Over the past decade, Portugal has seen a significant increase in FDI inflows, placing it among the leading OECD countries in terms of inward investment. However, despite this progress, regulatory frameworks continue to shape investment decisions, influencing the ability of Portugal to attract and retain international investors.

Portugal offers a business-friendly regulatory framework that has been praised for its openness and alignment with European standards. Regulatory harmonization within the European Single Market has lowered barriers for investors from the European Economic Area (EEA), while ongoing simplification efforts have helped to reduce administrative burdens. Financial incentives, funding opportunities, and skilled talent have further strengthened the country’s appeal. Investors recognize Portugal’s highly qualified workforce, strategic geographic location, and innovation-friendly policies as key factors in making the country an attractive destination for investment.

Despite these advantages, certain regulatory hurdles still pose challenges for international investors. Business licensing and permit processes, although streamlined in recent years, are still perceived as complex and time-consuming. Additionally, Portugal’s corporate taxation system, while offering incentives for R&D and innovation, remains complex and frequently changing, making compliance difficult for businesses. Lengthy court proceedings, particularly in administrative courts, have also been noted as a barrier to efficient business operations, impacting investor confidence.

Portugal’s labour market structure presents another challenge for long-term investment. While skilled labour is a major draw for foreign companies, skill shortages in some sectors are becoming a concern. Many companies are unaware of available incentives for workforce training and development, and challenges in hiring non-EEA talent persist due to administrative bottlenecks. Labour market duality, characterized by a gap between temporary and permanent contracts, continues to impact productivity and social equity, despite recent reforms aimed at addressing this issue.

To further strengthen its investment climate, Portugal can implement targeted regulatory reforms. Streamlining business licensing processes, enhancing tax regulation clarity, and accelerating digital transformation in judicial and administrative services would create a more predictable and efficient business environment. Increased transparency in regulatory impact assessments and greater stakeholder engagement in policy formulation would also contribute to investor confidence. Additionally, simplifying FDI incentives and promoting better awareness of available support for businesses would maximize their effectiveness in attracting international capital.

Portugal has made substantial progress in becoming an attractive destination for foreign investors, but continued regulatory improvements will be key to maintaining competitiveness in an increasingly globalized economy. By fostering a more efficient, transparent, and investor-friendly environment, Portugal can secure sustained FDI growth, strengthen its role in the European market, and support long-term economic and technological advancement.

Author

Paulo Lopes is a multi-talent Portuguese citizen who made his Master of Economics in Switzerland and studied law at Lusófona in Lisbon - CEO of Casaiberia in Lisbon and Algarve.

Paulo Lopes