Hiring employees by non-resident entities without a permanent establishment in Portugal
The hiring of employees by non-resident entities without a permanent establishment in Portugal involves several legal and tax requirements.
According to the Portuguese law, when a foreign (non-resident) entity hires employees in Portugal without having a permanent establishment (i.e. without a permanent physical presence in Portugal), it is obliged to fulfil several obligations:
- Registration of the entity with the National Registry of Legal Entities
The foreign entity must be registered in the National Registry of Legal Entities, which will assign the respective Portuguese legal person identification number.
- Registration of the entity in the Tax and Social Security Authorities
The foreign entity must be registered in the Tax and Social Security Authorities (it will be necessary to obtain the respective identification number) in order to fulfil its tax and social security obligations.
- Hiring employees
The employment contract of the employees must comply with the labour legislation in force in Portugal, either in accordance with the Labour Code or any applicable collective bargaining agreement.
- Payment of personal income tax
Foreign entity not resident in Portugal that hire employees to carry out their duties in the country must withhold IRS (Personal Income Tax) at the rates applicable to the income earned by the employees. The amounts withheld must be paid by the 20th of the month following the month in which they were deducted from the employee’s salary.
- Social Security contributions
Even without having a permanent establishment in Portugal, the foreign entity must ensure that contributions are made to the Portuguese Social Security system, which implies the payment of contributions due from both the employee and the employer.
In accordance with the Regulation (EC) No 987/2009 of the European Parliament and of the Council of 16 September 2009, the employee and the foreign entity can agree that the employee is responsible for paying the monthly Social Security contributions.
- Compliance with administrative obligations
The foreign company without a permanent establishment must ensure compliance with all administrative obligations, such as submitting monthly declarations to the Tax Authority and Social Security.
Bismon has solid experience in accountancy and tax matters with foreign entities, offering complete solutions to its clients, and works with a network of partners who provide legal advice to ensure compliance with legal obligations when hiring employees in Portugal.
