Portugal: Investing

FDI in Figures

According to UNCTAD's World Investment Report 2023, FDI flows to Portugal stood at USD 9.1 billion in 2022, in line with the 9.6 billion recorded the previous year but still well below the pre-COVID level (USD 12.2 billion). In the same year, the total stock of FDI stood at USD 177.3 billion, around 70.3% of the country’s GDP. According to EY's 2023 Attractiveness Survey, Portugal secured 248 FDI projects in 2021, ranking in the sixth position among the most attractive European economies for investment (4.2% of total FDI projects in Europe). The estimated number of jobs created by these projects is almost 22,000. Figures from the Portuguese Trade & Investment Agency show that the majority of investments are directed to the services sector, followed by manufacturing and energy. The main investing countries are Spain, the Netherlands, Luxembourg, France, and the UK. 76,6% of the total FDI stock was held by EU countries at the end of 2022 (Bank of Portugal). Portugal’s metalworking, auto component, and machinery industries predominate the recent FDI trends, accounting for about 30% of inflows (government figures). The latest data available from the OECD shows that in the first semester of 2023, FDI inflows to Portugal totalled USD 2.1 billion, compared to USD 4.8 billion in the same period one year earlier. The majority of this FDI was concentrated in real estate investments by non-residents in Portugal. European investors were the largest contributors, accounting for EUR 980 million of the total FDI inflows, Asian investors followed closely, with EUR 513 million, while US-domiciled investors contributed EUR 298 million (Bank of Portugal).

FDI is considered a priority by the Portuguese government. The country has recently launched the development of renewable energies, specifically solar energy (Portugal has the second-largest solar power station in the world) and wave power (obtained from wave movements). These sectors could provide new opportunities to foreign investors, so as the IT and tourism sectors. Portugal also created "free zones" to strengthen technology-driven investments. Citizenship by Investment (ARI) via Portugal's Golden Visa programme offers a fast track for non-EU investors to gain citizenship. The government also launched the “Startup Visa” programme, a hosting program for foreign investors who wish to develop new projects in the Iberic country. Portugal oﬀers a diverse economy and beneﬁts from its EU member status, but bureaucratic and judicial burdens can discourage FDI. Government approval is required only in certain sensitive sectors, including defence, water management, public telecommunications, railways, maritime transportation, and air transport. Portugal ranks 31st out of 82 countries in the Economist Business Environment ranking, 30th among the 132 economies on the Global Innovation Index 2023 and 29th out of 184 countries on the 2023 Index of Economic Freedom.

Foreign Direct Investment	2020	2021	2022
FDI Inward Flow (million USD)	7,683	9,615	9,099
FDI Stock (million USD)	176,301	177,801	177,329
Number of Greenfield Investments*	115	168	278
Value of Greenfield Investments (million USD)	4,030	7,591	5,535

Source: UNCTAD, Latest data available.

Note: * Greenfield Investments are a form of Foreign Direct Investment where a parent company starts a new venture in a foreign country by constructing new operational facilities from the ground up.

FDI STOCKS BY COUNTRY AND INDUSTRY

Main Investing Countries	2022, in %
Spain	20.8
Netherlands	20.0
Luxembourg	16.7
France	7.9
United Kingdom	7.0
Germany	3.7
Brazil	2.4

Main Invested Sectors	2022, in %
Financial and insurance activities	20.7
Professional, scientific and technical activities	19.1
Real estate	8.7
Manufacturing	7.0
Wholesale and retail trade	7.0
Information and communication	3.0

Source: OECD Statistics, Latest data available.

Form of Company Preferred By Foreign Investors: Public limited company, SA
Form of Establishment Preferred By Foreign Investors: Subsidiary
Main Foreign Companies: The leading case of successful foreign investment in Portugal is that of «Autoeuropa», a Volkswagen project in the Setúbal peninsula with an initial investment of 2 billion euros. Because it was so large, the State moderated the negotiations on salaries etc. It is also a pole for other companies making components for the automobile industry.
Foreign companies active in Portugal include: BMW, Volkswagen, Mercedes Benz, Google, Zalando, Vestas, McDonalds, etc.
Sources of Statistics: Banco de Portugal
Statistics Portugal (INE)

What to consider if you invest in Portugal

Strong Points

Portugal was one of the countries which was the most strongly hit by the economic crisis of the late 2000s. Thanks to a policy of rigor and the implementation of reforms of the banking sector, of pensions and of the labour market, the country has since regained an interesting economic competitiveness and has begun a deep diversification of its exports (both sectoral and geographical). Its economy has stabilised, with a GDP growth of 4% in 2022 (IMF forecasts) based on its main strengths:

A skilled and often multilingual workforce at a significantly lower cost than other Western European countries
A system promoting investment in innovation and R&D, which has enabled the country to attract new FDI, essential to its development. The large number of multinationals from all sectors testifies to it.
Its strategic international relations with Europe, Africa and America, in addition to its membership of the European Union, allow Portugal to maintain close ties with its former colonies such as Brazil, Mozambique, Macao and Angola, and can serve as a gateway to other Portuguese-speaking markets
Early sectoral and geographical diversification of exports
Political stability and fluid governance
A good business environment (the country was ranked 39th on the World Bank's Doing Business 2020 report.

