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Portugal: Market Profile

Picture: Portugal factsheet
Picture: Portugal factsheet

1. Overview

Portugal is a founding member of NATO and entered the European Community (now the European Union (EU)) in 1986. Since entering the union, Portugal has become a diversified and increasingly service-based economy. Portugal supports international efforts to promote human and economic development, reduce poverty, and boost shared prosperity around the world. Portugal has recovered from its post-financial crisis turbulence, allowing it to exit the EU's excessive deficit procedure in mid-2017. The incumbent center-left minority Socialist government has unwound some unpopular austerity measures while managing to remain within most EU fiscal targets.

Sources: World Bank, Fitch Solutions

2. Major Economic/Political Events and Upcoming Elections

November 2015
Following inconclusive parliamentary elections, Socialist leader Antonio Costa formed centre-left government.

October 2016
Former Prime Minister Antonio Guterres was appointed UN Secretary General.

October 2018
Construction on the Tamega Hydroelectric Complex began. The hydropower plant was expected to contribute 2,320MW of electricity the national grid and regional power pool. Construction was estimated to be completed in 2023.

October 2019
Legislative elections are to be held, determining the position of the prime minister and parliamentary representatives.

Sources: BBC Country Profile – Timeline, Fitch Solutions

3. Major Economic Indicators

Graph: Portugal real GDP and inflation
Graph: Portugal real GDP and inflation
Graph: Portugal GDP by sector (2017)
Graph: Portugal GDP by sector (2017)
Graph: Portugal unemployment rate
Graph: Portugal unemployment rate
Graph: Portugal current account balance
Graph: Portugal current account balance

e = estimate, f = forecast
Sources: IMF, World Bank, Fitch Solutions
Date last reviewed: May 1, 2019

4. External Trade

4.1 Merchandise Trade

Graph: Portugal merchandise trade
Graph: Portugal merchandise trade

Source: WTO
Date last reviewed: May 1, 2019

Graph: Portugal major export commodities (2018)
Graph: Portugal major export commodities (2018)
Graph: Portugal major export markets (2018)
Graph: Portugal major export markets (2018)
Graph: Portugal major import commodities (2018)
Graph: Portugal major import commodities (2018)
Graph: Portugal major import markets (2018)
Graph: Portugal major import markets (2018)

Sources: Trade Map, Fitch Solutions
Date last reviewed: May 1, 2019

4.2 Trade in Services

Graph: Portugal trade in services
Graph: Portugal trade in services

e = estimate
Source: WTO
Date last reviewed: May 1, 2019

5. Trade Policies

  • Portugal joined the World Trade Organisation (WTO) in January 1995, having been a member of the General Agreement on Tariffs and Trade (GATT) since 1962.

  • Portugal applies the EU's Common External Tariff, which means goods manufactured and imported from within the EU are not subject to customs charges. The average tariff rate for EU states is just 1.5%, which is among the lowest globally. The duties for non-European countries are also relatively low, especially for manufactured goods (4.2% on average). However, textile, clothing items (high duties and quota system) and food-processing industry sectors (average duties of 17.3% and numerous tariff quotas) still see protective measures. Most of the country's major trade partners are within the EU, hence risks are less pronounced.

  • The EU has imposed various anti-dumping measures on a wide range of products, predominantly in the areas of textiles, parts, steel, iron and machinery on goods coming from China and a few other Asian nations to protect domestic industries.

  • On November 13, 2016, the European Commission (EC) imposed a provisional anti-dumping duty on imports of some primary and semi-processed metals from China. The rate of duty is between 43.5% and 81.1% of the net free-at-union-frontier price before duty, depending on the company. The rate of duty for similar goods from Belarus is 12.5% of the net free-at-union-frontier price before duty.

  • In 2016, the EC introduced an import licensing regime for steel products exceeding 2.5 tonnes. The regulation will be active until May 15, 2020.

  • In March 2016, the EC imposed a definitive countervailing duty (8.7% or 9%) on imports consisting largely of textile products originating in India.

  • In Q215, the EC issued regulations on trade restrictions with Turkey regarding cattle, beef, watermelons and prepared tomatoes. This will help to protect domestic agriculture and regional farming businesses.

  • On January 1, 2017, the EU imposed additional import duties on certain fruit and vegetables if the quantity of the goods exceeds the trigger volume level within the specified application period.

  • In total, the EU imposes 39 unique anti-dumping measures, affecting 19 states. China has the largest number of anti-dumping provisions against it. Tariff lines are relatively fewer, with only 23 tariffs applicable to imports.

