Portugal follows a civil law system, rooted in the continental European legal tradition and primarily based on codified statutes rather than judicial precedent.

The legal framework is strongly influenced by Roman law and legislative codes, with the Constitution as the supreme source of law. Other key sources include statutes enacted by parliament, decree laws approved by the government, regulations, international treaties and European Union law, which has particular relevance in areas governed by EU competence. Although court decisions are not generally binding as precedent, case law, especially from the higher courts, is influential in the interpretation and application of legal rules.

The judicial system is organised into separate jurisdictions, mainly judicial courts, which hear civil and criminal matters, and administrative and tax courts, which decide public law disputes involving public authorities, administrative acts, public contracts, taxation and related matters. In addition, there are specialised bodies, including the Constitutional Court, which reviews constitutional matters, and the Court of Auditors, which supervises public expenditure and financial legality.

The judicial courts operate under a three tier hierarchical structure:

• first instance courts, known as Tribunais de Comarca, which hear cases initially;
• courts of Appeal, known as Tribunais da Relação; and
• the Supreme Court of Justice, which is the highest court within the ordinary judicial jurisdiction.

Similarly, the administrative and tax jurisdiction is structured around first instance administrative and tax courts, the Central Administrative Courts, divided between North and South, and the Supreme Administrative Court. Appeals are generally available subject to procedural rules, thresholds and admissibility requirements, depending on the type of proceedings and the value or legal relevance of the case.

Overall, the Portuguese legal system is characterised by judicial independence, codification, specialised court jurisdictions and a clear hierarchical appeal structure. Proceedings are mainly conducted in writing, although oral hearings and trial sessions play an important role in evidentiary matters, particularly in civil, criminal and certain administrative cases.

Alternative dispute resolution mechanisms are also widely used. Arbitration is common in commercial disputes and certain administrative and tax matters, particularly through the Administrative Arbitration Centre (CAAD). Peace Courts (Julgados de Paz) provide simplified procedures for lower-value civil disputes and place particular emphasis on mediation and consensual resolution.

Foreign investment in Portugal, in general, does not require approval from the authorities. However, a screening mechanism applies specifically to non-EU/EEA investors (including EU entities controlled by third-country persons) who seek to acquire control (direct or indirect) over strategic assets. These assets are essential for national defence, security and the supply of essential services.

The Portuguese government evaluates investments based on whether they pose a real and sufficiently grave threat to national security or the continuity of essential services, namely if:

• it affects physical security and operational availability of the assets;
• the investor has the ability to fulfil public service obligations;
• it affects the protection of sensitive data and technological assets; and
• it is linked to third-country governments that do not respect the rule of law, connections to criminal organisations or a history of disrupting public services in other countries.

Approval does not necessarily need to be obtained prior to completion of the investment.

The government has 30 working days from the signing of the deal (or its public disclosure) to initiate an evaluation. During this period, the authorities may request any information or documentation deemed necessary from the involved parties and other public bodies. If an evaluation is opened, the government has 60 days to decide. Absence of a decision within this timeframe acts as a “tacit approval.” If the government opposes the deal, all legal acts related to the transaction are deemed null and void.

The screening rules are focused on sectors critical to the national interest, such as energy, transportation and communications.

In addition to this general screening, specific industries like banking and insurance require prior authorisation from their respective regulators (Bank of Portugal and ASF) regardless of the investor’s nationality.

Furthermore, in addition to national law, foreign investments in Portugal are also governed by European Union regulations that impose specific restrictions within the single market. Notably, Regulation (EU) 2019/452 establishes a framework for the screening of foreign direct investments on grounds of security or public order, while the Foreign Subsidies Regulation (FSR) addresses distortions caused by non-EU subsidies. These European instruments are applicable and operate alongside domestic legislation, creating an additional layer of scrutiny that significantly impacts how foreign capital enters and operates within the Portuguese jurisdiction.

Investors may either wait for an ex-officio evaluation from the government as outlined in 2.1 Approval of Foreign Investments or proactively seek prior confirmation. In this case, investors can request a “safe harbour” confirmation, which is granted if the government fails to initiate an evaluation within 30 days of the request.

The consequences of proceeding with an investment that is subsequently vetoed are severe, given that a decision of opposition renders all related legal acts and transactions null and void, stripping them of any legal effect. This sanction is extensive, as it prohibits the economic exploitation of the assets and prevents the investor from exercising any corporate or voting rights over the strategic entities involved, effectively neutralising the investment.

The legal framework does not explicitly provide a formal mechanism to bypass an opposition decision through negotiated commitments or mitigation agreements that provide a precise timeline. As a result, the government either opposes the transaction or allows it to proceed.

However, any approved investment is inherently bound by the operational and regulatory requirements already applicable to all market participants. Especially in highly regulated strategic sectors, investors must comply with strict conduct standards and public service obligations overseen by sectoral regulators, ensuring that the investment remains aligned with the national interest regardless of the absence of specific ad hoc commitments.

The entity affected by a decision of opposition may challenge its legality by filing an appeal before the Portuguese administrative courts. While the law grants this right of judicial review, providing a precise timeline for a final ruling is difficult. However, it is widely recognised that Portuguese administrative courts are generally subject to significant delays, often resulting in lengthy litigation periods that may span several years.

In Portugal, the most common corporate vehicles are private limited liability companies (eg, sociedades por quotas, Lda) and public limited companies (eg, sociedades anónimas, SA).

A private limited liability company (Lda) is the most widely used structure for small and medium-sized businesses. It requires at least one shareholder, with a minimum share capital of EUR1. Shareholders’ liability is limited to their contributions to the share capital.

The governance model of a Portuguese private limited liability company (Lda) is characterised by its simplicity and flexibility, primarily consisting of two mandatory bodies: the general meeting of shareholders (eg, assembleia geral) and the management (eg, gerência). The general meeting is the supreme sovereign body where shareholders exercise their voting rights to approve annual accounts, elect directors and amend bylaws, while the management, composed of one or more directors (eg, gerentes), handles the day-to-day operations and legal representation, making it suitable for closely held businesses and family-owned structures. The appointment of a statutory auditor (ROC) becomes mandatory if the company exceeds two of the following three thresholds for two consecutive fiscal years:

• a balance sheet total of EUR1.5 million;
• net turnover of EUR3 million; and
• or an average number of 50 employees during the fiscal year.

A public limited company (SA) is generally used for larger projects, investment structures or companies seeking external funding. It requires a minimum of five shareholders (unless fully owned by a single entity) and a minimum share capital of EUR50,000.

Governance is more structured and may include different management and supervisory models. Typically, it is governed by a mandatory three-tier structure regardless of its size:

• the general meeting , led by a chairman and a secretary;
• the board of directors (eg, conselho de administração), which may be replaced by a sole director (eg, administrador unico) if the share capital does not exceed EUR200,000; and
• a supervisory body, typically a sole supervisor (eg, fiscal unico) who must be a statutory auditor (ROC).

Unlike the more flexible Lda companies, an SA requires these permanent governance bodies and mandatory account auditing to ensure legal compliance and institutional transparency.

The incorporation of a company in Portugal is relatively straightforward and can be completed within a few days, depending on the chosen procedure.

The main steps include:

• obtaining Portuguese tax numbers (NIF) for all shareholders and directors;
• defining the company structure, including corporate purpose, share capital and management;
• executing the incorporation deed (which may be done online or through a pre-approved template);
• registering the company with the Commercial Registry; and
• obtaining a corporate tax number and completing tax and social security registrations.

In practice, incorporation can be completed within one to five business days, particularly where standard procedures are used.

Private companies in Portugal are subject to several ongoing reporting and disclosure obligations. These obligations are primarily aimed at ensuring transparency and compliance with corporate and tax regulations.

