Most companies don’t decide to open a subsidiary in Portugal after a board meeting. It usually starts with someone hiring a Portuguese engineer because the value-for-talent ratio is hard to ignore, or a founder who “moves to Lisbon for six months” and somehow never moves back. Before long, payroll is in euros and the CFO is asking whether it would be easier to just set up locally.
Portugal is becoming a serious place to run a business, not just because of lifestyle, but because the math and incentives are increasingly hard to dismiss.
Below are some of the reasons we see this shift happening.
1. Talent Arbitrage – great engineering at reasonable costs
Portugal has a large pool of highly competent engineers, designers, and operators relative to its population. English proficiency is among the highest in Europe, and the country shares a time zone with the UK (which makes European and U.S. collaboration significantly easier).
Crucially, compensation expectations remain meaningfully below those in London, Amsterdam, Berlin, or Dublin. Whether one calls that “arbitrage” or simply “market inefficiency,” the result is the same: you can build out a real team without burning through a Silicon Valley burn rate.
Perhaps most importantly, Portuguese workers are loyal. They respect a company that respects them and treats them well and are not looking to move to a different job every two years. This enables the preservation of knowledge within the company.
Data point: Portugal currently ranks top-tier globally for English proficiency, especially among the under-35 demographic (EF English Proficiency Index).
2. Founders’ personal tax strategy – founders can exit without paying capital gains tax anywhere
Portugal recently made a very important change to its tax legislation. It scrapped the world-famous NHR regime that attracted many digital nomads and expats to Portugal and replaced it with the much more restrictive IFICI (often dubbed NHR 2.0). Whilst qualification to the NHR regime only required ticking a box and the qualification to IFICI is a lot harder, there has been one major change that went unnoticed and that makes IFICI a boon for foreign founders.
Under IFICI, UNLIKELY THE PREVIOUS REGIME, capital gains from a foreign source are always exempt in Portugal, provided that it does not come form a black listed jurisdiction.
This means that if a founder of a company in the U.S., the UK, Singapore, Germany and most other countries exits their parent company, there will be no capital gains tax if the founder is a Portuguese tax resident under IFICI. Creating a subsidiary can get that founder under IFICI.
This means that founders can move to Portugal in preparation for their exit and pay no capital gains tax. Nearly every country that has a tax agreement in Portugal has agreed not to apply capital gains tax to such individuals as well and so, the outcome is no capital gains tax anywhere.
It is important to pay attention to two important caveats:
The first is that U.S. citizens are always subject to tax. This means that they were also covered by the previous NHR regime and also that they will still need to pay capital gains tax, but only in the U.S., at a much lower rate than Portugal.
The second is that the exemption applies to the parent company, not to the Portuguese subsidiary. However, normally the majority of the value is created in the parent. However, the Portuguese sourced income is also taxed at a preferential rate of 20%.
The outcome is that founders can move to Portugal ahead of an exit, enjoy Portugal’s phenomenal lifestyle, and save millions in taxes. No need to move to Dubai – the solution is right here in Europe.
The exemption goes on to cover foreign-sourced dividends, interest and other type of income from a foreign source, allowing tax residents in Portugal to make fantastic investments.
3. Corporate Tax Rates Are Falling (Unusual for the EU)
Portugal’s corporate tax rate is in the middle of a phased reduction:
- 19% in 2026
- 18% in 2027
- 17% in 2028
Small entities receive reduced rates on the first €50,000 of taxable profit (15%), improving early-stage reinvestment dynamics.
This is not happening in isolation — Germany, France, and the Nordics are not cutting corporate tax, and the UK has been discussing raises. Portugal has quietly decided to compete.
4. Even lower rates (and falling) in Madeira and the Azores
The islands, Madeira and the Azores, have even lower rates. They are allowed to lower their rates by 30% compared to the mainland and have historically been applying the full 30%.
This means that the anticipated higher level corporate tax on the islands is 13.3% in 2026, 12.6% in 2027 and 11.9% in 2028. These are incredibly low level of tax in European standards.
Furthermore, Madeira’s famous international business center that gives access to a corporate tax rate of just 5% has just been extended until the end of 2033. This regime requires meeting a criteria (primarily investment in the island and job creation) but the benefit is significant.
5. It’s Easy to Relocate Executives to Portugal
One of Portugal’s underrated advantages is that people actually want to live here. Weather, ocean, restaurants, safety, healthcare, international schools — the usual factors apply, but without the sterility of more engineered jurisdictions.
Relocation matters because companies go where talent is willing to go.
Data point: Portugal consistently ranks at the top of global quality-of-life and safety indices (OECD, Numbeo, Global Peace Index).
Portugal remains one of the easiest European jurisdictions for highly skilled workers, founders, executives, and remote talent to obtain visas, residency, and eventually citizenship. In an era where the UK and U.S. are tightening talent access, Portugal is doing the opposite. Immigration policy is strategy — Portugal seems to understand that.
6. A Startup Ecosystem in the Helpful Phase
Lisbon and Porto are in that rare stage of ecosystem maturity where:
- there is capital
- there are founders
- there are accelerators
- and people still help each other without asking for a SAFE allocation
Government initiatives like Startup Portugal and EU-linked R&D incentives are unusually pragmatic. Founders coming from more cynical ecosystems notice the difference immediately.
7. Approximately €3 Billion in SIFIDE Capital Looking for Deployment
The SIFIDE tax incentive has created a pool of approximately €3B that must be deployed into R&D-linked investment vehicles and companies on preferential terms. From a CFO perspective, this changes funding conversations: Portugal could effectively subsidize part of the innovation budget for companies willing to build genuine R&D capacity here.
8. The Bureaucracy Problem Is Being Targeted (Finally)
The main downside of Portugal — bureaucracy — is no secret. What is new is that the current government has explicitly targeted bureaucratic reform and digitalization as a core competitiveness initiative. The budget of the immigration agency has been quadrupled and waiting times, although still being painful, are sharply dropping. The system is widely expected to work smoothly at the end of this year.
So What’s the Conclusion?
Opening a subsidiary in Portugal stopped being a lifestyle decision some time ago. Today it’s about:
- talent (still cheap for the quality)
- tax efficiency (personal + corporate)
- capital (SIFIDE + EU + private)
- mobility (visas + relocation)
- cost of retention (people stay)
- quality of life (people want to stay)
From where we sit, the more interesting part is not that companies are doing it — it’s that most are doing it quietly, without press releases, because it simply makes operational sense.
If you wish to discuss with us relocating your company to Portugal, please write to Luis Costa, the head of our corporate department at luis@freshportugal.com.