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Explore the market: Portugal

Lisbon

Portuguese eCommerce market is, generally, very much aligned with other European markets, if it comes to current situation and trends. However, it’s worth taking a closer look at customer preferences, delivery expectations, as this country has a non-typical location. We have gained for you information about the market, as well as the instructions on how to start a business in Portugal. Enjoy the article!

Some statistic data

Population: 5 mln

GDP per capita in 2019:  $23.447bn

Official languages: Portuguese

Purchasing power: 0,6 LCU per international dollars

E-commerce market

Size of the e-commerce market

The eCommerce market in Portugal is the 38th largest market for eCommerce with a revenue of US$4 billion in 2020, placing it ahead of New Zealand and behind South Africa.

With an increase of 30%, the Portuguese eCommerce market contributed to the worldwide growth rate of 29% in 2020. Revenues for eCommerce continue to increase. New markets are emerging, and existing markets also have the potential for further development. Global growth will continue over the next few years. This will be propelled by East and Southeast Asia, with their expanding middle class and lagging offline shopping infrastructure.

The eCommerce market includes online sales of physical goods to a private end-user (B2C). Included in this definition are purchases via computer as well as mobile purchases via smartphones and tablets. Excluded from the definition of e-commerce are the following: digitally distributed services (e.g., travel tickets), online stores dedicated to digital media downloads or streams, online stores dedicated to B2B markets, and sales between private individuals (C2C) within the eCommerce market.

More info: https://ecommercedb.com/en/markets/pt/all

Average basket value

The average annual online basket spend in Portugal is EUR1,513—just below Spain and on a par with major e-commerce market Germany. This figure, however, is dwarfed by Europe’s highest online spenders, the UK (EUR3,615).

Most popular marketplaces

The most popular marketplaces in Portugal are Zalando, Amazon, Euronix, El Cort Ingles.

Returns / complaints – legal regulations

Under EU rules, a trader must repair, replace, reduce the price or give you a refund if goods you bought turn out to be faulty or do not look or work as advertised. If a customer bought a product or a service online or outside of a shop (by telephone, mail order, from a door-to-door salesperson), he also has the right to cancel and return your order within 14 days, for any reason and without a justification.

More info: https://europa.eu/youreurope/citizens/consumers/shopping/guarantees-returns/index_en.htm

Most popular industries and product categories

The top 3 interests of online shoppers in Portugal are Clothing, Food & Drinks, and Shoes. Then next comes consumer electronics, books, music, travel.

Permits, licenses, certificates by industry

If you are a foreign resident wanting to start a business in Portugal, you’ll need to go through the following steps.

The first step is to ensure that you meet the legal requirements to trade as self-employed in Portugal. You need:

If you are an entrepreneur in Portugal with a business idea, you will need to do your market research and also develop a strong business plan. You can download business plan templates and look at sample business plans from various different industries from a website such as this one.

Decide on the business legal structure

See the below section on Portuguese business types for details of the different types of setup you can choose from.

Choose a business name and address

You may already have these but if not, now is the time to finalize them; you must register them as part of your set-up process.

Choose set-up method

There are three methods of setting up a company in Portugal. Two simplified ways (online and on-the-spot) and the traditional method.

  1. Setting up online (Empresa Online) – this allows certain types of Portuguese businesses to be set up and registered over the internet with 1-2 days for a cost of €360. An electronic certificate is necessary. The Portal de Empresa website for doing this can be found here.
  2. Setting up on-the-spot (Empresa de Hora) – sole traders and limited companies can be created in an hour for €360 via this government scheme. All partners should be present along with all necessary documentation and any legal representatives. Details of how to set up using Empresa de Hora can also be found here.

If you are unable or unwilling to start up your Portuguese business using Empresa Online or Empresa de Hora, you can set up using the traditional method (Criacao da Empresa) by following the steps below:

  1. Obtain a Certificate of Admissibility to formally identify your Portuguese company name. This is possible through the Institute of Registries and Notaries (IRN)
  2. Apply for a Company Card and a Collective Card (the main business ID) from the IRN
  3. Open a business bank account and deposit the initial capital
  4. Declare commencement of activity at the local Tax Office
  5. Register your Portuguese business at a Commercial Registry Office
  6. Register as an employer at the local Social Security office

Once you have completed these steps, which should take no more than around 15 days, you can start running your business in Portugal. First check if your area of business activity has any additional requirements, such as a license or certain qualifications. In fact, for some businesses, it is illegal to start the activity without official status in Portugal.

