Company registration in the Azores

Company registration in the Azores

The Azores, an autonomous region of Portugal, offers a compelling jurisdiction for company registration due to its unique status within the European Union. Nestled in the Atlantic Ocean, the islands boast distinctive economic and tax policies, rendering them an appealing locale for international businesses.

This article elucidates the principal facets and benefits of engaging in business activities in the Azores, including tax incentives, economic conditions, and business registration procedures. Additionally, it underscores the legal intricacies and operational considerations pivotal when selecting this jurisdiction for your enterprise.

Overview of the economic and political climate of the Azores

As an integral part of Portugal, the Azores is fully enmeshed in the economic and legal framework of the European Union. This integration affords companies registered in the Azores unfettered access to the EU’s single market, encompassing over 500 million consumers. Adherence to European directives and regulations ensures transparency in business operations and safeguards investments.

The region is attractive to investors due to its tax incentives and subsidies, facilitated by the European Union to foster economic development in geographically remote areas. These supportive measures make company registration in the Azores particularly advantageous for businesses aiming to optimise their tax liabilities and enhance profitability.

Political stability and autonomous status within Portugal

The Azores enjoys an autonomous regional status, granting it a measure of self-governance, inclusive of its own regional government and parliament. This autonomy fosters political stability and permits the tailoring of legislation to meet the needs of the local economy and business community. The regional government actively devises programmes to entice investment, thus rendering the establishment of a company in the Azores appealing to foreign investors.

Affiliation with Portugal also bestows upon the Azores all the benefits of the country’s EU membership, including political and economic backing in times of international or economic crises. This affiliation further solidifies the Azores' reputation as a stable and secure jurisdiction for business initiation.

The investment climate in the Azores is bolstered by consistent infrastructure projects funded by both the EU and the Portuguese government, which enhance the business milieu and augment the region’s allure for company establishment.

Strategic advantages of doing business in the Azores

Setting up a company in the Azores offers numerous strategic benefits that render the region particularly attractive to entrepreneurs and international corporations. Below are the key elements contributing to a favourable business environment in the Azores:

• Geostrategic location
  • Occupying a pivotal geographical position in the Atlantic Ocean, the Azores acts as a conduit between Europe, North and Central America, and Africa. This location is ideal for logistics and transport operations, as well as for companies engaged in export-import activities. Establishing a company in the Azores provides access to expansive markets and facilitates the convenient dispatch of goods to various destinations.
• Tax incentives
  • The Azores offers enticing tax conditions for businesses, including reduced rates of corporate tax and VAT relative to mainland Portugal. Moreover, special economic zones such as the Santa Maria SEZ offer further benefits, including diminished tax rates and additional incentives for investors. These factors make establishing a company in the Azores a favourable strategy for tax reduction.
• Developed infrastructure
  • With well-developed infrastructure including modern ports and airports, the Azores delivers efficient logistical solutions for businesses. The advancement of telecommunications and technology infrastructure further supports enterprises, particularly in the information technology and e-commerce sectors.
• Tourist potential
  • Renowned for its unique natural beauty, the Azores is a favoured tourist destination. Ventures in the hospitality, tourism, and entertainment sectors can yield considerable profits, buoyed by the increasing influx of tourists and support from local authorities. Establishing a business in the tourism sector in the Azores opens a plethora of market opportunities.
• Support from local government
  • The local government proactively supports both nascent and existing businesses through various programmes and initiatives aimed at stimulating economic growth. This support encompasses grants, subsidies, and consultative and educational services for entrepreneurs.

Prerequisites for establishing a business in the Azores

Establishing an enterprise in the Azores necessitates adherence to specific prerequisites crucial for lawful and effective commercial operations under the scope of both local and European regulations.

Company identity specifications

The selected business identifier must be unique and not currently registered within the Portuguese Commercial Register. It should accurately represent the enterprise's operations and eschew any misleading or derogatory terms. The name should conform to Portuguese or internationally recognized commercial terminologies.