Key obligations include:

• filing annual accounts and financial statements with the Commercial Registry;
• updating the commercial registry in case of changes to directors, shareholders or articles of association;
• maintaining updated records of the ultimate beneficial owner (UBO) in the central register; and
• complying with tax reporting obligations, including periodic tax filings.

Failure to comply with these obligations may result in fines and restrictions on the company’s activity.

Portuguese law provides for different management structures, particularly in public limited companies (SA), while private limited companies (Lda) follow a simpler model.

In an Lda, management is carried out by one or more directors who are responsible for the day-to-day operations of the company. There is no requirement for a supervisory body, although one may be established voluntarily.

In an SA, companies may adopt one of several governance models:

• a one-tier model, consisting of a board of directors and a statutory auditor;
• a two-tier model, with a management board and a supervisory board; or
• a model combining a board of directors with an audit committee.

These structures allow flexibility depending on the size and complexity of the business.

Directors and officers are subject to duties of care, loyalty and compliance with the law.

They must act in the best interests of the company and may be held liable for damages resulting from breaches of these duties.

Liability may arise towards the company, shareholders or third parties, particularly in cases of negligent management, unlawful acts or failure to comply with statutory obligations. In certain circumstances, directors may also incur criminal or administrative liability.

Portuguese law recognises the principle of separate legal personality, meaning that shareholders are generally not liable beyond their capital contributions. However, in exceptional cases, courts may disregard this separation (piercing the corporate veil), particularly where there is abuse of the corporate structure, fraud or misuse of the company to harm creditors.

Employment relationships in Portugal are governed by a structured set of legal sources, including the Labour Code, supplementary legislation, collective bargaining agreements, case law and individual employment contracts.

Labour rules are predominantly mandatory in nature, reflecting the protective function of employment law. As a general principle, they establish minimum standards that cannot be waived or reduced by agreement. However, Portuguese labour law also recognises an important role for collective bargaining, allowing collective bargaining agreements, in specific matters expressly provided for by law, to derogate from statutory rules within the limits established by the Labour Code.

Collective bargaining agreements play a central role in shaping working conditions and may be extended to non-signatory employers and employees through administrative extension orders, ensuring consistency within sectors and preventing distortions of competition.

Case law, particularly from higher courts, contributes to the interpretation and consistent application of labour rules.

In an international context, under the Rome I Regulation, the parties may choose the law applicable to the employment contract. However, such choice cannot deprive the employee of the protection afforded by the mandatory rules of the country where the work is habitually carried out. As a result, employees working in Portugal will generally benefit from Portuguese labour law protections, even when employed by foreign entities.

Individual employment contracts give effect to the employment relationship and must comply with the applicable legal and collective framework, allowing deviations only where more favourable to the employee.

In Portugal, employment contracts are not generally subject to a written form and may be concluded verbally. However, written form is required in specific cases, including fixed-term contracts, temporary work, part-time work, telework and other regulated arrangements.

Regardless of form, employers are subject to information obligations regarding the essential terms of the employment relationship.

Permanent contracts are the standard form of employment. Fixed-term contracts are only permitted where a genuine temporary business need exists and must be properly justified in the contract. The stated reason must correspond to an actual temporary need, and improper use may result in the contract being reclassified as a permanent contract from the outset, representing a significant legal risk.

Fixed-term contracts are subject to maximum duration limits of two years, including renewals, while open-ended fixed-term contracts (of uncertain duration) may not exceed four years in general.

The law also provides for very short-term contracts, mainly for seasonal activities, which do not require written form provided they do not exceed 35 days, with a maximum of 70 days per year with the same employer.

Overall, contractual terms are heavily influenced by mandatory rules and collective agreements, limiting individual negotiation.

Working time is subject to statutory limits and may not, in general, exceed eight hours per day and 40 hours per week. Employees are also entitled to minimum rest periods, including 11 consecutive hours of daily rest and a weekly rest.

The legal framework provides for flexibility mechanisms, including adaptability arrangements, working time banks and compressed working schedules, allowing companies to adjust working time to operational needs within defined limits.

Adaptability allows working time to be calculated on an average basis, enabling longer working periods in certain phases balanced by shorter periods, provided the applicable average is respected.

Working time banks allow additional working hours to be performed and compensated at a later stage, either under collective agreements or group-based arrangements subject to employee approval and labour authority oversight. Compressed working schedules allow the weekly working time to be performed over fewer days, resulting in longer daily working periods within legal limits.

The law also provides for working time exemption regimes applicable to managerial or high-trust roles, allowing increased flexibility while maintaining essential protections. Overtime work is exceptional in nature and subject to legal limits and increased pay rates. In practice, this results in higher labour costs for employers and acts as a disincentive to its regular use.

Termination of employment in Portugal does not follow an “employment at will” model and is subject to statutory grounds and formal procedures.

Employer-initiated termination is only permitted in legally defined situations, including disciplinary dismissal, collective dismissal, redundancy (elimination of position) and dismissal for unsuitability.

Termination may also occur through expiry, mutual agreement, termination by the employee (with or without cause) or other legally established forms.

From an economic perspective, a distinction is made between compensation and indemnity. Compensation is payable in lawful terminations based on objective grounds, while indemnity arises in cases of unlawful dismissal, where the employee may choose reinstatement or compensation.

Collective dismissal is based on economic, structural or technological reasons and involves a formal, phased procedure. This includes initial communication to employee representatives and to the Directorate-General for Employment and Labour Relations, the definition of objective selection criteria, and a mandatory information and consultation phase aimed at assessing the grounds and exploring alternative measures. Following this phase, the employer may issue a final decision, which must be individually communicated to the affected employees and takes effect after the applicable notice period.

Employees affected by collective dismissal are entitled to statutory compensation, outstanding payments and, generally, access to unemployment benefits.

Termination by mutual agreement may, in certain cases, allow access to unemployment benefits under Decree-Law No. 220/2006, where it occurs in a context comparable to redundancy or collective dismissal.

All termination mechanisms are subject to judicial review, and employees may challenge the legality of dismissal.

The Portuguese system is based on the principle of freedom of association, meaning that employees are not required to join or be represented by collective bodies.

Employee representation depends on workers’ initiative and is not mandatory in all companies. Nevertheless, the legal framework provides for information and consultation mechanisms that ensure employee participation.

The main forms of representation include workers’ committees, trade union structures and union representatives, which exercise information, consultation and participation rights.

Workers’ committees play a particularly relevant role, especially in matters such as company activity, restructuring processes and collective dismissals. These structures are also involved in health and safety matters, including risk assessment and the implementation of preventive measures.

Even in the absence of representative bodies, employers remain subject to information and consultation obligations in certain situations. Employee representatives benefit from enhanced protection, particularly against dismissal.

Overall, the Portuguese system combines freedom of association with structured participation mechanisms, ensuring employee involvement without imposing rigid representation models.

In the context of an employment relationship governed by a subordination agreement, the employee’s salary is subject to progressive personal income tax (PIT) rates ranging from 12.5% to 48%. The applicable withholding rate is determined by the employee’s monthly gross salary, and the employer is responsible for withholding and remitting the corresponding amount to the tax authorities on the employee’s behalf.

In addition to income tax, employees contribute 11% of their gross salary to the social security system, an amount equally withheld and remitted by the employer. Employers are further required to make their own social security contribution of 23.75%, calculated on the basis of the salary paid to the employee.

Taxes Applicable to Businesses

Companies that are tax resident in Portugal, namely those with their registered office or place of effective management in Portuguese territory, are subject to corporate income tax (CIT) on their worldwide income. The standard CIT rate currently stands at 19% (for tax periods beginning on or after 1 January 2026), under a phased reduction schedule set to reach 17% by 2028. SMEs and Small Mid Cap companies benefit from a reduced 15% rate on the first EUR50,000 of taxable income, with the standard rate applying to the excess.