Sources: WTO – Trade Policy Review, Fitch Solutions

6. Trade Agreements

6.1 Multinational Trade Agreements


  1. The EU Common Market: The transfer of capital, goods, services and labour between member nations enjoy free movement. The common market extends to the 28 member nations of the EU, namely: Austria, Belgium, Bulgaria, Croatia, Cyprus, the Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden and the United Kingdom.

  2. European Economic Area (EEA)-European Free Trade Association (EFTA) (Iceland, Liechtenstein, Norway and Switzerland): While it enhances trade flows between these countries and the EU, only Switzerland is a fairly major trading partner.

  3. EU-Turkey: The customs union within the EU provides tariff-free access to the European market for Turkey, benefitting both exporters and importers.

  4. EU-Japan Economic Partnership Agreement (EPA): In July 2018, the EU and Japan signed a trade deal that promises to eliminate 99% of tariffs that cost businesses in the EU and Japan nearly EUR1 billion annually. According to the EC, the EU-Japan EPA will create a trade zone covering 600 million people and nearly a third of global GDP. The result of four years of negotiation, the EPA was finalised in late 2017 and came into force on February 1, 2019 after the EU Parliament ratified the agreement in December 2018. The total trade volume of goods and services between the EU and Japan is an estimated EUR86 billion. The key parts of the agreement will cut duties on a wide range of agricultural products, while seeking to open up services markets – particularly financial services, e-commerce, telecommunications and transport. Japan is the EU's second biggest trading partner in Asia after China. EU exports to Japan are dominated by motor vehicles, machinery, pharmaceuticals, optical and medical instruments, and electrical machinery.

  5. EU-SADC EPA (Botswana, Lesotho, Mozambique, Namibia, South Africa and Swaziland): An agreement between EU and SADC delegations was reached in 2016 and is fully operational for SADC members following the ratification of the agreement by Mozambique. The remaining six members of SADC included in the deal (the Democratic Republic of the Congo, Madagascar, Malawi, Mauritius, Zambia and Zimbabwe) are seeking economic partnership agreements with the EU as part of other trading blocs – such as with East or Central African communities.

Provisionally Active

The Comprehensive Economic and Trade Agreement (CETA): The CETA is an agreement between the EU and Canada. CETA was signed in October 2016 and ratified by the Canadian House of Commons and EU Parliament in February 2017. However, the agreement has not been ratified by every European state and has only provisionally entered into force. CETA is expected to strengthen trade ties between the two regions, having come into effect in 2016. Some 98% of trade between Canada and the EU will be duty free under CETA. The agreement is expected to boost trade between partners by more than 20%. CETA also opens up government procurement. Canadian companies will be able to bid on opportunities at all levels of the EU government procurement market and vice versa. CETA means that Canadian provinces, territories and municipalities are opening their procurement to foreign entities for the first time, albeit with some limitations regarding energy utilities and public transport.

Ratification Pending

  1. EU-Central America Association Agreement (Guatemala, El Salvador, Honduras, Nicaragua, Costa Rica, Panama, Belize and the Dominican Republic): An agreement between the parties was reached in 2012 and is awaiting ratification (29 of the 34 parties have ratified the agreement as of October 2018). The agreement has been provisionally applied since 2013.

  2. EU-Singapore FTA (EUSFTA): On February 13, 2019, the European Parliament passed the agreement which would see the creation of the EUSFTA. However, before the agreement is implemented, all the states involved will need to ratify the agreement through their individual legislatures; in this case, the FTA may become provisionally active along the lines of states which have already ratified the agreement.

Under Negotiation

  1. EU-Australia: The EU, Australia's second largest trade partner, has launched negotiations for a comprehensive trade agreement with Australia. Bilateral trade in goods between the two partners has risen steadily in recent years, reaching almost EUR48 billion in 2017, and bilateral trade in services added an additional EUR27 billion. The negotiations aim to remove trade barriers, streamline standards and put European companies exporting to or doing business in Australia on equal footing with those from countries that have signed up to the Trans-Pacific Partnership or other trade agreements with Australia. The Council of the EU authorised opening negotiations for a trade agreement between the EU and Australia on May 22, 2018.

  2. EU-United States (Trans-Atlantic Trade and Investment Partnership): This agreement was expected to increase trade and services, but it is unlikely to pass under the Trump administration in the United States against the backdrop of rising global trade tensions.

  3. EU-Vietnam FTA: In July 2018, the EU and Vietnam agreed on final texts for the EU-Vietnam FTA and the EU-Vietnam Investment Protection Agreement (IPA). As of March 2019, the final text of the agreement has been finalised and is awaiting signature and conclusion.

