1. Incentive Policy Framework
The Portuguese government enacted Law No. 321/95 on November 28, 1995, which regulates and establishes the legal framework for foreign direct investment in Portugal. This law defines the basic principles that foreign investors must follow when investing in Portugal; specifies the types of foreign investment; regulates the participation of foreign capital in joint-stock companies, the acquisition of real estate, and the signing of investment contracts; clarifies the institutions that promote and assist foreign investment and their specific functions; establishes a registration system for the progress of foreign investment projects to obtain relevant management and statistical data; and outlines dispute resolution methods, restrictions on institutional setups, confidentiality obligations, and potential sanctions for violations of this law.
Chapter 2 of Law No. 321/95 stipulates the basic principles of foreign direct investment in Portugal: foreign investors enjoy rights and protections equivalent to those of Portuguese companies and are entitled to all incentive policies; foreign investment operations in Portugal must comply with Portuguese fundamental laws, current economic regulations and principles, and the legal provisions of international agreements to which Portugal is a party.
Chapter 3, Articles 2-3 of Law No. 321/95 specifies the types of foreign investment. Chapter 8 of Law No. 321/95 states that foreign investment projects must report their progress and profitability to the relevant authorities during their operation, and this reporting is solely for the purpose of information management and statistical data collection by the relevant authorities.
The Portuguese government encourages foreign direct investment in accordance with EU regulations, which prohibit member states from restricting the free movement of foreign capital, whether for the purchase of products or services. The Portuguese Trade and Investment Agency is responsible for projects with an investment scale of over 25 million euros, while projects below this threshold are managed by the Portuguese Agency for Small and Medium Enterprises (IAPMEI), which has developed numerous incentive policies and actively assists foreign companies in investing in Portugal, provided that the investment brings technological innovation, technological advancement, improves labor skills, and promotes regional economic development.
Portugal categorizes encouraged investment projects into two main types: "Projects that align with national potential interests (PIN)" and "Projects that align with national long-term strategic interests (PIN+)." The national strategic development framework plan for Portugal from 2007 to 2013 is published on the website www.qren.pt, which outlines several incentive policies committed by the Portuguese government. The Portuguese government guarantees the following for foreign investment:
(1) Foreign investment enterprises and Portuguese domestic enterprises enjoy equal rights, and discrimination against foreign investment is prohibited.
(2) The government guarantees the safety of foreign investments and protects their property and rights, ensuring they enjoy national treatment.
(3) Foreign investors enjoy all financial and tax incentives provided by Portuguese law.
(4) Guarantees are provided for the remittance of dividends, profits, distributions, capital gains, and income from the sale of investment capital.
Overall, Portugal's foreign investment policy primarily focuses on providing national treatment. The Portuguese Trade and Investment Agency (AICEP) indicates that for large investment projects, direct dialogue can be established, and specific incentive policies may be granted based on the project's job creation and other specific circumstances.
2. Industry Incentive Policies
Currently, Portugal is fully open to foreign investment, with no restrictions on foreign capital entry and no special industry incentive policies.
3. Regional Incentive Policies
Madeira and the Azores are Portugal's free trade zones, where businesses established in the free trade zone can enjoy various tax incentives:
(1) A standard VAT rate of 15%, a general rate of 8%, and a preferential rate of 5% are available.
(2) Exemption from stamp duty.
(3) The most favorable corporate income tax policy can be enjoyed until 2020, with rates ranging from 1% to 5%.
(4) Exemption from local taxes and fees.
(5) Exemption from business registration fees.
Processing enterprises that meet any two of the following conditions can enjoy a 50% reduction in corporate income tax:
(1) Making outstanding contributions to economic modernization through technological innovation, new processes, and new products.
(2) Increasing product added value through new initiatives, promoting economic diversification.
(3) Cultivating high-level human resources.
(4) Making outstanding contributions to environmental protection.
(5) Providing 15 jobs with a duration of over five years.
Enterprises operating in the free trade zone may have the opportunity to receive funding from EU structural funds, such as specific industry skills training, with the EU covering up to 50% of training costs, and similar funding is available for the use of new energy-saving technologies.
For specific information, please refer to the latest policies.