International business can be expensive. Shipping costs can be high, and fees abound. From customs to income tax, small businesses are constantly being gouged.
Businesses need to find ways to save every dollar they can.
Even small tax breaks can mean big savings for international small businesses. In Portugal, these benefits are everywhere.
More than most countries, Portugal offers major tax incentives for both domestic and international businesses. Aside from wanting to promote your business, the Portuguese government is enticing international investors to work with, and in, the country to boost the economy.
Even small tax breaks can mean big savings for international small businesses. In Portugal, these benefits are everywhere
Though gradually improving, the Portuguese economy is still recovering from the 2014 economic crisis that’s still affecting Greece. By incentivizing businesses large and small to work with Portugal, the government hopes that these improvements will continue.
But you don’t need to know about that. You want to know what’s in it for you. We’ve got the three best tax-incentives that Portugal offers international businesses. These will help you save money, and will greatly affect your bottom line.
Non-Habitual Resident Program
Portugal’s government offers tax benefits to everyone, even if you aren’t doing business in or living there.
The country’s “non-habitual resident program” is one of these benefits.
By applying for and receiving non-habitual residency status, international business people can become tax-residents in Portugal without ever stepping foot there. Tax-residency makes your income tax free in Portugal and in the country where the income is sourced.
Tax-residency makes your income tax free in Portugal and in the country where the income is sourced
That means that money sent from you to Portugal, and money acquired in Portugal is not subject to income tax under this program. Pretty sweet, right? Well, there’s more.
Under this same program, international businesses can apply for a “Golden Residence Permit.” If you enter the country regularly, this permit allows you to enter and stay in country without a visa, and allows you to travel to any Schengen-affiliated nation.
Whether it’s you receiving the tax break, or your Portuguese partners, foreign companies benefit. If you’re not saving directly, tax breaks for your partners can mean lower prices for you down the road. On top of that, the Golden Permit Program makes travel simple, and cheap.
Portugal’s government doesn’t give benefits to every business though. They do offer preferential treatment for specific industries and the businesses that operate within them.
Specifically, Portugal is one of the world’s leaders in renewable energy, and continues to inject funding into businesses that operate in or promote it.
For investors, the government caps investment tax credits at between 10% and 20%. That’s a lot of deductions for small businesses.
Portugal is one of the world’s leaders in renewable energy, and continues to inject funding into businesses that operate in or promote it.
Portugal is one of Europe’s centers for renewable energy sourcing. International businesses can look to supply energy companies, or to invest in new technologies. With these tax benefits, parties on both sides of the Atlantic can save money and strengthen trading ties.
The Portuguese government also offers tax breaks for businesses that promote globalization. As we’ve said, the country’s economy is still recovering. As a result, much investment has been geared toward enticing international businesses to work with and in Portugal, and for domestic businesses to create goods that promote globalization.
As with the renewable energy credit, the government caps deductions at 10% and 20% depending on the industry.
Once again, for domestic and international businesses, these industries offer major tax incentives.
Portugal sees the value of small business, both at home and internationally. It’s common to hear that small business is the “backbone” of many nations’ economies, and Portugal is no exception.
In certain industries like agriculture, commerce, and industry, small and medium sized businesses are provided tax reliefs from the Portuguese government. Not to get too technical, but the breaks add up to 25% of due tax, and are reinvested in eligible assets within two years of the income being earned.
So, some money is given back to the small business, while the rest is invested in order to accumulate interest.
Depending on where in Portugal you invest, small businesses may be open to more tax credits.
Depending on where in Portugal you invest, small businesses may be open to more tax credits
In Madeira, an autonomous region off the coast, if small businesses reinvest up to 15% of their retained earnings, they are eligible for up to 25% of due taxes.
This seems like a lot to take in. But the bottom line is that your business saves money by doing business in Portugal. Either you can reinvest it and grow your money, or benefit from tax breaks.
Like we’ve said, these incentives are a two-way street. Sometimes your international business benefits directly, and sometimes you benefit indirectly. Regardless, someone in your transaction is saving money, which means that investing in and working with Portugal is a smart financial choice.
Speaking of money, what happens when you try to pay your Portuguese supplier, or when they try to pay you?
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