Moving your business to Portugal: Affiliate vs Branch

Moving your business to Portugal: Affiliate vs Branch

by | May 23, 2024

When deciding to move a business abroad, it is important to understand the main differences between an affiliate company and a branch in terms of power of direction and liability.

Affiliate companies (subsidiaries) may assume the legal form of a:

  •       Private limited liability companies (Lda.) with two or more partners;
  •       Single-member limited liability companies (Unipessoal, Lda.) held solely by one partner;
  •       Private limited liability companies by shares (S.A.), with a minimum of five shareholders.

Subsidiaries are independent legal entities and are therefore legally distinct from the parent company. 

The share capital is held mostly by the parent companies, who exercise a dominant influence, either because they hold a majority stake in the share capital or because they have more than half of the votes or may appoint more than half of the members of the management body.

Affiliates are subject to Portuguese tax laws and regulations, but the parent entity’s liability is limited to its investment in the share capital of the affiliate company.

In some cases, affiliates only provide services to the parent entity (intra-group transactions) under a service provision agreement (e.g. a development centre), in which case an adequate tax setup can be devised.

Branches, however, are not independent legal entities, being only an extension of the foreign entity. Thus, these develop the same economic activity as the foreign entity, who is fully liable in the case of debt or non-compliance by the branch.

The advantage of the branch is the free flow of capital between the branch and the head office, which is not deemed as profit distribution, but as an intra-corporate transaction.

 The branch can be named after the parent entity, but the name must include the expression “Representação Permanente” (permanent representation) or “Sucursal” (branch).

For further information or assistance with company incorporations and with the setup of subsidiaries and branches, please contact us at geral@sbpslegal.com.

 

Moving your business to Portugal: main types of companies

Moving your business to Portugal: main types of companies

by | May 23, 2024

When deciding to move a business abroad, it is important to understand the main differences in legal form in terms of minimum share capital and number of shareholders/partners and shareholder liability.

The main types of companies in Portugal are:

  •       Private limited liability companies (Lda.) with two or more partners;
  •       Single-member limited liability companies (Unipessoal, Lda.) held solely by one partner;
  •       Private limited liability companies by shares (S.A.), with a minimum of five shareholders.

The table below shows the main characteristics in terms of number of partners, minimum share capital and its form, liability of shareholders, management, and (comparative) advantages.

COMPANY LEGAL FORM PRIVATE LIMITED LIABILITY COMPANIES SINGLE-MEMBER LIMITED LIABILITY COMPANIES PRIVATE LIMITED LIABILITY COMPANIES BY SHARES
Number of partners

2

(at least)

 1

5

(at least)
Minimum share capital (€) € 2 € 1 € 50,000
Capital form Shares Shares Shares
Liability of shareholders Limited to owned share* Limited to owned share* Limited to owned shares*
Management 1 or more General Managers 1 or more General Managers
  • Board of Directors, or Executive Board of Directors and General and Supervisory Board
  • Odd number of Directors
Advantages
  • Limited Liability
  • Control by 2 or more Partners
  • Minimum Share Capital of € 2
  • Limited Liability
  • Total control by a single Partner
  • Minimum Share Capital of € 1

 
  • Limited Liability
  • Control by the major Shareholders
  • Transfer of shares is easier
  • Additional capital and funding are easier

 

* Additional liability may apply under specific circumstances.

For further information or assistance with company incorporations and with the setup of subsidiaries and branches, please contact us at geral@sbpslegal.com.

 

What is a living will?

What is a living will?

by | May 23, 2024

A Living Will or Vital Will, also known as an Advance Directive of Will, is a document in which someone states his/hers wishes about receiving medical care in a situation of inability to make or communicate decisions, allowing also for the appointment of a proxy and of one or more chosen healthcare providers.

Who can have a Living Will?

The Living Will can be made by any Portuguese or foreign citizen, of legal age, in full use of mental faculties, residing in Portugal and registered with the National Health Service.

How does the Living Will work?

After the Living Will form has been filled out, it needs to be signed in person at any of the 120 RENTEV (National Registry of Living Wills) desks in Portugal. It can also be sent by registered post with acknowledgement of receipt, as long as the signature has been witnessed by a Notary or Lawyer.

The Living Will is available online and in the case of an emergency it can be accessed by healthcare professionals. Each time someone accesses the Living Will, a notification will be sent through email and/or SMS.