Weak Points

The main weaknesses of Portugal's economy include:

High unemployment rate
Economy is weakened by high levels of private and public debt
Small population
Low productivity
Underdeveloped manufacturing sector
Rigidity of labour law.

Government Measures to Motivate or Restrict FDI

In recent years, Government policies have prioritised the promotion of Portugal’s appeal to foreign investors. As a result, taxation procedures have been simplified, effective warehouse and transport logistics have been developed (especially in the Sines terminal located in the southwest of Portugal) and telecommunication infrastructure has been improved. The Government has also worked to establish the AICEP - an agency for investment and foreign trade. The Government adopted the golden visa residence programme, which is a simple and fast-track residence permit programme designed to attract foreign investment into the country. Other measures implemented to help draw investment include easing some labour regulations to increase workplace flexibility and creating a special aid regime for large products (over EUR 25 million).

To improve the business climate, the Government has created the "Simplex" website, an information repository containing all measures taken to reduce bureaucracy, and the 'Empresa na Hora' initiative (a company in one hour), which allows companies to incorporate in less than an hour.

Protection of Foreign Investment

Bilateral Investment Conventions Signed By Portugal: To see the list of investment treaties signed by Portugal, consult UNCTAD's International Investment Agreements Navigator.
International Controversies Registered By UNCTAD: Refer to UNCTAD's Investment Dispute Settlement Navigator.
Organizations Offering Their Assistance in Case of Disagreement: ICSID , International Center for Settlement of Investment Disputes
ICCWBO , International Court of Arbitration, International Chamber of Commerce
Member of the Multilateral Investment Guarantee Agency: Portugal is a signatory of the MIGA convention.

Country Comparison For the Protection of Investors	Portugal	OECD	United States	Germany
Index of Transaction Transparency*	6.0	6.5	7.0	5.0
Index of Manager’s Responsibility**	5.0	5.3	9.0	5.0
Index of Shareholders’ Power***	7.0	7.3	9.0	5.0

Source: The World Bank - Doing Business, Latest data available.

Procedures Relative to Foreign Investment

Freedom of Establishment: Foreign and domestic investors are subject to the same rules (except for certain sectors, see below).
Acquisition of Holdings: In general, there are no nationality requirements and no limitations on the repatriation of profits or dividends. Portugal limits foreign investment with respect to the production, transmission, and distribution of electricity, the production 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. Furthermore, governmental approval is required in certain sectors, including: defense, water management, public telecommunications, railways, maritime transportation, and air transport.
Obligation to Declare: In principal, foreign investment in Portugal is free of administrative limitations. Foreign investors, by and large, may carry out activities under the same conditions as local investors.
To establish a new business, foreign investors must follow the same rules as domestic investors, including mandatory registration and compliance with regulatory obligations for specific activities.
Competent Organisation For the Declaration: AICEP
ePortugal
Requests For Specific Authorisations: Portugal enacted a national security investment review framework in 2014, giving the Council of Ministers authority to block specific foreign investment transactions that would compromise national security.
Portuguese government approval is required in the following sectors: defense, water management, public telecommunications, railways, maritime transportation, and air transport, as well as any economic activity that involves the exercise of public authority.
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). 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.

Office Real Estate and Land Ownership

Possible Temporary Solutions: Consult Instant Offices, CoWorker, Idealista, etc.
The Possibility of Buying Land and Industrial and Commercial Buildings: Foreign investors can become the owners of land which is necessary for their setting up. It is possible to buy freehold or leasehold, to build industrial and commercial premises or to buy through a real estate company.
Risk of Expropriation: According to Portuguese law, foreign investors are entitled to prompt, adequate, and effective compensation if they are victims of expropriation (which can only occur in case of public interest). However, there have been no cases of expropriation of foreign assets or companies in Portugal in recent history.

Investment Aid

Forms of Aid: Investment aid may take the form of grants, tax credits and deferrals, access to loans and reduced cost of land. They may be tailored to the specific investment.

