It’s no great surprise that people are looking towards Southern Europe to embrace a new lifestyle, better weather and conditions to start a business. For me, Portugal is the best choice and a clear leader.

When it comes to European destinations, Norther Europeans (not only) are drawn to Portugal and Spain. It’s the obvious choice as both countries have warm climates, and outstanding beaches, not to mention cities of every size and facility. The appeal is far beyond this. Spain and Portugal both offer a laidback and relatively low cost of living compared to other European countries.

Both countries have attracted the so-called ‘millennials’, looking for a retirement location. Both are now attracting younger families who want to set up a business and enjoy a better lifestyle for their families. The leading question is which country makes it easiest to set up business, and more importantly, to stay in business. Not so many years ago, many people simply dreamed of opening a bar or a restaurant, some survived, but many didn’t. Opportunities now abound in all areas of service and small business.

Getting registered

Portugal seems to have a clear lead here. Portugal has a ‘same day’ company formation available throughout the country. https://www2.gov.pt/en/servicos/criar-uma-empresa-na-hora If you can work with a pre-approved name, (‘off the shelf’), the cost is 360 Euros. You will need to get your tax number first, but any branch of the tax office, and they are everywhere, will deal with this. As far as I am able to discover, Spain does not offer such a service. This Portuguese government service also supplies a variety of articles of association which you can see in advance. It’s a very good service for a new small prospective business, but if you want something tailored to your specific needs, it may be wise to consult a lawyer or accountant.

Many companies offer this service on a commercial basis, and prices vary. In both Spain and Portugal, there are many companies who will arrange the whole process for you. If at all possible, work on personal recommendations from people you trust. Get a clear quote for the services you need.

Start-up friendly

Portugal is gaining a very positive reputation as a digital hub. The government has also launched initiatives, such as Start-up Portugal, which offers tax benefits and funding to encourage the growth of start-ups. Find out more here, https://startupportugal.com/ This is a non-profit government-backed programme.

Spain’s start-up scheme is being developed, especially in Barcelona and Madrid. It is aimed at providing start-ups with mentorship, grants and tax incentives. Both countries should be considered as start-up friendly, but Portugal seems to be further ahead.

Internet and mobile services

According to a recent analysis by nPerf, from January 1 to September 30, 2024, which conducted a total of 20,321-speed tests, Portugal has emerged as a leader in mobile connectivity, doubling the average speeds of Spain. Portugal has a good internet network, with fibre readily available in most towns and cities. Both Spain and Portugal offer fast internet speeds, more than sufficient for those who plan to work from home.

Language

Portugal, and especially the Algarve, seems to have a clear advantage here. The official language is Portuguese, but the country is very accommodating to English-speaking foreigners. English is also widely spoken when conducting business. Most business and government documentation is available in English, which makes it easier for foreign entrepreneurs to find their way around the challenges of starting a business.

In Spain, it’s somewhat different. English may be spoken for business dealings in areas such as Barcelona or Madrid, but very little outside of these cities. Local businesses and government documentation generally work in Spanish.

None of this means you don’t need to learn the local language, if you are going to integrate, it’s worth making the effort.

Precautions

Do your planning with care. What business do you want to start, what is your competition? Work to your strengths, starting a new life in the sunshine will be a difficult enough challenge, at least use your existing skills and experience. Is there a market for what you plan to offer, in which area do you plan to start? Look through our pages, most of the services available to the foreign resident market can be found there.

Talk to friends who are already established in the area you are interested in. Look at schooling, accommodation, and office space (if you will need it). Be especially careful about the cost of housing in Spain if you are moving from the UK. Spain’s Prime Minister has recently announced that he plans to introduce a tax of up to 100% on residential property being purchased by non-EU citizens. This will add substantial costs for UK buyers.

Get good advisors

Even if you are going to start with an ‘off-the-shelf’ company, you will need an accountant. The local tax system is complex and very thorough. Only an experienced accountancy firm will be able to set you up correctly and keep your accounts in order. Don’t listen to people who tell you it’s possible to ‘keep a low profile’ and avoid tax. It’s not!

Find a good bank, there are plenty of choices. Personal recommendations are like gold. In Portugal, banks are increasingly going online with restricted hours of operation at branches. Friends may well already have a good relationship with a bank and be able to introduce you to a contact at the bank. Don’t plan to start with a bank loan, until you are established banks are very reluctant to grant loans.

At some point, you will need a lawyer (not a solicitador, it’s not the same thing). A solicitor (solicitador) in Portugal is also a legal professional, but their role is more focused on administrative and procedural aspects of legal matters. You will find major international partnerships with all the services and specialist advice you may need, through to small firms with one or two lawyers with a lot of local knowledge. Always try to get personal recommendations and choose according to the nature and scope of the business you intend to start.

Portugal is a great choice to start a new business, not all easy, but worth it.

PS. Since writing this column Spain’s Prime Minister has announced plans to impose a tax of up to 100% on properties bought by non-residents from countries outside the EU, such as the UK. Announcing the move, Prime Minister Pedro Sánchez said the "unprecedented" measure was necessary to meet the country's housing emergency. This makes Portugal even more favourable.

Author

Resident in Portugal for 50 years, publishing and writing about Portugal since 1977. Privileged to have seen, firsthand, Portugal progress from a dictatorship (1974) into a stable democracy. 

Paul Luckman