There are a number of different legal structures for businesses in Portugal, ranging from individual sole traders to large incorporated companies with many employees. The Portuguese Companies Coderegulates businesses in Portugal and defines the different legal forms. Here’s a brief overview:

Businesses owned by one individual

  • Sole Trader
  • Single-Member Limited Company
  • Individual Limited Liability Establishment

Businesses owned by more than one person

  • Private Limited Company (Sociedade por Quotas) 

Portuguese company with a minimum of two partners and minimum capital investment of €5,000. Shareholders pay a minimum of €100 per share and are also jointly responsible for everything agreed in the Articles of Association. Shareholders are liable for debts up to the amounts covered by business assets.

Public Limited Company (Sociedade Anomina)

  • Portuguese company that requires at least five shareholders and a minimum capital investment of €50,000. Liability of debts is limited to business assets and shareholders are liable for amounts up to their share value.

Partnership (Sociedade em Nome Colectivo)

  • Portuguese company with a minimum of two partners whose liability extends to personal assets that can be used to cover debts.

Limited Liability partnership (Sociedade em Comandita)

  • Portuguese company with a minimum of two partners who are a mix of general partners who run the business and have unlimited liability (including personal assets) and sleeping partners who provide capital and whose liability is limited to the amount invested.

Cooperative

  • Non-profit organizations run through cooperative principles and mutual assistance of members. They are freely established legal entities whose capital and composition may vary.

More info: https://www.expatica.com/pt/working/self-employment/starting-a-business-in-portugal-105304/#How

Preferred payment methods, trusted payment providers

Cards and e-wallets are the payment methods most often offered by the top 100 Portuguese online stores.

Logistics

Expected delivery time

Domestic parcels usually arrive the next business day. In Europe, delivery time is usually between 48 and 96 hours.

Most popular courier companies

CTT, GLS, UPS

Most popular delivery method

European e-shoppers usually choose the home delivery option when buying online. In Portugal, the tranquillity of getting the package delivered to your home address makes 79% of all deliveries. Portuguese buyers prefer to receive their order to their homes and only 25% choose their working place as the delivery location.

Same day delivery

Same as in other European countries, same-day delivery is not popular. Next day delivery, or even within 2 days is considered as very good service.

Shipping package regulations

Check your items meet Portugal’s unique import regulations before sending them, or you risk having your parcel returned to you at a charge.

In addition to EU import guidelines, Portugal has its own unique rules on what can be imported. Some items that are prohibited from import to Portugal – or may require a specialized license – include:

  • Certain food products including cereals, meat, and dairy products
  • Certain clothing and apparel
  • Certain toys and games

If you’re still unsure, visit the Portuguese government’s dedicated webpage or contact your courier service.

Bank account, banking regulations

If you wish to open a Portuguese bank account, you need to get a NIF (“Número de Identificação Fiscal” = Portuguese Tax Number).  You can easily get a NIF through a representative in Portugal.  This representative can either be a financial representative or a lawyer that will apply on your behalf.  You must obtain this number for any governmental activity, running a business, making an investment, or pursuing any legal matters in Portugal.

Obtaining a NIF number and then opening a bank account are typically the two steps taken by prospective applicants of the Golden Visa program in Portugal.

While some of the Portuguese banks allow opening your account online, most of them require you to visit their local branch in person. Nevertheless, the process is easy and the required documents are quite easy to collect. Although it may depend on your choice of bank, in general, the documents you need are as follows:

  • Proof of Identification (e.g.; a passport would be sufficient)
  • Proof of address (e.g.; a recent utility bill or letter received in the last three months with your visible name and address)
  • Portuguese NIF Number
  • Proof of Income/Employment (e.g., recent payslip or an employment letter)
    • If you are not employed, you can still open an account, provided that you have proof of registration with the Portuguese employment center (Centro de Emprego) or you have a work contract assurance
  • Portuguese Phone Number for SMS Activation
  • Additionally, a deposit of € 250-300 in cash (typically asked for new accounts)

Import/export regulations

The TARIC (Tarif Intégré de la Communauté), described above, is available to help determine if a license is required for a product. Moreover, the European Commission maintains an export helpdesk with information on import restrictions of various products:
http://trade.ec.europa.eu/tradehelp/import-restrictions

The many EU Member States maintain their own list of goods subject to import licensing. For example, Germany’s “Import List” (Einfuhrliste) includes goods for which licenses are required, their code numbers, any applicable restrictions, and the agency that will issue the relevant license. The Import List also indicates whether the license is required under German or EU law.