Non-resident companies without a permanent establishment in Portugal are taxed only on Portuguese-source income, at a flat rate of 25%.

VAT

VAT applies to the supply of goods and services in Portugal. The standard rate is 23% in mainland Portugal, with a reduced rate of 13% and a super-reduced rate of 6% applying to certain goods and services. Lower rates apply in the Autonomous Regions of Madeira and the Azores.

Withholding Tax on Dividends and Interest

Withholding tax treatment depends on the nature and residence of the beneficiary. Where the beneficiary is an individual resident in Portugal, dividends and interest are generally subject to a 28% withholding tax. For corporate beneficiaries resident in Portugal, the applicable rate is 25%, although distributions may be fully exempt under the participation exemption regime, provided the following conditions are met:

• the entity is subject to and not exempt from a tax similar to CIT at a legal rate not lower than 60% of the CIT rate currently in force in Portugal;
• the entity holds at least 10% of the capital or voting rights of the Portuguese entity;
• the entity holds this participation uninterruptedly for the year prior to the distribution; and
• the entity is not resident or domiciled in a country, territory or region subject to a clearly more favourable tax regime, as identified under the list of tax havens approved by Portuguese legislation.

For non-resident beneficiaries, whether individuals or companies, the domestic withholding tax rate is 25%, rising to 35% where the beneficiary is resident in a jurisdiction listed as a tax haven under Portuguese law.

These rates may be reduced under an applicable double tax treaty. Interest paid to non-residents is equally subject to a 25% withholding tax as a general rule, again subject to potential reduction under a double tax treaty or exemption under the EU Interest and Royalties Directive, provided the applicable conditions regarding ownership threshold and holding period are satisfied.

Real Estate Acquisition Taxes

Companies acquiring real estate in Portugal are subject to two transfer taxes. Municipal Property Transfer Tax (IMT) applies at progressive rates ranging from 0% to 7.5%, calculated on the higher of the purchase price or the tax registration value of the property. Stamp Duty applies at a flat rate of 0.8% on the same basis. Both taxes are due prior to completion of the transaction.

Pillar Two

Portugal transposed the EU Minimum Tax Directive into domestic law in 2024, implementing the OECD’s Pillar Two framework for large multinational and domestic groups with annual consolidated revenues exceeding EUR750 million.

The legislation introduced three rules:

• the Income Inclusion Rule (IIR), under which the parent company of a group calculates and pays its share of the top-up tax in respect of low-taxed group entities;
• the Undertaxed Profits Rule (UTPR), a backstop mechanism applicable where the IIR is not applied by the parent’s jurisdiction, allocating top-up tax liability to other group entities; and
• a Qualified Domestic Minimum Top-Up Tax (QDMTT), which ensures that any top-up tax owed in respect of Portuguese low-taxed entities is collected domestically, preserving Portugal’s tax revenue and preventing reallocation to other jurisdictions.

The Portuguese QDMTT has been granted safe harbour status on the OECD’s central record.

IFICI regime (Tax Incentive for Scientific Research and Innovation)

The IFICI regime grants a flat 20% personal income tax rate on qualifying Portuguese-source income derived from eligible activities and exempts from Portuguese taxation certain categories of foreign-source income. The regime is available for a period of ten consecutive years from the year of registration and is not compatible with other tax benefits, including the former Non-Habitual Resident (NHR) regime, the Young Personal Income Tax (IRS) regime and the Returning Residents regime (programa regressar).

To benefit from the regime, the individual must become tax resident in Portugal, must not have been tax resident in Portugal in any of the five preceding years and must carry out an activity that falls within the scope of the regime.

Eligibility is subject to a two-tier validation: the applicant must exercise a qualifying activity as defined by law, and the entity for which the activity is performed must itself be recognised as eligible under the applicable rules.

Qualifying activities include:

• higher education teaching and scientific research;
• qualified positions in contractual investment projects;
• highly qualified roles in specific sectors of strategic relevance to the national economy;
• R&D personnel eligible under the Tax Incentive System for Business Research and Development (SIFIDE) framework;
• positions or members of governing bodies in certified startups; and
• certain activities carried out by tax residents in the Autonomous Regions of the Azores or Madeira, subject to criteria defined under regional legislation.

Wage Enhancement Tax Incentive

Introduced by the State Budget for 2025 and updated by the State Budget for 2026, the Wage Enhancement Tax Incentive is designed to reward employee performance through benefits at the level of IRS, social security contributions and CIT.

With regard to employees, an exemption is granted on amounts paid or made available to employees by way of productivity bonuses, performance bonuses, profit-sharing payments and balance sheet gratifications, for IRS and social security contribution purposes, up to a limit of 6% of the employee’s annual base salary.

In order to benefit from this exemption, the employer must:

• increase the average annual base salary across the company, by reference to the end of the prior year, by a minimum of 4.6%; and
• ensure that the increase in the annual base salary of employees earning a value equal to or lower than the company’s average annual base salary at the end of the prior year is also a minimum of 4.6%.

It should also be noted that, for CIT purposes, costs corresponding to the qualifying salary increases are deductible at 200% of their actual amount, recognised as an expense of the relevant financial year.

SIFIDE - R&D Tax Credit

In the context of available tax incentives, the SIFIDE regime deserves particular attention. Under this regime, certain research and development expenses may be deducted directly from the CIT tax liability, including:

• research expenditure incurred with a view to acquiring new scientific or technical knowledge; and
• development expenditure arising from the exploitation of research results or other scientific or technical knowledge, with a view to the discovery or substantial improvement of raw materials, products, services or manufacturing processes.

Within these categories, eligible expenditure includes costs relating to fixed assets such as personnel costs for technical staff involved in research and development tasks, and costs associated with the participation of directors and senior staff in the management of research and development institutions.

The deductible expenditure is calculated on the following basis.

• Base rate – 32.5% of eligible expenses incurred in the relevant tax period.
• Incremental rate – 50% of the increase in eligible expenses incurred in the relevant tax period compared to the simple arithmetic mean of the two preceding financial years, up to a maximum of EUR1,500,000.

RFAI - Investment Support Tax Regime

The RFAI is a tax incentive regime available to companies carrying out activities in sectors specifically listed under Portuguese law, including:

• extractive and manufacturing industries;
• tourism, including activities of interest to the tourism sector;
• IT activities and related services;
• agricultural, aquaculture, fishing, livestock and forestry activities;
• research and development and high-technology activities;
• information technology, audiovisual production and multimedia;
• defence, environment, energy and telecommunications; and
• shared services centre activities.

In addition to the sectoral requirements, companies must cumulatively satisfy the following conditions:

• maintain properly organised accounts;
• have their taxable profit determined by direct assessment methods rather than indirect methods;
• retain the assets subject to investment within the company and in the relevant region for a minimum period of three years from the date of investment, in the case of micro, small and medium-sized enterprises, or five years in all other cases, or for the minimum useful life of the assets if shorter, or until the assets are written off, dismantled, abandoned or rendered unusable;
• have no outstanding debts to the state or social security in respect of contributions, taxes or levies, or have such debts duly secured; and
• make qualifying investments that generate job creation and maintain those jobs until the end of the minimum retention period applicable to the assets subject to investment.