Sources: WTO Regional Trade Agreements database, Fitch Solutions

7. Investment Policy

7.1 Foreign Direct Investment

Graph: Portugal FDI stock
Graph: Portugal FDI stock
Graph: Portugal FDI flow
Graph: Portugal FDI flow

Source: UNCTAD
Date last reviewed: May 1, 2019

7.2 Foreign Direct Investment Policy

  1. The Portuguese Trade and Investment Agency – AICEP Portugal Global – is a government agency promoting investment inflows and assisting international companies in finding business opportunities in Portugal. It also aims to contribute to the success of Portuguese companies abroad in their internationalisation processes or export activities. AICEP offers comprehensive, one-stop investment consultancy services, while providing a single point of contact in all phases: pre-investment, incentives negotiation, settling in and after care.

  2. Both the International Center for settlement of Investment Disputes (ICSID) and the International court of arbitration, International chamber of commerce (ICCWBO) are available to foreigners investing in Portugal for the purpose of resolving disagreements.

  3. There is no discrimination between domestic and foreign investors with respects to establishing business in almost all the economic sectors that are open to private investment. Foreign investors must register within 30 days of the investment.

  4. A number of industries require government approval for investment purposes. These industries are:

    • Defence
    • Water management
    • Public telecommunications operators
    • Railway
    • Maritime transportation
    • Air transport

  5. Investors wishing to set up a new credit agency, or who wish to acquire the controlling stake of a Portuguese bank or financial institute, need the approval from:

    • The Bank of Portugal (if the foreign entity is from an EU state)
    • The Ministry of Finance (for non-EU entities)

  6. Portugal ensures land owners compensation in the case of expropriation; however, such cases have little-to-no precedent in Portugal's recent history.

  7. Portugal has over 50 bilateral investment treaties with other states, including Germany, Poland, South Korea, Pakistan, Croatia, Chile, Mauritius, Uruguay, Mexico, Egypt, Philippines, Turkey, China, Qatar, Kuwait and the UAE.

  8. Portugal has designated the following industries as top priority, with investment initiatives and policies promoting their development:

    • Biotechnologies
    • Shared service centres
    • The electric and electronic sectors
    • High value added chemistry
    • The NICT (new information and communication technologies)
    • High end tourism

Sources: WTO – Trade Policy Review, Fitch Solutions

7.3 Free Trade Zones And Investment Incentives

Free Trade Zone/Incentive ProgrammeMain Incentives Available
Madeira Free Trade Zone (also known as the International Business Centre) and the Santa Maria Island Free Trade Zone- Offers a lowered Corporate Income Tax (CIT) rate of 5% (in comparison to the standard CIT rate in the rest of Portugal, which stands at 21%) if business is conducted with an entity not situated in Portugal.

- Reduced CIT rates have a ceiling applied to them, with the limit determined by the number of jobs created by the entity in question.

- To qualify for tax reductions, companies must meet one of the following criteria:
  • Creation of one to five jobs in the first six months of operation and undertake a minimum investment of EUR75,000 in the acquisition of fixed assets, tangible or intangible, in the first two years of operation
  • Creation of six or more jobs in the first six months of operation
- No property transfer tax

- No withholding tax on dividends paid to members of EU states or with states which have a double tax agreement with Portugal

- 80% exemption on stamp duty

- 80% exemption on municipal property tax

- A 50% reduction in taxable income if the entity fulfils two of the following criteria:
  • Contribution to the modernisation of the economy through technical innovation, new products and procedures
  • Diversification of the regional economy by introducing new activities of added value
  • Fixation of qualified human resources
  • Contribution to the improvement of the environment
  • Creation of 15 jobs for a period of 5 years

Sources: US Department of Commerce, Fitch Solutions

8. Taxation – 2019

  • Value Added Tax: 6%-23%
  • Corporate Income Tax: 21%

Source: Portugal Ministry of Finance

8.1 Business Taxes

Type of TaxTax Rate and Base
Standard rate: 21%
Reduced rate: 17% (for the first EUR15,000 for SMEs)
Capital Gains Tax- Taxed as CIT
- 50% of gainsobtained from the disposal of fixed, biological or intangible assets (other than those related to similar or investment firms), and which have been held for a minimum of one year, may be excluded from tax payment given that the income generated from the disposal of the asset is reinvested within a certain time period
Value Added TaxMainland Portugal
- Standard rate: 23%
- Intermediate rate: 13%
- Reduced rate: 6%

