Why Portugal is the Best Place to Start Your Tech Business: A Comparison with Europe’s Top Markets

In recent years, Portugal has established itself as one of the most attractive destinations for entrepreneurs and international companies, especially in the technology sector.

With a combination of tax incentives, affordable cost of living, digital infrastructure, and an innovation-friendly ecosystem, the country stands out as an excellent choice for tech companies. 

In this article, we analyze the main advantages of starting a business in Portugal,  highlighting the specific benefits for startups and technology companies. 

1. Competitive Corporate Taxation 

Tax burden is a key factor in deciding where to establish a business. Portugal offers a  competitive tax system: 

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Portugal's Advantage: In addition to the standard 21% rate being competitive, small and medium-sized enterprises (SMEs) benefit from a lower initial rate. Additionally, the Madeira  Free Trade Zone offers a tax rate of only 5% for companies that meet certain criteria. 

2. Tax Incentives and Startup Ecosystem 

Portugal has one of the most advantageous tax regimes for startups and technology  companies, offering several incentives: 

• SIFIDE (System of Tax Incentives for Business R&D): Allows up to 82.5%  deduction of R&D expenses on corporate tax. 

• RFAI (Tax Regime for Investment Support): Reduces corporate tax for companies investing in innovation and expansion. 

• Startup Portugal: Financial support programs, incubation, and acceleration for startups.

• Tech Visa: Eases the hiring of foreign talent in the tech sector. 

A great place to start your business

In recent years, the Portuguese government has heavily invested in the startup ecosystem.  Between 2018 and 2023 alone, more than €1.3 billion was allocated to innovation and technology incentives.

The startup sector in Portugal has shown exponential growth, with an average annual increase of 30% in the number of new tech startups. Lisbon has solidified itself as one of Europe's leading tech hubs, while cities like Porto and Braga are also attracting significant investments. 

Portugal also hosts international events such as Web Summit, strengthening networking opportunities and attracting foreign investment for emerging companies. 

3. Affordable Cost of Living and Operations 

Starting a business requires considering operational costs, including salaries, office rent, and payroll taxes. Portugal stands out as one of the most affordable countries in Western  Europe. 

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Portugal's Advantage: Operational costs are significantly lower than in countries like  France, Germany, and the United Kingdom, allowing startups to optimize investments. 

4. Ease of Starting and Managing a Business 

Portugal has made significant progress in digitizing and simplifying business creation: 

• Empresa na Hora (Company in an Hour): Allows companies to be set up in less than 24 hours. 

• e-Residency (Estonian-style system under study): Portugal is evaluating a similar model to facilitate the establishment of digital businesses. 

• Online Platforms: Many tax and business obligations can be managed digitally. 

Portugal offers a unique combination of competitive taxation, tech incentives, affordable costs, and an innovative ecosystem, making it a highly advantageous choice for startups and technology companies. Compared to Spain, France, Germany, and the United Kingdom, Portugal stands out for its low operational costs, ease of starting a business, and  R&D incentives. 

If you're looking for a strategic location to launch or expand your technology company in  Europe, Portugal should be at the top of your list. 

Considering starting a business in Portugal?

Contact our partners at Cotarelli e Rodrigues Adv to get the legal support and take the first steps!