Where these conditions are met, the following tax benefits are available:

• CIT deductions – in the case of investments made in the Norte, Centro, Alentejo, Autonomous Region of the Azores and Autonomous Region of Madeira, a deduction of 30% of qualifying expenditure applies to investments up to EUR15,000,000, and 10% on the portion exceeding that threshold. For investments in the Algarve and Lisbon regions, a deduction of 10% of qualifying expenditure applies.
• IMI exemption or reduction – for a period of up to ten years from the year of acquisition or construction of the property, in respect of properties used in connection with qualifying investments.
• IMT exemption or reduction – in respect of acquisitions of properties constituting qualifying investments.
• Stamp Duty exemption – in respect of acquisitions of properties constituting qualifying investments.

Capitalisation Tax Incentive Regime (ICE)

The tax incentive regime for company capitalisation was introduced by the State Budget for 2023 and replaced the DLRR regime, the deduction for retained and reinvested profits, which was repealed in that same year.

The regime consists of a deduction from taxable profit, available to Portuguese companies, corresponding to the application of the 12-month Euribor rate,  equal to the average for the tax period, calculated on the basis of the last day of each month, plus a spread of two percentage points, applied to the net increase in eligible equity.

The deduction may not exceed, in each tax period, the greater of the following limits:

• EUR4,000,000; or
• 30% of earnings before depreciation, amortisation, net financing costs and taxes.

For the purposes of the ICE regime, the following are considered net increases in eligible equity:

• cash contributions made in the context of the incorporation of a company or the share capital increase of the beneficiary company;
• in-kind contributions made in the context of a share capital increase corresponding to the conversion of debt into equity;
• share issue premiums; and
• the appropriation of distributable accounting profits, in accordance with commercial law, to retained earnings or directly to reserves or to a share capital increase.

Tax consolidation is available in Portugal through the Special Group Taxation Regime (RETGS).

The regime is optional and allows the parent company of a qualifying group to elect for a consolidated determination of the group’s taxable base, aggregating the taxable profits and losses of all group members through an algebraic sum.

A group exists for these purposes where a parent company holds, directly or indirectly, at least 75% of the share capital of one or more subsidiaries, provided that such holding also confers more than 50% of the voting rights.

The election is only available where all of the following conditions are met on a cumulative basis:

• all group companies must have their registered office and place of effective management in Portuguese territory and their income must be subject to the standard CIT regime at the highest applicable rate;
• the parent company must have held its participation in each subsidiary for more than one year prior to the start of the regime;
• the parent company must not itself qualify as a subsidiary of another Portuguese resident company that meets the conditions to be treated as a parent; and
• the parent company must not have renounced the regime in the three years preceding the election.

Portugal historically applied traditional thin capitalisation rules, which were replaced in 2013 by a broader interest limitation regime, in line with the OECD BEPS recommendations and subsequently aligned with the EU Anti-Tax Avoidance Directive (ATAD).

The key rule to highlight is the limitation on the deductibility of net financing expenses. Net financing expenses are deductible up to the higher of EUR1,000,000 or 30% of earnings before depreciation, amortisation, net financing expenses and taxes (EBITDA). The purpose of this rule is to prevent excessive debt financing from artificially reducing taxable income.

Net financing expenses that exceed the applicable threshold in a given tax period may be carried forward and deducted in any of the five subsequent tax periods, subject to the same limitations applying in each of those periods.

Transfer pricing rules apply in Portugal. Under the applicable legal framework, transactions carried out between a taxpayer and any related entity must be conducted on terms and conditions that are substantially identical to those that would normally be agreed between independent parties in comparable transactions.

This is the arm’s length principle, which aims to ensure tax equity between companies forming part of multinational groups and independent enterprises, neutralise tax avoidance practices, protect the domestic tax base and reduce obstacles to international investment and trade.

In this sense, related party relationships exist where one entity has the power to exercise, directly or indirectly, a significant influence over the management decisions of another.

To determine the arm’s length terms and conditions, taxpayers must adopt the most appropriate method having regard to, among other factors:

• the nature of the transaction;
• the availability of reliable information; and
• the degree of comparability between the controlled transaction and comparable uncontrolled transactions.

The available methods are:

• the comparable uncontrolled price method;
• the resale price method;
• the cost plus method;
• the profit split method; and
• the transactional net margin method.

Where none of these methods can be applied due to the unique nature of the transactions or the absence of reliable comparable data, other generally accepted economic valuation techniques may be used, in particular where the transactions involve real estate rights, shares in unlisted companies, credit rights or intangibles.

Anti-Avoidance Framework

Portugal has a number of rules designed to prevent and combat tax avoidance and evasion.

As a starting point, it should be noted that Portugal has a general anti-abuse rule, which may always be invoked where a situation considered abusive for tax purposes is at issue. Under this rule, arrangements or series of arrangements that are put in place with the principal purpose of obtaining a tax advantage that defeats the object or purpose of the applicable tax law, and that are carried out through an abuse of legal forms or are not considered genuine having regard to all relevant facts and circumstances, are disregarded for tax purposes.

Taxation is then applied in accordance with the rules applicable to the transactions or acts that reflect the underlying economic substance, and the intended tax advantages are not recognised.

The rule operates as a safeguard against aggressive tax planning. An arrangement is considered non-genuine to the extent that it is not carried out for valid economic reasons that reflect economic substance. An arrangement may consist of more than one step or part.

In addition to the general anti-abuse rule, which may be invoked by the tax authority whenever it considers a given structure or transaction to be abusive, a number of specific rules deserve mention.

CFC Rules

Under Portugal’s Controlled Foreign Company rules, profits or income obtained by a non-resident entity may be attributed to a Portuguese tax resident entities where such income originates from a jurisdiction subject to a clearly more favourable tax regime, provided the Portuguese resident holds, directly or indirectly, at least 25% of the share capital, voting rights, or rights over the income or assets of that entity.

Blacklisted Jurisdictions

Portugal has, by means of a specific ministerial order, identified an extensive list of jurisdictions considered to have a clearly more favourable tax regime. Income paid to or received from entities in those jurisdictions is subject to several tax aggravations. A tax rate of 35% applies to capital income and securities capital gains arising from or paid to those jurisdictions.

Exit Tax Rules

Where an individual taxpayer of Portuguese nationality transfers their tax residence to a jurisdiction identified as having a clearly more favourable tax regime, that individual may continue to be treated as a Portuguese tax resident for taxation purposes in the year of the transfer and the following four years, unless they can demonstrate that the transfer was motivated by legitimate reasons, such as the temporary exercise of an activity in that territory on behalf of an employer domiciled in Portugal.

Portugal, as a Member State of the European Union, does not operate an independent tariff regime. Customs and trade policy are an exclusive EU competence, meaning that the tariffs applicable to goods imported into Portugal from third countries are those established under the EU Common Customs Tariff, applied uniformly across all Member States.

The Portuguese regulator competent to enforce competition law in Portugal, including the rules on merger control, is the Autoridade da Concorrência (Portuguese Competition Authority, PCA).

The relevant legislation concerning national merger control is Law No 19/2012 of May 8, as amended (Portuguese Competition Law, PCL), which establishes the general Competition Law regime. 

The definition of undertaking under PCL (article 3) is:

An undertaking shall be understood as “any entity carrying out an economic activity, regardless of its legal status and its method of financing” and, for the purposes of this law, shall be considered as a single enterprise, the set of entities which, although legally distinct, constitute an economic unit or maintain interdependent links between them arising, in particular:

• from a majority shareholding in the share capital;
• the holding of more than half of the votes attributed by the shareholdings;
• the possibility of appointing more than half of the members of the management or supervisory body; and
• the power to manage their business.

Prior Notification of Merger Operations

In order to assess whether a particular transaction is subject to the obligation of prior notification (either to the European Commission or to the PCA), it is necessary to go through two stages. The first stage is to assess whether there is a concentration of undertakings for the purposes of competition law. Secondly, if the transaction qualifies as a concentration within the meaning of these rules, it is necessary to determine whether such merger of undertaking is subject to mandatory prior merger notification under the applicable law.