- Standard: 22%
- Intermediate: 12%
- Reduced rate: 5%

- Standard rate: 18%
- Intermediate: 9%
- Reduced rate: 4%
Withholding Tax: dividends, interest and royalties25% to non-residents (35% if recipient is located in a tax haven)
Transfer Tax- 6% on residential property
- 5% on rural property
- 6.5% on non-residential urban property
- 10% if buyer is located in a tax haven
Payroll Tax: social security- 23.75% of an employee's salary (as paid for by the employer)
- employees contribute 11%
- contributions by an employer are tax deductible

Source: Portugal Ministry of Finance
Date last reviewed: May 1, 2019

9. Foreign Worker Requirements

9.1 Work Permit

EU member citizens do not require a work permit, but their employer must inform the job office about their employment. Citizens of the EEA (with EU member states, Iceland, Norway and Lichtenstein) and Switzerland do not require a visa to enter, reside and work in the country. No work permit is needed by foreigners from outside the EU if they have a permanent residence or family reunion permit, have been granted asylum, study in the country or have blue or green cards.

9.2 Obtaining Foreign Worker Permits

Individuals from non-EU countries require residence and work permits. The procedure to be granted a work permit includes a review of the local job market to ensure that there is no Portuguese or EU job seekers available to fulfil the position. Employers must first apply for a permit to hire foreign workers. The vacant position must be reported to the local district labour office and cannot be changed at a later stage to fit the profile of a potential employee. The candidate must then apply for a work permit. The government issues the permit for a maximum of two years, which can be repeatedly prolonged, but always for a maximum of two years, and may be renewed as many times as needed. The permit process takes an average of one month.

9.3 Blue Card

Intended for the stay of a highly qualified employee. A foreigner holding a blue card may reside in the country and work in the job for which the blue card was issued, or change that job under the conditions defined. High qualification means a duly completed university education or higher professional education which has lasted for at least three years. The blue card is issued with the term of validity three months longer than the term for which the employment contract has been concluded, but for the maximum period of two years. The blue card can be extended. One of the conditions for issuing the blue card is a wage criterion – the employment contract must contain gross monthly or yearly wage at least at the rate of 1.5 multiple of the gross average annual wage.

10. Risks

10.1 Sovereign Credit Ratings

Rating (Outlook)Rating Date
Moody'sBaa3 (Stable)12/10/2018
Standard & Poor'sBBB (Stable)15/03/2019
Fitch RatingsBBB (Stable)30/11/2018

Sources: Moody's, Standard & Poor's, Fitch Ratings

10.2 Competitiveness and Efficiency Indicators

World Ranking
Ease of Doing Business Index
Ease of Paying Taxes Index
Logistics Performance Index
Corruption Perception Index
IMD World Competitiveness39/6333/63N/A

Sources: World Bank, IMD, Transparency International

10.3 Fitch Solutions Risk Indices

World Ranking
Economic Risk Index
Short-Term Economic Risk Score66.565.865.4
Long-Term Economic Risk Score59.862.563.4
Political Risk Index
Short-Term Political Risk Score75.675.675.6
Long-Term Political Risk Score79.879.879.8
Operational Risk IndexN/A
Operational Risk Score72.170.871.0

Source: Fitch Solutions
Date last reviewed: May 1, 2019

10.4 Fitch Solutions Risk Summary

The economy's shift towards an investment and export-oriented growth model will depend crucially on its ability to keep the momentum behind reform going. The minority government led by Socialist Party leader Prime Minister Antonio Costa has proven to be a sound fiscal steward, bringing the budget deficit to within EU limits more quickly than expected. However, some austerity measures are being reversed, and progress on privatisation has slowed, with the government remaining averse to selling state-owned enterprises. This will limit the prospects of more fiscal flexibility, and would miss an opportunity to boost competitiveness of key industries.

Portugal's long-term demographic dynamics suggest a significant decline in both the working-age and total population over the next decade, as migration outflows and declining fertility rates take their toll. As the population ages, health and pension spending is set to rise to 25-30% of GDP between by 2027, compared with half that in 2000. The shift in demographic structure will also put increasing pressure on the working-age population to underwrite the country's large welfare state, potentially exacerbating social tensions. Already, the country's powerful labour unions have expressed their discontent with the government's taxation and employment policies and austerity measures.