Which decisions can the Living Will cover?

The Living Will can include instructions on life support, futile treatment to delay the natural process of death, palliative care, or clinic trials. However, the Living Will cannot be used to pursue assisted suicide.

What is the expiry of a living will?

The Living Will is valid for 5 years as of the date of activation. When reaching the expiry date, a notification will be sent, and the process will then need to be repeated.

Can the Living Will be ended before expiry?

The Living Will can be modified or freely revoked at any time. In the case of a change, the 5-year period will restart.

For further information or for assistance with drafting of wills and with estate planning, please contact us at geral@sbpslegal.com.

Understanding Labor Associated Costs in Portugal

Understanding Labor Associated Costs in Portugal

by | May 15, 2024

It is important to be aware of the net salary and fringe benefits to be offered to candidates and of the total amounts involved in specific compensation packages. 

Minimum wages in Portugal in 2024 are €820/gross/month for a full-time job. Unlike most other countries, salaries are paid 14 months per year (the last two relating to a Christmas and a Vacation supplement), even though the yearly amount can be paid in twelfths.

Monthly gross base salaries are subject to personal income tax, which applies only to employees. Regardless of monthly withholding brackets, the final tax rate is progressive, but taxable income depends on several variables. Social security, on the other hand, applies to both employees (11%) and employers (23.75%).

When hiring, employers must also consider other associated costs: 

  1. Wage Guarantee Fund – 1% over monthly gross base salaries.
  2. Workers Compensation Insurance – cost may vary according to industry/workplace hazards, but it amounts to circa 1% over yearly gross base salaries.
  3. Training – 40h/year compulsory training relevant to the job role.
  4. Health & Safety – before admission, employees are required to undergo occupational health assessments, which are associated with the risks of the workplace/industry (for office roles, for instance, basic tests are usually enough). From then onwards, these will be repeated at specific intervals, according to the hazards of the role and the age of the employee. 
  5. Meal allowance – payment of a daily meal allowance is not mandatory (unless determined within a certain industry because of a collective labour agreement/convention), but it is common practice. Meal allowance is exempt from personal income tax and social security up to € 6 per working day, which may increase to € 9.60 if paid through a meal card.
  6. Other allowances – all other allowances or benefits are typically optional unless determined by a collective labour agreement/convention (e.g., bonuses, health or life insurance, pension funds, travel cards/transport expenses, seniority bonuses, per diem, etc.). Some of these benefits, if regular, may also be limited to a certain amount and the difference will then be subject to social security and personal income tax, exemptions depending on the type of benefit.

For further information or assistance, feel free to reach out to us at geral@sbpslegal.com.

Insolvency: Civil vs Criminal Liability

Insolvency: Civil vs Criminal Liability

by | May 15, 2024

When directors accept their appointment, they are not ensuring the company’s economic and business success, but they are expected to fulfill their duties in compliance with the law, the company’s articles of association and the required standard of care, supervision, and loyalty.

It is important to note that while Directors and Officers Insurance covers claims resulting from managerial decisions that adversely impact the company, it does not exonerate directors and officers from criminal liability. It just provides personal financial protection from actual or alleged covered acts of wrongdoing while serving on the board and/or as an officer.

The Portuguese Code of Business Insolvency and Recovery (CIRE) requires judges, within insolvency proceedings, to report to the Public Prosecutor’s Office, for the purposes of preparing criminal charges, facts that may evidence wilful insolvency. Punishment of these offences is aimed at protecting the right to credit, that creditors hold over debtors who have become insolvent.

Although a legal person cannot be punished criminally, its directors and managers, as well as de facto directors, can be held accountable and criminally prosecuted as follows:

  •       Wilful Insolvency – prison sentence up to 5 years or a fine of up to 600 days;
  •       Frustration of Credits – prison sentence up to 3 years or a fine;
  •       Favouring Creditors – prison sentence up to 2 years or a fine of up to 240 days;
  •       Negligent Insolvency – prison sentence up to 1 year or a fine of up to 120 days.

Fault-based insolvency, on the other hand, is of a property and civil nature and in general bears no criminal consequences. It is a process that takes place autonomously within insolvency proceedings, with the purpose of verifying whether the debtor or the directors of a company have carried out certain fault-based acts that contributed to the said insolvency.

For further information or assistance, feel free to reach out to us at geral@sbpslegal.com.