The legal definition of concentration of undertakings under PCL (Article 36) is:

A concentration of undertakings shall be deemed to occur, for the purposes of the PCL, where there is a lasting change of control over all or part of one or more undertakings, as a result of:

• the merger of two or more undertakings or parts of previously independent undertakings; and
• the acquisition, directly or indirectly, of control of all or part of the share capital or assets of one or more other undertakings, by one or more undertakings or by one or more persons who already control at least one undertaking.

The creation of a joint venture shall constitute a concentration of undertakings where the joint venture performs, on a lasting basis, the functions of an autonomous economic entity.

Control shall derive from any act, regardless of its form, which entails the possibility of exercising, on a lasting basis, alone or jointly, and considering the circumstances of fact or law, a decisive influence on the activity of an undertaking, in particular:

• the acquisition of all or part of the share capital;
• the acquisition of rights of ownership, use or enjoyment over all or part of the assets of an undertaking; and
• the acquisition of rights or the conclusion of contracts which confer a decisive influence on the composition or on the deliberations or decisions of the organs of the company.

If it is found that there is a concentration of companies for the purposes of Competition law, the next step in the analysis will be to check whether the notification criteria, whether European or national, are met.

Obligation to (Prior) Notify a Merger - Minimum Thresholds

If the triggers for mandatory notification to the European Commission are not met, a concentration will still be subject to a prior control regime (ex ante intervention) by the PCA when it meets one of the following conditions (as per Article 37(1) of PCL).

• As a consequence of the concentration, a market share equal to or greater than 50% of the Portuguese market in a specific product or service, or in a substantial part of it, is acquired, created or reinforced.
• As a consequence of the concentration, a market share equal to or greater than 30% but smaller than 50% of the Portuguese market in a specific product or service, or in a substantial part of it, is acquired, created or reinforced provided that the individual turnover in Portugal in the previous financial year, by at least two of the undertakings involved in the concentration are greater than five million euros, net of taxes directly related to such a turnover.
• The undertakings that are involved in the concentration have reached an aggregate turnover in Portugal in the previous financial year greater than EUR100 million, net of taxes directly related to such a turnover, as long as the turnover in Portugal of at least two of these undertakings is above five million euros. The assessment of the market share and the calculation of the turnover of each undertaking involved in the concentration shall be performed in accordance with specific criteria and special rules apply in some specific cases.

A set of concentrations between the same entities within a period of two years – even if the operations, individually considered, would not be considered subject to prior notification – are considered a single concentration subject to prior notification when the concentrations jointly reach the turnover’s threshold entailing the mandatory notification to PCA after the conclusion of the agreement on the last of the operations and before its implementation.

Concentrations that are considered, under the thresholds set out in 6.1 Merger Control Notification, to be of mandatory filing before the PCA shall be notified to such authority after the conclusion of the agreement and before being implemented; or, where applicable, after the date of the preliminary announcement of a public takeover bid or exchange offer, or the announcement of the acquisition of a controlling interest in a company whose shares are admitted to trading on a regulated market; or, in the case of a concentration resulting from a public procurement procedure, after the final award and before being implemented.

Also, PCL expressly provides for the possibility of voluntary notification when there is a serious intention of concluding an agreement. A concentration subject to mandatory prior notification may not be put into effect before it has been notified and has been the object of an explicit or tacit decision of non-opposition and, accordingly, the validity of any legal transaction carried out during the evaluation period depends upon the clearance of the concentration (standstill obligation).

A notification only becomes effective after duly submission with all the elements and the respective payment of the fee due.

The procedure for assessing a concentration under the PCL comprises two phases: an initial investigation phase , and an eventual phase two, usually called the “in-depth investigation phase”.

• In phase one PCA has 30 working days from the date when the notification becomes effective to decide: that the concentration is not subject to mandatory filing;
• not to oppose the concentration; or
• to initiate an in-depth investigation, if, in view of the evidence gathered, it has serious doubts that the concentration will result in significant impediments to effective competition. 

In straightforward cases and if some criteria are met – such as absence of horizontal overlap, the absence of vertical relationships, minimal market shares, transition from joint to sole control or negligible activity – a short-form notification can be used, which requires significantly less data and typically leads to a faster clearance decision.

During phase one, if PCA considers that there are serious competition concerns, it decides to initiate an in-depth investigation (ie, phase two). In this phase, PCA has a maximum of 90 working days to carry out the additional inquiries that it considers necessary (this time period already incorporates all the working days used by PCA during phase one). This period may be extended by the competition authority, at its own initiative or at the request of the notifying party/parties, for a period that, in total, may not exceed 20 working days.

The time period is suspended whenever there are PCA’s additional requests of information (to the participant parties and/or other interveners) and respective replies. If no decision is issued by PCA within such deadlines (considering said extensions and suspensions), a non-opposition decision is considered to have occurred. In phase two, PCA must conduct a hearing of the parties (a procedural step that is usually initiated by the issuance of a draft final decision) within 75 working days from notification.  

By the end of the phase two PCA must decide:

• not to oppose the concentration (with or without commitments offered by the notifying parties); or
• to prohibit the concentration, prescribing appropriate measures, should the concentration have already occurred.

PCL establishes the general competition legal framework concerning anticompetitive agreements and abuses of dominant position. This law applies to all economic activities carried out, whether on a permanent or occasional basis, in the private, public and cooperative sectors. PCL shall be interpreted in accordance with European Union Law and considering the case law of the Court of Justice of the European Union.

Regarding restrictive agreements and similar practices, PCL prohibits, in Article 9, agreements between undertakings, concerted practices and decisions by associations of undertakings which have as their purpose or effect the prevention, restriction or distortion of competition. Said agreements between undertakings may be legally binding agreements, informal agreements or simple arrangements between undertakings.

In regards to concerted practices, they generally involve fixing market conditions and business actions taken in parallel, for instance through a sudden and simultaneous rise in prices for a given product.

As with Article 101 of the TFEU, PCL provides examples of restrictive practices.

• Direct or indirect fixing of purchase or selling prices or of any other trade conditions.
• Limitation or control over production, the distribution, technical development or investments.
• Sharing of markets or sources of supply.
• Application to trade partners of dissimilar conditions to equivalent transactions, therefore placing them in disadvantage in the competition.
• Make the conclusion of contracts subject to acceptance by the other parties of supplementary obligations which, by their nature or according to commercial usage, have no connection with the subject of such contracts.
• Establishing, within the scope of the supply of goods or accommodation services in tourist developments or local accommodation establishments, that the other contracting party or any other entity may not offer, on electronic platforms or in physical establishments, prices or other sales conditions for the same good or service that are more advantageous than those practiced by an intermediary operating through an electronic platform.

Similarly to what is provided by Article 101(3) of TFEU, in accordance with Article 10 of the PCL, any restrictive practice under the terms of article nine (agreements between undertakings, concerted practices and decisions by associations of undertakings which have as their purpose or effect the prevention, restriction or distortion of competition) may be deemed justified when it contributes to improve the production or distribution of goods or services or to promote technical or economic development, provided that, cumulatively, they:

• offer the users of such goods or services a fair part of the benefit arising therefrom;
• do not impose to the undertakings concerned any restrictions that are not indispensable to the attainment of such objectives; and
• do not grant such undertakings the opportunity to suppress the competition in a substantial part of the goods or services market at stake.

As to the public interest defence/importance, it is established by Article 4 of the PCL that the undertakings that have been legally entrusted with the management of services of general economic interest, or are by their nature legal monopolies, are subject to the provisions of the PCL, to the extent that enforcement of these provisions does not create an obstacle to the fulfilment of their specific mission.

