Portuguese law defines a startup as a legal person that cumulatively: has carried out its activity for less than 10 years; employs fewer than 250 workers; has an annual turnover not exceeding EUR 50 million; does not result from the transformation or demerger of a large company, and is not majority-owned (directly or indirectly) by a large company; and has its registered office or permanent representation in Portugal or, at least, 25 employees in Portugal.
Not stopping there, the Portuguese legislator added, in Article 2 of Law No. 21/2023 of 25 May, that in order to fall within the legal definition of a startup, the company must: be an innovative company with high growth potential, with an innovative business model, products or services; have completed at least one venture-capital financing round through an entity legally authorised to invest in venture capital and subject to the supervision of the CMVM or its international counterpart; or have received investment from Banco Português de Fomento, S.A., or from funds managed by it, or by companies in which it holds a stake.
However, the truth is that the legal framework for startups allows considerable flexibility. Indeed, failure to meet the alternative requirements in the previous paragraph may be remedied by a prior declaration issued by Startup Portugal, based on evidence that the applicant holds an innovative business model, products or services, or a rapidly scalable business with high growth potential.
Recognition of this status is obtained through a prior-notification procedure with Startup Portugal, on the single portal for public services. Once the entity is recognised as a Startup, it is included in an updated list of recognised start-ups and scaleups, made available in digital format by Startup Portugal.
In Portugal, there is a diverse range of benefits for investors and holders of corporate offices in startups, mostly of a tax nature. Between the tax incentive for acquiring shareholdings in startups, the tax incentive for scientific research and innovation (IFICI), reduced IRC (corporate income tax) rates and VAT benefits that may become applicable, it is easy to understand the appeal of this model, which has been developed in recent years.
With the entire process of incorporation, recognition and planning of your business spread across so much legislation, it is important to be accompanied by specialised professionals with experience in the field. The VPA Team is ready to help your Startup, regardless of its maturity. Contact us through our Website!
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