For foreigners the red tape is almost impenetrable, especially if you don’t speak Portuguese, as you will be inundated with official documents and must be able to understand them. It’s only when you come up against the full force of Portuguese bureaucracy that you understand what it really means to be a foreigner in Portugal! It’s difficult not to believe that the authorities’ sole purpose in life is to obstruct business (in fact it’s to protect their own jobs).
Patience and tolerance are the watchwords when dealing with Portuguese bureaucrats (and will do wonders for your blood pressure). Although many foreigners find it hard to believe, things have improved considerably in recent years and the regulations and procedures have become less onerous since Portugal joined the EU.
Despite the red tape, Portugal is traditionally a country of small companies and sole traders, and there are hundreds of thousands of family-run businesses (of all sizes) employing the vast majority of the working population. Among the best sources of help and information are your local chamber of commerce ( câmara de comércio) and town hall ( câmara).
Many small businesses in Portugal exist on a shoestring, with owners living from hand to mouth, and certainly aren’t what could be considered thriving enterprises. Self-employed businessmen usually work extremely long hours, particularly those running bars or restaurants (days off are almost impossible in the high season), often for little financial reward.
As in most countries, many people choose to be self-employed for the lifestyle and freedom it affords (no clocks or bosses), rather than the money. It’s important to keep your plans small and manageable and work well within your budget, rather than undertake a grandiose scheme. You should be prepared to spend some years getting established, during which time you may be lucky to meet your expenses (therefore it’s important to have sufficient capital to tide you over), particularly if you’re paying rent (or a mortgage) on both your home and business premises.
Hiring employees shouldn’t be taken lightly in Portugal and must be taken into account before starting a business. You must enter into a contract under Portuguese labour law and employees enjoy extensive rights. It’s also very expensive to hire employees, as in addition to salaries you must usually pay social security contributions plus 14 months’ salary a year, five weeks’ paid annual holiday and around 14 paid public holidays.
Before establishing a business or undertaking any business transactions in Portugal, it’s important to obtain legal advice to ensure that you’re operating within the law. There are severe penalties for anyone who ignores the regulations and legal requirements.
Expert legal advice is also necessary to make the most of any favourable tax and business breaks, and to make sense of the myriad of rules and regulations. It’s imperative to ensure that contracts are clearly defined and water-tight before making an investment, as if you become involved in a legal dispute it’s likely to take years to resolve.
Before starting a business in Portugal you should obtain advice from a lawyer ( advogado) and an accountant ( contabilista). Many foreigners also employ an intermediary, called a despachante, to act as a middleman between them and the bureaucracy. This speaks volumes for the stifling and tortuous Portuguese bureaucracy, which is so complicated and cumbersome that it’s necessary for citizens to employ a special official simply to do business with the government!
Many Portuguese lawyers, accountants and agents speak English and other languages, particularly in resort areas.
Avoiding the Crooks
In addition to problems with the Portuguese authorities, assorted crooks and swindlers are unfortunately fairly common in Portugal, particularly in resort areas. You should always have a healthy suspicion regarding the motives of anyone you do business with in Portugal (unless it’s your mum or spouse), particularly your fellow countrymen.
It’s generally best to avoid partnerships as they rarely work and can be a disaster. In general, you should trust nobody and shouldn’t sign anything or pay any money before having a contract checked by a lawyer. It’s a sad fact of life that foreigners who prey on their fellow countrymen are common in Portugal.
In most cases you’re better off dealing with a long-established Portuguese company with roots in the local community (and therefore a good reputation to protect), rather than your compatriots. Note that if things go wrong you may be unprotected by Portuguese law, the wheels of which grind extremely slowly (when they haven’t fallen off completely!).