Article 7(1) of the PCL sets the priorities of PCA’s mission and states that in carrying out its responsibilities, the PCA shall be guided by the public interest criterion of promoting and protecting competition and may, based on this criterion, assign different degrees of priority to the matters it is called upon to analyse and reject the handling of matters it deems non-priority.

I is also established by the PCL that the PCA shall exercise its sanctioning powers on a case-by-case basis, whenever the public interest of pursuing and punishing infringements of competition rules entails the initiation of administrative offence proceedings, taking into account in particular the priorities in competition policy and the elements of fact and law brought by the parties.

The PCA registers all complaints but will only initiate proceedings if there are sufficient grounds to do so. Should PCA consider a complaint to be non-priority or lacking legal basis, it must inform the complainant, who then has ten working days to submit written observations. If the complainant fails to do so, the complaint is deemed withdrawn. If observations are submitted (within the deadline), the PCA may, in light of such observations, either initiate proceedings or, alternatively, notify the complainant of an express decision of rejection.

PCL prohibits the abuse of a dominant position which is deemed to occur where an undertaking holds a dominant position in the relevant market, and exploits it in an abusive manner.

According to the European Court of Justice’s jurisprudence, a dominant position relates to a position of economic strength that enables an undertaking to prevent effective competition from being maintained in the relevant market by granting it the power to behave in a considerable extent regardless of its competitors, customers and consumers.

There shall be an individual or collective dominant position with regard to a given product or service if:

• a company acts in a market in which it is not subject to significant competition; or
• two or more companies behave in a concerted manner on a market in which they do not have significant competition or in which they prevail over others (joint dominance).

As with Article 102 of the TFEU, PCA also provides examples of restrictive practices.

• Directly or indirectly imposing unfair purchase or selling prices or other unfair trading conditions.
• Limiting production, markets or technical development to the prejudice of consumers.
• Applying dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a competitive disadvantage.
• Making the conclusion of contracts subject to acceptance by the other parties of supplementary obligations which, by their nature or according to commercial usage, have no connection with the subject of such contracts.
• Refusing access for another undertaking to a network or other essential facilities that it controls, against the appropriate payment, provided that such undertaking without it cannot act, for de facto or legal reasons, as a competitor of such undertaking in a dominant position in the upstream or downstream markets, except if the dominant undertaking evidences that such access is not reasonably possible for operational or other reasons.

The last example is innovative when comparing the wording of the national law with EU Law provisions. However, in practical terms, the same understanding and practice is followed within the EU scheme.

In addition to the abuse of dominant position, PCL also prohibits, in Article 12, the abuse of economic dependence, which intends to prevent the abuse by one or more undertakings of the economic dependence over a supplier or client that has no equivalent alternative.

Portuguese legislation also prohibits unilateral commercial practices regarding activities which do not necessarily or per se have effects on competition. The Decree-Law No 166/2013, of December 27 sets out the legal regime applicable to individual restrictive trade practices which impose transparency and balance in commercial relations (establishing some obligations such as and prohibits some specific unilateral conducts such as selling below cost (with some specific exceptions), discriminatory pricing and abusive trade practices.

Patents protect technical inventions that are new, involve an inventive step and are capable of industrial application. In Portugal, patents are governed mainly by the Industrial Property Code and are granted by the Portuguese Institute of Industrial Property (INPI). Protection is territorial and, for national patents, lasts for 20 years from the filing date, subject to payment of annual fees. Utility models may also be relevant for certain technical solutions and have a shorter maximum term of ten years.

Registration and Procedure

A patent application may be filed directly before INPI, or protection may be obtained through the European patent system, including validation in Portugal, or through international routes such as the PCT. A national application is subject to formal examination, publication in the Industrial Property Bulletin, a period for third-party observations or opposition, substantive examination and a final decision. The process is technical and investors should normally conduct prior searches and freedom-to-operate analysis before launching products or technology in Portugal.

Enforcement and Remedies

Patent rights allow the holder to prevent unauthorised manufacture, use, sale, importation or commercial exploitation of the patented invention. Enforcement is usually brought before the Portuguese Intellectual Property Court, although alternative dispute resolution may be available in specific cases. Remedies may include interim and final injunctions, seizure of infringing goods, removal from the market, destruction of infringing products or means of infringement, damages and publication of the decision. Patent infringement may also have criminal relevance in certain circumstances.

Portugal also participates in the European patent framework. For European patents and unitary patent matters, businesses should consider at an early stage whether protection and enforcement will be pursued through national routes, the European Patent Office and, where applicable, the Unified Patent Court system.

Trade marks protect signs capable of distinguishing the goods or services of one undertaking from those of another. These signs may include words, names, logos, letters, numbers, colours, shapes, sounds or other signs, provided that they are distinctive and can be represented in a way that allows the scope of protection to be clearly identified. In Portugal, national trade marks are governed by the Industrial Property Code and granted by INPI. Registration is valid for ten years from the filing date and can be renewed indefinitely for further ten-year periods.

Registration and Procedure

Applications are filed before INPI and must identify the sign, the applicant and the goods or services covered, classified under the Nice Classification. INPI examines absolute and relative grounds for refusal, such as lack of distinctiveness, descriptiveness or unlawfulness, and third parties prior rights, and the application is published so that third parties may oppose registration. A prior clearance search is strongly recommended, especially before adopting a brand name, launching a product or investing in packaging, domain names or marketing.

Businesses can also protect trade marks in Portugal through an EU trade mark filed with the European Union Intellectual Property Office (EUIPO), which covers all EU member states, or through an international registration designating Portugal or the EU. The best route depends on the geographical scope of the business, budget, likelihood of conflict and enforcement strategy.

Enforcement and Remedies

A registered trade mark gives the owner the right to prevent unauthorised use of identical or confusingly similar signs for identical or similar goods or services, and, in some cases, use that takes unfair advantage of or harms the reputation of a well-known or reputed mark.

Remedies include injunctions, damages, seizure, withdrawal or destruction of infringing goods, customs action and publication of judgments.

Trade mark infringement and counterfeiting may also trigger criminal proceedings. Owners should monitor the market and the INPI, EUIPO and domain name registers, since non-use for a continuous period may expose the registration to revocation.

Industrial designs protect the appearance of the whole or part of a product. This may include lines, contours, colours, shape, texture, materials or ornamentation, provided that the design is new and has individual character. Design protection is particularly relevant for consumer products, fashion, packaging, furniture, technology hardware, interfaces and other products where appearance has commercial value.

Registration and Duration

In Portugal, designs are registered before INPI under the Industrial Property Code. Once granted, national design protection may last for up to 25 years, usually through successive five-year periods of protection. Applicants may also seek protection through the EU design system, which is often attractive where the product will be marketed across several EU jurisdictions.

The registration process involves filing representations of the design and identifying the product to which it applies. Businesses should pay particular attention to the timing of disclosure. Public disclosure before filing may affect novelty, although certain grace-period rules can be relevant. As a practical matter, filing before launch is usually the safest approach.

Enforcement and Remedies

A registered design allows the holder to prevent third parties from making, offering, putting on the market, importing, exporting or using a product incorporating a design that does not produce a different overall impression on the informed user. Enforcement may be brought before the Portuguese Intellectual Property Court, with remedies including interim and final injunctions, seizure, withdrawal from the market, destruction of infringing goods, damages and publication of the judgment. Where the appearance of a product is also distinctive or creative, overlapping protection through trade marks, copyright or unfair competition rules may also be considered.

Copyright protects original literary, scientific and artistic works. In Portugal, the main legal framework is the Code of Copyright and Related Rights. Protected works may include books, articles, music, lyrics, audiovisual works, photographs, software, architectural works, visual arts and other original creations. Copyright protects the form of expression of an idea, not the idea, method, concept or business model itself.

