Over the years, I have worked with clients from China, Hong Kong, Brazil, the United States, and many other jurisdictions seeking to expand their business into Portugal.Despite the diversity of markets and industries, foreign businesses tend to make remarkably similar legal mistakes — often small at the beginning, but capable of developing into tax penalties, contractual disputes, or serious compliance issues.
Below are the five most common risks I encounter in practice, together with practical guidance on how to avoid them.
01 | The Importance of Putting Contracts in Writing — Even When the Law Does Not Require It
In many sectors, particularly international trade, agreements are frequently concluded verbally or through informal email exchanges. While Portuguese law allows verbal contracts in certain situations, relying solely on oral agreements significantly increases the risk of disputes, evidentiary uncertainty, and difficulties in enforcing contractual rights.
In one case we handled, a foreign company faced prolonged payment delays from a Portuguese buyer. Although email correspondence confirmed that a commercial understanding had been reached, the lack of a formal written contract created ambiguity regarding deadlines, conditions, and mutual responsibilities. The dispute dragged on for months, placing serious pressure on the company’s cash flow — a situation that could have been easily avoided had the agreement been properly documented from the outset.
How to avoid this risk:
• Always put relevant agreements in writing, even when verbal contracts are legally valid
• Use clear and complete contracts signed by all parties
• Include essential clauses such as price, deadlines, liability, default, and dispute resolution mechanisms
02 | Failing to Meet Tax and Accounting Obligations
Portugal’s tax and reporting system is highly regulated. Many foreign-owned companies are unaware that obligations such as SAF-T file submissions, certified invoicing software, and periodic tax filings are mandatory — even when the company is not actively trading.
How to avoid this risk:
• Appoint a Portuguese accountant immediately after company incorporation
• Use certified invoicing software approved by the tax authorities
• Ensure all mandatory tax and accounting filings are submitted on time
03 | Not Registering Trademarks
Portugal and the European Union operate under a first-to-file trademark system. If a business delays registration, a third party may legally register the same or a similar brand first — a situation that occurs more often than many companies expect.
How to avoid this
• Conduct trademark availability searches at an early stage
• Register trademarks either in Portugal or at EU level, depending on business strategy
• Act promptly if opposition or enforcement becomes necessary
04 | Misunderstanding Portuguese Labour Law
Portuguese labour law offers strong protection to employees. Legal issues frequently arise when foreign employers apply informal HR practices that may be common in their home jurisdictions but are incompatible with Portuguese legal requirements.
How to avoid this
• Ensure all employment relationships are governed by written contracts
• Understand mandatory rules on working hours, overtime, paid leave, and social benefits
• Seek legal advice before terminating employment relationships
05 | Not Understanding Import and Export Regulations
Portugal is a strategic entry point to the European Union, but customs procedures and VAT rules are complex. Errors such as incorrect tariff classifications, incomplete documentation, or misunderstandings regarding VAT obligations can result in shipments being stopped at the border.
In one matter, a Chinese manufacturer experienced repeated customs delays because the tariff codes used in China did not align with EU classifications. As a result, shipments were held for weeks, generating storage costs and disrupting supply chains to European clients. Proper legal and customs planning would have prevented these delays altogether.
How to avoid this
Review EU customs and VAT requirements before shipping
- Work with experienced and reliable customs brokers
- Obtain legal advice to assess compliance risks in advance
Conclusion
Most legal difficulties faced by foreign businesses in Portugal do not arise from the law itself, but rather from unfamiliar administrative systems, language barriers, and overlooked compliance obligations. With proper legal guidance and early planning, these risks can be effectively managed.
For businesses considering setting up or expanding operations in Portugal, a timely legal assessment can save considerable time, costs, and unnecessary exposure to risk.
