Attitude toward Foreign Direct Investment
The Government of Portugal recognizes the value of foreign investment and sees such investment as an important engine of economic growth. The country exited its three-year EU-IMF bailout program in May 2014, and has successfully regained access to international bond markets with yields approaching historic lows.
Other Investment Policy Reviews
Portugal has not undergone an OECD or UNCTAD Investment Policy Review in the last ten years. Current investment climate snapshots are available through the Economist Intelligence Unit and the World Bank’s Doing Business Report.
Laws/Regulations on Foreign Direct Investment
The Bank of Portugal (Portugal’s central bank) defines FDI as “an act or contract that obtains or increases enduring economic links with an existing Portuguese institution or one to be formed.” A non-resident who invests in at least 10% of a resident company’s equity and participates in the company’s decision-making is considered a foreign direct investor. The Portuguese legal system is based on non-discrimination with regard to the national origin of investment, and foreigners are generally permitted to invest in all economic sectors open to private enterprise, subject to a few exceptions (see below).
Business Registration
Citizens, Portuguese or otherwise, can register a business in person at one of 214 offices of the government’s “Empresa na Hora” registration service. More information is available at: http://www.empresanahora.pt/ENH/sections/PT_inicio. Businesses can also be registered online through the “Citizen’s Portal” available at: https://bde.portaldocidadao.pt/evo/landingpage.aspx. A company must typically register with the Directorate General for Economic Activity (DGAE), with the Tax Authority (AT), and with Social Security. The online registration process can take as little as one to two days.
In line with the EU, Portugal defines an enterprise as micro, small, and medium-sized based on its headcount, annual turnover, or the size of its balance sheet. To qualify as a micro-enterprise, a company must have less than 10 employees and no more than €2 million in revenues or €2 million in assets. Small enterprises must have less than 50 employees and no more than €10 million in revenues or €10 million in assets. Medium-sized enterprises must have less than 250 employees and no more than €50 million in revenues or €43 million in assets. The SME Support Institute (IAPMEI) offers financing, training, and other services for SMEs based in Portugal: http://www.iapmei.pt/
More information on laws, procedures, registration requirements, and investment incentives for foreign investors in Portugal is available here, at AICEP’s website: http://www.portugalglobal.pt/EN/InvestInPortugal/investorsguide2/howtosetupacompany/Paginas/ForeignInvestment.aspx
Industrial Promotion
The Portuguese Agency for Foreign Investment and Commerce (AICEP) is the lead agency for promotion of trade and investment. AICEP is responsible for the promotion of global Portuguese trademarks, the export of goods and services, and attraction of foreign direct investment (FDI). It is the point of contact for investors with projects of more than €25 million or companies with a consolidated turnover of more than €75 million. For foreign investments not meeting these thresholds, AICEP will make a preliminary analysis and direct the investor to assistance agencies such as the Institute of Support to Small- and Medium Sized Enterprises and Innovation (IAPMEI), a public agency within the Ministry of Economy that provides technical support, or to AICEP Capital Global, which offers technology transfer, incubator programs and venture capital support.
AICEP does not favor specific sectors for investment promotion. It does, however, provide a “Prominent Clusters” guide on its website where it advocates investment in Portuguese companies by sector: http://www.portugalglobal.pt/EN/SourceFromPortugal/prominent-clusters/Pages/prominent-clusters.aspx
Limits on Foreign Control and Right to Private Ownership and Establishment
Portuguese law is based on a principle of non-discrimination. There are no requirements for mandatory Portuguese shareholders and no limitations on the repatriation of profits or dividends. Nonetheless, shareholders that are not resident in Portugal must obtain a Portuguese taxpayer number for tax purposes. EU residents may obtain this number directly with the tax administration (in person or by means of an appointed proxy); non-EU residents must appoint a Portuguese resident representative to handle matters with tax authorities.
The rules that apply to foreign investors are the same that rule national investment; foreign investment is not subject to any special registration or notification to any authority (without prejudice of mandatory registration obligations or compliance with regulatory obligations in specific activities).
However, there are limitations on both foreign and domestic investments with regard to certain economic activities. Portuguese government approval is required in the following strategic sectors: defense, water management, public telecommunications, railway, maritime transportation and air transport. Any economic activity that involves the exercise of public authority also requires government approval. Private sector companies can operate in these areas only through a concession contract.
Portugal limits foreign investment with respect to the production, transmission, and distribution of electricity, the manufacturing of gas, the pipeline transportation of fuels, wholesale services of electricity, retailing services of electricity and non-bottled gas, and services incidental to electricity and natural gas distribution. Any concessions for electricity and gas sectors are assigned only to limited companies with their headquarters and effective management in Portugal.
Portugal limits foreign investment in the provision of executive search services, placement services of office support personnel, and publicly-funded social services.
Investors wishing to establish new credit institutions or finance companies, acquire a controlling interest in such financial firms, and/or establish a subsidiary must have authorization from the Bank of Portugal (for EU firms) or the Ministry of Finance (for non- EU firms). In both cases, the authorities carefully consider the proposed transaction, but in the case of non-EU firms, the Ministry of Finance especially considers the impact on the efficiency of the financial system and the internationalization of the economy. Non- EU insurance companies seeking to establish an agency in Portugal must post a special deposit and financial guarantee and must have been authorized for such activity by the Ministry of Finance for at least five years.
Privatization Program
Portugal launched an aggressive privatization program in 2011 as part of its EU-IMF bailout, covering state-owned enterprises in the air transportation, land transportation, energy, communications, and insurance sectors.
The bidding process has been public, transparent, and non-discriminatory to foreign investors. Indeed, foreign companies have been among the most successful bidders since the beginning of the program. Chinese, Omani, and French companies have purchased large stakes in Portugal’s electricity utility (EDP), its electricity and natural gas grid operator (REN), its airport operator (ANA), and the insurance arm of the state-owned bank (Caixa Seguros). In addition, Portugal’s postal service (CTT) sold 70% of its shares to public investors on the Lisbon stock exchange in 2013. Most recently, the government sold a 66% stake in the national airline, TAP, in November 2015. However, the incoming government renegotiated the sale in February 2016, reducing the purchaser’s stake to 45% of capital, though with continued management control.
Screening of FDI
The government of Portugal does not screen, review, or approve foreign direct investments.
Competition Law
Law No. 18/2003, dated June 6, governs protection and promotion of competition in Portugal. It specifically prohibits collusion between companies to fix prices, limit supplies, share markets or sources of supply, discriminate in transactions, or force unrelated obligations on other parties. Similar prohibitions apply to any company or group with a dominant market position. The law also requires prior government notification of mergers or acquisitions that would give a company more than 30% market share in a sector, or mergers or acquisitions among entities that had total sales in excess of €150 million in the preceding financial year. The Competition Authority has 60 days to determine if the merger or acquisition can proceed. The European Commission may claim authority on cross-border competition issues or those involving entities large enough to have a significant EU market share.