Creation, Ownership and Duration

Copyright arises automatically upon creation of the work and does not depend on registration. As a general rule, economic rights last for 70 years after the author’s death, although specific rules apply to collective, anonymous, audiovisual and other categories of works. Moral rights are also important under Portuguese law and include the right to claim authorship and to object to certain distortions or uses that harm the author’s honour or reputation.

Ownership should be addressed carefully in contracts. In many business contexts, such as commissioned works, employment, software development, marketing materials and audiovisual production, the main risk is not whether copyright exists, but whether the company has obtained the necessary rights to use, adapt, distribute, communicate or sublicense the work. Written assignments or licenses should therefore identify the works, rights, territory, term, permitted uses and remuneration.

Registration and Enforcement

Registration with the Inspectorate-General for Cultural Activities (IGAC) is optional, but may be useful as evidence of authorship, ownership or date of creation. Copyright can be enforced through civil and, in certain cases, criminal proceedings. Remedies may include injunctions, seizure, removal of infringing copies, damages, publication of the decision and measures against online infringement. For online businesses, music, audiovisual content, software and platform-based services, rights clearance and evidence of the chain of title are often as important as enforcement itself.

Software

Computer programs are protected in Portugal primarily by copyright, under specific software legislation and the general copyright framework. Protection covers the expression of the program, including source code and object code, but not the underlying ideas, principles, algorithms or functionalities as such. Patent protection for software-related inventions may be available only where the invention has the required technical character and meets the general patentability criteria.

In commercial practice, software protection usually depends on a combination of copyright, confidentiality, trade secret protection, licensing terms, escrow arrangements, access controls and careful treatment of open-source components. Development agreements should clearly regulate ownership, third-party materials, repositories, documentation, maintenance, cybersecurity, audit rights and permitted use.

Databases

Databases may be protected by copyright if the selection or arrangement of their contents is original. Separately, a sui generis database right may protect the maker of a database where there has been substantial investment in obtaining, verifying or presenting its contents. This is particularly relevant for data-driven businesses, platforms, directories, catalogues and digital services.

The practical value of database protection depends heavily on evidence. Businesses should document the investment made in collecting, verifying and maintaining data, restrict unauthorised extraction or re-utilisation through contractual terms, and implement technical controls where appropriate.

Trade Secrets and Confidential Information

Trade secrets are protected where information is secret, has commercial value because it is secret, and has been subject to reasonable steps to keep it confidential. This may include technical know-how, business plans, customer lists, pricing models, algorithms, manufacturing processes, financial information and strategic data. Protection does not require registration, but it does require active internal management.

Companies doing business in Portugal should use non-disclosure agreements, confidentiality clauses, internal access controls, employee policies, clean-room procedures where needed and clear rules for contractors and consultants. Remedies for unlawful acquisition, use or disclosure may include injunctions, corrective measures, damages and restrictions on the use or dissemination of the trade secret.

Other Rights and Practical Considerations

Other protected subject matter may include domain names, geographical indications, appellations of origin, semiconductor topographies, plant varieties and unfair competition claims. In practice, IP protection in Portugal should be treated as a portfolio exercise. Businesses should combine registrations, contracts, internal policies, monitoring and enforcement planning, rather than relying on a single right.

The main data protection framework applicable in Portugal is the General Data Protection Regulation, Regulation (EU) 2016/679 (GDPR), together with Law No 58/2019 of 8 August, which implements and supplements the GDPR at national level. Law No 58/2019 also identifies the Portuguese supervisory authority and contains certain national rules on matters such as processing in an employment context, processing by public entities, video surveillance, secrecy obligations and sanctions.

Portuguese data protection law follows the core GDPR principles: lawfulness, fairness and transparency; purpose limitation; data minimisation; accuracy; storage limitation; integrity and confidentiality; and accountability. In practice, organisations doing business in Portugal must be able to demonstrate that personal data is collected and used on a valid legal basis, that individuals receive clear information, and that appropriate technical and organisational measures are in place.

Key Compliance Obligations

For companies operating in Portugal, the main compliance obligations usually include:

• preparing privacy notices and internal policies;
• mapping processing activities and maintaining records of processing, where required;
• ensuring that contracts with processors include GDPR-compliant clauses;
• assessing whether a data protection officer must be appointed;
• implementing security measures appropriate to the risk;
• managing data subject rights requests;
• assessing and documenting international data transfers;
• notifying personal data breaches to the supervisory authority where required; and
• carrying out data protection impact assessments for high-risk processing.

Sector-specific rules may also be relevant, depending on the business activity. These include rules on electronic communications and direct marketing, cybersecurity, consumer protection, financial services, health data, employment, video surveillance and the use of digital platforms.

Practical Approach

In Portugal, as in the rest of the EU, data protection compliance is not only a documentation exercise. Companies are expected to implement procedures that work in practice, particularly where they process sensitive data, monitor employees or customers, use CCTV, rely on digital marketing, transfer data outside the European Economic Area or deploy automated decision-making tools.

The GDPR applies directly in Portugal and has broad territorial scope. It applies to organisations established in Portugal that process personal data in the context of their activities, even if the actual processing takes place outside Portugal or outside the European Union.

It may also apply to organisations that are not established in Portugal or elsewhere in the EU, where they offer goods or services to individuals located in the EU or monitor their behaviour within the EU. This means that a foreign company with no Portuguese subsidiary may still be subject to Portuguese and EU data protection rules if, for example, it targets Portuguese customers, operates a Portuguese-facing website or app, runs behavioural advertising campaigns aimed at users in Portugal, or tracks users located in Portugal.

International Transfers

Transfers of personal data from Portugal to countries outside the European Economic Area (EEA) are subject to the GDPR transfer rules. Such transfers may take place where there is an adequacy decision, appropriate safeguards such as standard contractual clauses, binding corporate rules, or another valid transfer mechanism under the GDPR.

In practice, companies should also assess the legal and practical risks of the destination country, particularly where personal data is transferred to service providers, cloud platforms, group companies or technology vendors located outside the EEA.

Representative and Lead Authority

Non-EU organisations subject to the GDPR may need to appoint an EU representative, unless an exemption applies. Where a company operates in more than one EU Member State, the GDPR’s one-stop-shop mechanism may also be relevant, with a lead supervisory authority being determined by reference to the organisation’s main establishment in the EU.

For companies entering the Portuguese market, it is therefore important to assess early whether the business model triggers GDPR applicability, whether a Portuguese or EU establishment is being created, and which supervisory authority is likely to be competent.

The CNPD

The Portuguese data protection authority is the Comissão Nacional de Proteção de Dados, commonly referred to as the CNPD. Law No 58/2019 confirms that the CNPD is the national supervisory authority for the purposes of the GDPR and Portuguese data protection law. It is an independent administrative authority with public law powers and administrative and financial autonomy, operating in connection with the Portuguese Parliament.

The CNPD’s role is to supervise and enforce data protection law in Portugal. It also cooperates with other EU supervisory authorities, particularly in cross-border cases involving organisations operating in several Member States.

Powers and Enforcement

The CNPD has investigative, corrective, advisory and authorisation powers under the GDPR and national law. These include the power to request information, carry out audits and investigations, issue warnings or reprimands, order controllers or processors to bring processing into compliance, impose temporary or definitive limitations on processing, order the suspension of data flows and impose administrative fines.

Administrative fines may follow the GDPR framework and can be significant, depending on the nature, gravity and duration of the infringement, the number of individuals affected, the degree of responsibility of the controller or processor, and any mitigating or aggravating factors.

Practical Role for Businesses

In practice, the CNPD is relevant not only in contentious matters, but also in day-to-day compliance. Organisations may need to interact with the CNPD in the context of personal data breach notifications, complaints submitted by data subjects, prior consultation in high-risk cases, audits, investigations or requests for guidance.