Source: Fitch Solutions
Date last reviewed: April 29, 2019

10.5 Fitch Solutions Political and Economic Risk Indices

Graph: Portugal short term political risk index
Graph: Portugal short term political risk index
Graph: Portugal long term political risk index
Graph: Portugal long term political risk index
Graph: Portugal short term economic risk index
Graph: Portugal short term economic risk index
Graph: Portugal long term economic risk index
Graph: Portugal long term economic risk index

100 = Lowest risk; 0 = Highest risk
Source: Fitch Solutions Economic and Political Risk Indices
Date last reviewed: May 1, 2019

10.6 Fitch Solutions Operational Risk Index

Operational RiskLabour Market RiskTrade and Investment RiskLogistics RiskCrime and Security Risk
Portugal Score71.051.766.580.985.0
Central and Eastern Europe Average73.564.671.376.3
Central and Eastern Europe Position (out of 8)20272210
Emerging Europe Average73.564.6
Emerging Europe Position (out of 28)20
Global average49.750.3
Global Position (out of 201)27

100 = Lowest risk; 0 = Highest risk
Source: Fitch Solutions Operational Risk Index

Graph: Portugal vs global and regional averages
Graph: Portugal vs global and regional averages
Operational Risk Index
Labour Market Risk Index
Trade and Investment Risk IndexLogistics Risk
Crime and Security Risk Index
New Zealand77.773.775.772.189.4
United Kingdom77.671.479.0
United States77.581.375.382.970.5
Isle of Man65.869.162.449.382.3
Regional Averages73.564.671.376.381.8
Emerging Markets Averages46.048.146.544.744.8
Global Markets Averages49.750.349.849.049.8

100 = Lowest risk; 0 = Highest risk
Source: Fitch Solutions Operational Risk Index
Date last reviewed: May 1, 2019

11. Hong Kong Connection

11.1 Hong Kong’s Trade with Portugal

Graph: Major export commodities to Portugal (2018)
Graph: Major export commodities to Portugal (2018)
Graph: Major import commodities from Portugal (2018)
Graph: Major import commodities from Portugal (2018)

Note: Graph shows the main Hong Kong exports to/imports from Portugal (by consignment)
Date last reviewed: May 1, 2019

Graph: Merchandise exports to Portugal
Graph: Merchandise exports to Portugal
Graph: Merchandise imports from Portugal
Graph: Merchandise imports from Portugal

Note: Graph shows Hong Kong exports to/imports from Portugal (by consignment)
Exchange Rate HK$/US$, average
7.76 (2014)
7.75 (2015)
7.76 (2016)
7.79 (2017)
7.83 (2018)
Sources: Hong Kong Census and Statistics Department, Fitch Solutions
Date last reviewed: May 1, 2019

Growth rate (%)
Number of Portuguese residents visiting Hong Kong27,391-2.8
Number of Portuguese residing in Hong Kong1100.9

Sources: Hong Kong Tourism Board, United Nations Department of Economic and Social Affairs – Population Division

Growth rate (%)
Number of European residents visiting Hong Kong1,929,824-0.2
Number of developed states citizens residing in Hong Kong65,6801.6

Sources: Hong Kong Tourism Board, United Nations Department of Economic and Social Affairs – Population Division
Date last reviewed: May 1, 2019

11.2 Commercial Presence in Hong Kong

Growth rate (%)
Number of Portuguese companies in Hong KongN/A
- Regional headquarters
- Regional offices
- Local offices

11.3 Treaties and agreements between Hong Kong and Portugal

Portugal and Hong Kong signed a comprehensive double tax agreement in 2011, with the agreement coming into effect in 2012.

Source: Hong Kong Inland Revenue Department

11.4 Chamber of Commerce (or Related Organisations) in Hong Kong

The European Chamber of Commerce in Hong Kong
Address: Room 1302, 13/F, 168 Queen’s Road, Central, Hong Kong
Tel:  (852) 2511 5133
Fax: (852) 2511 6833

Source: The European Chamber of Commerce in Hong Kong

Honourary Portuguese Consulate in Hong Kong
Address: Room B, 25/F, Yardley Commercial Building, 3 Connaught Road West, Sheung Wan, Hong Kong
Email: info@hkportugalcon.org
Tel: (852) 2587 7182
Fax: (852) 2587 7331

Source: Honourary Portuguese Consulate in Hong Kong

11.5 Visa Requirements for Hong Kong Residents

Hong Kong residents can travel to the Schengen Zone without a visa. They can travel for tourism and business purposes and remain in the region for a period of up to 90 days.

Source: ETIAS Visa
Date last reviewed: May 1, 2019

Content provided by Picture: Fitch Solutions – BMI Research
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