beneficiário Efectivo).

The shortest period you have after the creation of your company is linked to the deposit of the value of the share capital in the account in the name of the company. Some banks will ask for Registo do Beneficiário Efectivo, so be careful and source your bank with time. The deadline for this deposit is 5 days after creation of your company. However, you can also choose to deliver it to the company’s coffers by the end of the first financial year.

Mera Comunicação Prévia – Mere Prior Communication

The access to operate in some economic activities is subject to the presentation of a Mere Prior Communication (MCP).
The MCP is required to start any food business operation and also to communicate any alterations or closure of establishments or public spaces.

The completed form is sent to the territoriality competent Municipal Council, or to the DGAE, and gives access to the exercise of commerce, services and restaurant activities.

Livro de reclamações – Complaints book

The Complaints Book serves customers or consumers to exercise the right to complain in the face of dissatisfaction felt in relation to a service provided by its operator.

The entrepreneur or person responsible for the business cannot, at any time, deny the availability of the Complaints Book when it is requested. In the event that this happens, the complainant can bring the problem to the entities that oversee the sector and this can mean big problems for that company.

It costs € 20 euros and if you have customer that wants to complaint just give him the book and ask for his ID card.

“In a food business there are costs beyond costs”

 Bernardo Rodrigues, o Gajo do Marketing na WEAT

Costs to create a food business company in Portugal

 

How much does it cost to start a food business in Portugal?

The cost of starting a company will depend on the legal form and number of partners who will be part of the company, but also on the movable and immovable property associated with it.

The main costs of starting a food business company are:

  • Cost of registration through the Company on the spot: € 360;
  • Certificate of Admissibility for the creation of the company: € 70, normal order or €150 for urgent orders;
  • In companies with property entries or shareholdings that have to be registered: € 50 per property or share;
  • Companies with movable assets: € 30 for each asset;
  • If mopeds, motorcycles, tricycles or quads with cylinder capacity up to 50 cm3 are associated. with a limit of 30 thousand euros: € 20 per vehicle.

But there are other type of expenses  you should consider when starting a food business.

The most common additional expenses for starting a food business are:

POS Software

All companies are required to have invoicing software that is certified by the Tax Authority. Therefore, if you are going to create a company, you must have these costs in your company’s budget.

TOC and Lawyer

Although there are some specifications for some small Sole Entrepreneur companies that are not required to have a Chartered Accountant if you plan to have more than € 20 000 of revenue we strongly advise you to get an accountant.
You are not required to have a laywer in Portugal to start a food business. All starting up processes can be done by the entrepreneurs or their accountants.

Company headquarters and business premises

Unless your capital is very high, the most common thing when starting a business is to rent the place where the premises and the respective headquarters of the company will be. In this area you should think that you will have to pay the deposit, the rent, and equip the place so that it works correctly and is attractive to customers.

Suppliers and cost of goods

In food businesses, suppliers represent a very high expense, and you should take this into account early on. Do your sourcing with time and do your math well, analysing what’s essential to get started, Also, try your best to negotiate values at the start of your business.

Services:

Remember that when you have a business there are essential services that have to be paid monthly. These services include electricity, water, telephone, internet and gas. In addition to these

Insurance

Don’t forget about the insurance you will have pay. If you have employees, they need to be insured as well.

Workers

Workers represent a high financial burden on a company’s expenses. Therefore, be well informed about your obligations as a boss, as you will have to pay wages, allowances, social security discounts, insurance, among other expenses like Medicina no Trabalho (Job medical consults).

Marketing

Most businesses don’t account for a marketing budget and then when they fail, they don’t understand why. If you don’t know the market, and the market doesn’t know you, why do you expect to anybody to buy from you?

Registering your brand copyright

Registering your brand is not mandatory, but advisable. If you create a unique and singular brand name it’s up for grabs it you don’t register it.

If you plan to register your brand first go to INPI and check if there is already a brand registered under the NICE Classification you’re planning to operate.

After you have verified the relevance of your brand and confirmed that there is no irregularity in the name, you will need to deliver the following elements/documents online or in person:

  • Distinctive Trade Signs Registration Application Form.
  • Registration application continuation sheet completed in Portuguese and in duplicate, if necessary
  • Graphic representation of the brand (with the words, images, figures and drawings that compose it and the colors of the brand, in case you want to register colors).
  • Identification data of the person applying for registration (name, company name or company name, nationality, address, TIN and email).
  • Classification of products/services for which the brand is intended, according to the Nice Classification.
  • Indication of the country where you made the first application for registration of the trademark, the date and the application number, if you want to claim priority.
  • Signature or electronic identification of the applicant or his representative.
  • Authorization, if the mark bears the name or portrait of another person, signs, symbols, coats of arms, emblems or distinctions of the State, municipalities or other entities.
  • Reward registration number, if the brand refers to a reward.
  • Declaration of consent from the owner of the trademark which yours can be confused with (if applicable).
  • Recording sounds in mp3 or WAVE format, if the brand includes sounds

Taxes after starting up a food business in Portugal

In addition to all the expenses mentioned here, you should never forget the taxes to be paid.

We present the four main taxes that you may pay in your food business.

Corporate Tax – IRC

When you open a company through a company, it is taxed through the Corporate Income Tax, IRC. This tax is levied on your company’s profits, and represents a rate of 21%. SMEs benefit from a 17% rate on the first 15 thousand euros of profit. Only when this value is exceeded is the 21% rate applied.

VAT

VAT rates can vary between 6%, 13% and 23% in Portugal, depending on the goods or services provided by your business. However, companies bear VAT and pay it. The difference between the two is communicated to the Finance Department by your accountant monthly or every three months. Food businesses can charge 13% or even 6% depending of their CAE and types of goods sold.

TSU

Single Social Tax is the contribution that is paid to Social Security for each worker that a company has. Currently, the TSU represents a rate of 23.75% on the salary of each worker.
Derrama – Municipal Surcharge: This is a tax that will be paid to the municipality where the company is headquartered. The municipal surcharge is applied to the company’s profits, and cannot exceed 1.5%. The value varies from city to city.

Property Tax

In addition to these four taxes, if there are property transfers in your company, you may have to pay the IMT, Municipal Tax on Onerous Property Transfers.

If your business has profits of more than 1.5 million euros, you will have to pay a tax called state surcharge, which can reach 9%.

Know the market

Starting a business is a process that can be a bit complex, especially if it’s your first time trying to do it.

In addition to decide about the legal form of your company, gather documentation you’ve probably never heard of, and follow several procedures to the letter you must plan and structure your business well. The bureaucratic process of starting up a business may have fancy legal names, but it’s easily doable.
The headaches can come if you don’t have a good business plan or a marketing strategy.

It is often said that haste is the enemy of perfection. And when we talk about creating a company or starting a business, it is essential that we structure ideas, verify their viability and define a business model. We’re not saying that your company needs to be perfect. None is, but it needs to make money to survive.

And do you know why it is so important to focus on these points before starting your business? Because a good idea is not synonymous with feasibility and success. To find out if your idea is really good and viable you must first analyse the market and your target audience. By carrying out this marketing you will not only be able to understand which competing companies exist, but also the acceptance by your audience of the product or service you intend to offer.

Soon we will write how to create a marketing plan and a business plan for a food business in Portugal.