Companies doing business in Portugal should therefore treat data protection governance as an operational risk area. Good documentation, clear internal responsibilities, staff training, vendor management and incident response procedures are important not only to comply with the law, but also to demonstrate accountability if the CNPD reviews the organisation’s practices.

No single, comprehensive overhaul of Portuguese private or regulatory law is expected in the short term. Instead, legal development is being driven predominantly by EU-level regulation and targeted national reforms across specific sectors. The most significant trend is the increasing convergence between digital regulation, data governance, AI, cybersecurity and sector-specific regulatory frameworks, alongside incremental reforms in employment and immigration law.

Intellectual Property, Data Protection and AI

No major structural reform of Portuguese intellectual property or data protection statutes is expected in the immediate future. However, the legal framework is undergoing substantial transformation through directly applicable EU legislation.

Industrial Designs

A significant development is the EU design reform package. Regulation (EU) 2024/2822 modernises the EU design regime, with key provisions applicable from May 2025 and further procedural changes entering into force in July 2026. Directive (EU) 2024/2823 must be transposed by December 2027.

The reform broadens design protection to include digital and animated designs, clarifies scope of protection, and introduces changes affecting spare parts and repair clauses. This is particularly relevant for businesses in product design, fashion, consumer goods, software interfaces and digital assets.

Copyright and Artificial Intelligence

Portugal has already implemented the Digital Single Market Copyright Directive via Decree-Law No. 47/2023, introducing significant updates including text and data mining exceptions, press publisher rights and online content-sharing rules.

The most significant ongoing development is the intersection between copyright law and AI regulation. The EU AI Act, directly applicable in Portugal, imposes obligations on providers of general-purpose AI models, including transparency and copyright compliance requirements relating to training data. The European Parliament’s March 2026 resolution on copyright and generative AI signals further EU-level regulatory development in this area.

As a result, copyright compliance is increasingly extending beyond traditional infringement analysis to include AI training datasets, opt-out mechanisms for text and data mining, content provenance and contractual allocation of AI-related risk.

Data Protection and Digital Regulation

The GDPR remains the cornerstone of Portuguese data protection law, with no replacement anticipated. However, it is increasingly complemented by a broader EU digital regulatory framework.

Key developments include:

• EU AI Act  – phased implementation, with significant compliance obligations for AI developers and deployers; Portugal is expected to designate ANACOM as a key supervisory authority.
• Data Act (applicable since September 2025) – introduces rules on access to and use of data generated by connected products and related services, with particular relevance for IoT, industrial systems, mobility, energy, and cloud services.
• NIS2 Directive (transposed via Decree-Law No. 125/2025, effective April 2026) – significantly strengthens cybersecurity obligations for essential and important entities, including governance, incident reporting, and risk management requirements.
• Digital Services Act implementation (Law No. 12-A/2026) – establishes national competent authorities and updates the regulatory framework for intermediary and platform services.

The cumulative effect of these reforms is a regulatory environment increasingly defined by EU-level instruments rather than domestic legislative overhaul. Businesses operating in Portugal should therefore adopt a cross-regulatory compliance approach spanning IP, AI governance, cybersecurity and data regulation.

Immigration and Nationality Law

Portuguese immigration law has recently undergone targeted amendments, particularly affecting family reunification procedures and job seeking residence permits. These changes reflect a broader policy focus on administrative efficiency and migration control. Further legislative reforms to the Immigration Act remain under discussion and may introduce additional restrictions to family reunification and other residence pathways.

Forthcoming Reforms

A significant reform of Portuguese nationality law entered into force on 19 May 2026. The minimum residence period for naturalisation has been extended from five years to seven years for EU and CPLP nationals and ten years for all other foreign nationals. The qualifying period now begins on the date of issuance of the first residence permit, rather than the date of the residence application, materially extending eligibility timelines for new applicants. Importantly, the reform applies only to nationality applications submitted on or after its entry into force, with pending applications remaining subject to the previous legal framework.

In addition, the reform strengthens the integration requirements for naturalisation by introducing new requirements relating to Portuguese culture, history, national symbols, and civic knowledge, alongside the existing Portuguese language requirement. Some aspects of these new requirements remain subject to implementing regulations.

EU-Level Developments and Enforcement

At EU level, the Pact on Migration and Asylum became applicable from June 2026, requiring adjustments to Portuguese border management, asylum processing, return procedures, and administrative cooperation mechanisms.

At national level, the Government continues to pursue broader immigration reforms aimed at strengthening enforcement against irregular migration, including more effective return procedures and enhanced administrative powers. However, some of these measures remain subject to the legislative process and judicial scrutiny.

These reforms indicate a clear policy shift towards tighter immigration control, longer integration timelines, and increased enforcement efficiency, with material consequences for residence planning, litigation, and family reunification strategies.

Employment Law

No comprehensive structural reform of the Portuguese Labour Code is expected in the short term. However, labour law is evolving through a combination of national policy proposals and EU-driven regulatory change.

National Developments

A proposed “labour package” is currently under discussion and may introduce amendments in key areas such as:

• working time organisation;
• fixed-term employment contracts;
• dismissal regimes; and
• employee rights protections.

While the final scope remains uncertain, the direction of reform suggests a recalibration of flexibility versus protection, with a gradual strengthening of employee safeguards.

EU Influence and Structural Change

EU-level developments continue to exert increasing influence on Portuguese employment law, particularly in areas such as:

• platform work regulation;
• algorithmic management and AI in employment; and
• data protection in the workplace.

These changes are progressively reshaping HR practices, including recruitment, performance evaluation and workforce monitoring.

Although the core structure of Portuguese labour law is expected to remain stable, incremental regulatory tightening and digitalisation-driven obligations are likely to reduce employer flexibility and increase compliance complexity.

Competition and Merger Control

A significant evolution is underway in EU merger control policy, which is expected to materially influence Portuguese enforcement practice.

The European Commission published its draft revised Merger Guidelines on 30 April 2026. Following a public consultation period that closed on 26 June 2026—with stakeholder feedback currently being published and analysed by DG COMP—the final version of the guidelines is expected to be formally adopted in the fourth quarter of 2026.

The Portuguese Competition Authority (Autoridade da Concorrência) is expected to align closely with this evolving EU approach. While no immediate legislative change is confirmed at national level, a shift in enforcement practice is anticipated, particularly in:

• The substantive assessment of mergers – driven by the newly introduced “theory of benefit”, which allows companies to justify mergers based on broader efficiencies such as supply chain resilience, sustainability, and security of supply, balanced against stricter scrutiny of dynamic efficiencies;
• The evaluation of non-price effects – placing greater emphasis on the impact of mergers on innovation and investment, including the application of the new “Innovation Shield” to protect start-ups from anticompetitive acquisitions;
• Market structure analysis in digital sectors and ecosystems – increasing scrutiny of killer acquisitions, data accumulation, and theories of harm based on market power entrenchment.

This development suggests a gradual but meaningful shift in merger control enforcement, with increased scrutiny of strategic and digital markets and greater alignment with EU analytical standards.

Cross-Sector Outlook

Across all practice areas, three overarching trends are evident:

• EU regulatory dominance – Portuguese law is increasingly shaped by directly applicable EU regulations rather than domestic legislative reform.
• Digital convergence – IP, data protection, cybersecurity and AI governance are becoming structurally interconnected.
• Increased compliance burden – businesses face expanding obligations across multiple regulatory layers, particularly in technology-driven sectors.

For companies operating in Portugal, the key challenge is no longer isolated legislative change, but continuous adaptation to a fast-evolving, multi-layered EU regulatory ecosystem.