For information relevant to member state import licenses, please consult the relevant member state Country Commercial Guide: EU Member States’ Country Commercial Guides https://export.gov/ccg/ or conduct a search on the Commerce Department’s Market Research Library, available from: https://www.export.gov/Market-Intelligence

More info: https://www.trade.gov/knowledge-product/portugal-import-requirements-and-documentation

Tax rules: Corporation tax

Corporate tax in Portugal generally only applies to incorporated companies. Self-employed sole traders and people with stakes in partnerships pay personal Portuguese income tax on their profits instead.

The main categories of companies subject to corporate tax are the following:

  • Resident incorporated companies must pay corporate tax on their worldwide income.
  • Resident unincorporated companies must pay corporate tax on any worldwide income that isn’t subject to personal income tax.
  • Non-resident companies (those registered outside Portugal) must pay corporate tax on Portuguese income that isn’t subject to personal income tax.

Businesses pay corporate tax in Portugal at a flat rate of 21% of any taxable profits. The rate has gradually come down in the last decade, leaving it slightly below the European Union average of 21.9%.

Businesses in Portugal may also need to pay surcharges on top of their corporate tax bill. These are as follows:

  • Up to 1.5% local surcharge (Derrama) on the profit charged by the regional municipality.
  • 3% state surcharge (Derrama Estadual) on profit between €1.5 million and €7.5 million (2.1% in Madeira, 2.4% in the Azores).
  • 5% surcharge on profit between €7.5 million and €35 million (3.5% in Madeira, 4% in the Azores).
  • 9% surcharge on profit over €35 million (6.3% in Madeira, 7.2% in the Azores).

More info: https://www.expatica.com/pt/finance/taxes/corporate-tax-in-portugal-91209

VAT registration thresholds

VAT in Portugal (Imposto Sobre o Valor Agregado, or IVA for short) was established in 1986. It is payable by all businesses with a turnover of more than €10,000 on taxable goods and services.

There are three rates of VAT in Portugal:

  • General rate: 23% on taxable goods and services
  • Intermediate rate: 13% on food and drink goods and services
  • Reduced rate: 6% on certain essential necessities including certain foods (e.g., meat, fruit, vegetables, cereals), books, newspapers, medicines, transport, and hotel accommodation.

Separate VAT rates apply to the Portuguese islands of Madeira (22%/12%/5%) and the Azores (18%/9%/4%).

More info: https://www.expatica.com/pt/finance/taxes/corporate-tax-in-portugal-91209

Customer preferences

Willing to buy from foreign sellers

Recent developments in the social, economic, and technological context have had a high impact on the consumption habits of the Portuguese, and today there is a greater concern with the management of the family budget, as well as a concern with the environmental aspect of products, such as sustainability and the origin of the products they consume. The Portuguese are becoming more concerned about their personal comfort and well-being, especially the younger generations. A trend among the Portuguese youth is to buy natural, organic, locally grown foods. According to Deloitte, 45% of Portuguese claim to be willing to pay more for products and services provided by companies committed to having a positive social and environmental impact. On average, Portuguese consumers tend not to be impulsive buyers, especially after years of recession. Portuguese consumers tend to be loyal to clothing brands, but they are usually not loyal to food brands, as they tend to buy whatever is cheapest. Additionally, consumers prefer foreign products – with the exception of food. Nevertheless, in recent years there have been public awareness campaigns focused on encouraging people to buy domestic products. The Portuguese consumer has currently been described as “addicted to deals”, as purchases of products on sale account for nearly half of all the purchases made in the country every year. Good prices and sales are the factors that most influence purchasing decisions and are what attract the Portuguese consumer.

Most popular countries for import of goods

Consumers in Portugal also miss out on the potential of a broader choice of products and better prices. Only 12 % of Portuguese consumers buy online from other EU countries.

Low confidence plays a key role: only 34% 34% of Portuguese consumers feel confident buying online from another EU country, they choose: Spain, Germany, Italy the most often.

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