For further information, consult the website of the Institute for support for SMEs (IAPMEI) and that of AICEP Portugal Global - Trade & Investment Agency.
Privileged Domains: Relevant investment projects with a minimum investment of EUR 3 million that qualify for strategic economic interest and promote the creation of jobs are eligible for tax incentives granted on a case-by-case basis under a government contract for a period of up to ten years. Such incentives include a tax credit of 10% to 25% of the investment, as well as exemptions or reductions from property transfer tax, property tax, and stamp tax.
Under the Tax regime for investment promotion (Regime Fiscal de Apoio Ao Investimento - RFAI), companies that invest in certain regions can benefit from a deduction against corporate income tax otherwise payable (capped at 50% of the CIT due) of 25% (for qualified investments lower than EUR 15 million) or 10% (for the part of qualified investments exceeding that limit) of the qualified investment.
For further information, consult the website Portal dos Incentivos.
Privileged Geographical Zones: Fishing, agriculture, renewable energies, tourism and electronics. Furthermore, European aid programs have been used by Portugal to co-finance key investments in the areas of research and development, information and communications technology, transport, water, solid waste, energy efficiency and renewable energy, urban regeneration, health, education, and culture.
Free-trade zones: One of the institutions which is part of AICEP (the Portuguese Agency for Investment and Foreign Trade) is AICEP Global Parques which owns areas for setting up companies and industrial estates. They are located in areas which are economically disadvantaged (and in which apply the fiscal and social measures in favor of companies with the aim of stimulating employment) but which are strategically placed from a geographical point of view for easy access to road, rail and sea transport.
Portugal has one foreign trade zone (FTZ)/free port in the Autonomous Region of Madeira, with companies being able to enjoy import- and export-related benefits, financial and tax incentives. For additional information on Madeira’s tax regime, please visit the website of the International Business Centre of Madeira.
Public aid and funding organisations: The EU through the ERDF.
The institution created by the government is a venture capital company: Trade & Investment Agency (AICEP).
For SMEs, the Small and Medium-Sized Enterprise Support Institute (IAPMEI).
Furthermore, the state-financed private equity company Portugal Ventures may invest in the capital of startups.

Investment Opportunities

The Key Sectors of the National Economy

The Agency for Investment in Portugal (AICEP) regularly publishes investment opportunities on its website. Sectors with large potential include:

Tourist investment (especially in the Douro Valley and the Alentejo region)
Agrifood projects in the Alentejo region (biofuels, olive oil, fruit, flowers, etc.)
Forest investment projects all over the country

Other sectors attracting substantial foreign investment are:

Automotive sector
The chemical industry, which benefits from wide experience especially in sectors from extraction to petrochemical refining as well as manufacturing products from the most basic to solutions with high added value
The electric and electronic sectors have recently undergone considerable transformation with the setting up of several foreign groups
With more than 7,600 companies in ICT, the Portuguese information and communication technologies market has shown itself capable of rapid adaptation to and effective assimilation of new technologies
Biological industries bring together several international projects in domains such as pharmacy, biotechnologies (especially with renowned Portuguese universities) and R&D
Call centres. The country has a qualified workforce, which speaks several languages and is competitive, associated with modern telecommunication networks and property which is easily accessible and inexpensive
In the tourism sector Portugal is promoting more high-end products and services.

For further information, consult the "Prominent Clusters" page on the AICEP portal.

High Potential Sectors

The sectors which have been officially designated as top priorities to be developed are:

Biotechnologies (to create synergies with the American MIT project in Portugal)
Shared service centres (call centres and associated infrastructure)
The electric and electronic sectors (a big gamble on alternative energies)
High value added chemistry (eg. polymers, etc.)
The NICT (new information and communication technologies)
High end tourism.

Privatization Programmes

In 2011, Portugal launched an aggressive privatization program as part of its EU-IMF-ECB bailout, including state-owned enterprises in the air transportation (national airline company and airports), land transportation, energy, communications, the postal service (Correios), energy, sanitation, and insurance sectors. Current privatisations plans concern the energy and airlines sector.

Tenders, Projects and Public Procurement

Tenders Info , Tenders in Portugal
Ted - Tenders Electronic Daily , Business Opportunities in the EU
DgMarket , Tenders Worldwide

Sectors Where Investment Opportunities Are Fewer

Monopolistic Sectors: No monopolistic sectors. Concessions in the electricity and gas sectors are assigned only to companies with headquarters and effective management in Portugal.

Finding Assistance For Further Information

Investment Aid Agency: AICEP - Portuguese Investment Agency
Institute for Support for SMEs and Investment (IAPMEI)
Other Useful Resources: Portal dos Incentivos
Chamber of Commerce and Industry
Portuguese Tourist Institute
Doing Business Guides: Guide for Investors - trade.gov
The World Bank Report on Doing Business in Portugal
PWC Tax Guide - Portugal
Investment Climate in Portugal - US Department of State

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