Official address and registration

Each enterprise established in the Azores must possess a registered office within the archipelago. This locale serves as the primary site for official communications and legal notifications. Additionally, it is documented in the registration files and listed on the public commercial registry.

Criteria for C-level managers

There are no nationality or residency prerequisites for the founders and executives of firms in the Azores, allowing extensive possibilities for global investors. It is essential that these pivotal individuals demonstrate the requisite expertise and experience to govern the enterprise proficiently. Although no specific qualifications are mandated by law, different forms of enterprise may demand varying numbers of founders or executives—for example, a joint-stock company necessitates at least five shareholders.

Incorporation regulations in the Azores

Incorporating a business in the Azores, similar to the broader Portuguese context, entails adherence to a set of regulations that are generally conducive to foreign investment but require compliance with specific legal and bureaucratic standards. The "Empresa na Hora" program facilitates the rapid incorporation of companies within an hour at designated facilities, assuming all necessary documentation and capital are present.

Foreign enterprises must obtain tax identification and adhere to Portuguese taxation laws, encompassing corporate tax, VAT, and potentially other local levies. Portugal extends a preferential tax regime to Azorean residents, which includes reduced VAT rates and lower personal and corporate income tax rates.

Although there are no universal restrictions on foreign entities owning real estate in Portugal, certain business activities, especially those potentially impacting the environment or related to national security, may encounter specific limitations or require additional approvals.

Enterprises operating within the Azores must conform to Portuguese employment regulations, which govern hiring practices, minimum wages, work conditions, and termination procedures. The Azores feature specific regional employment provisions that may also require consideration.

The regional administration of the Azores offers various incentives for investments, particularly for enterprises contributing to the regional economic advancement, such as those in tourism, technology, and environmentally sustainable initiatives. These incentives may include financial subsidies, tax reductions, and support in property acquisition.

As a component of Portugal, the Azores adhere to EU regulations, encompassing directives on trade, competition, labour rights, and environmental standards. Membership in the EU also affords benefits such as access to a unified market and various EU-funded programs.

Primary business entities

In the Azores, entrepreneurs are provided with a selection of corporate structures, each designed to meet different operational needs and objectives. Available structures include a branch of a foreign company, a JSC (SA), or an LLC (LDA).

• Branches enable international firms to maintain a local foothold in the Azores as extensions of the foreign parent company, without constituting a separate legal entity. The establishment of a branch involves the submission of financial statements to the parent company and obtaining approvals from Portuguese regulatory authorities. Branches function under the name of the parent company and are obligated to comply with both local and international tax and reporting regulations.
• An SA is optimal for large-scale enterprises and those seeking to generate capital via public or private offerings. An SA in the Azores necessitates a minimum share capital of EUR 50K, which is required before operational commencement. This entity type must designate at least three directors and hold annual general shareholder meetings, making it suitable for larger entities with intricate management structures and formalized corporate practices.
• An LDA is typically preferred by small to medium-sized enterprises due to its operational flexibility and minimal capital prerequisites. The min. authorized capital for an LDA is merely 1 EUR, rendering it accessible to start-ups and smaller ventures. Financial liability for LDA members is confined to their capital contributions, thereby minimizing personal financial exposure. The governance of an LDA can be managed by one or more managers, appointed by the founders.

Promising economic sectors

The Azores offer several attractive economic sectors that may interest investors looking to register a company in this region. These sectors stand out due to unique natural conditions, geostrategic location, and support at both local and European levels.

Agriculture remains a key element of the Azorean economy, specialising in dairy and beef production, as well as viticulture and organic farming. Establishing a company in the Azores in this sector can be a profitable investment, given that over 30% of Portugal’s milk is produced here. The cheeses made on the islands are famous for their quality and have Protected Designation of Origin (PDO) status, making them highly valuable on international markets.

Fishing and sectors related to the sea, such as aquaculture and maritime tourism, hold significant positions in the Azorean economy. Creating a business in this area on the Azores could involve activities such as whale watching, underwater fishing, and yachting. The Azores' Exclusive Economic Zone accounts for 18% of European maritime territories, offering unique opportunities for research and exploitation of marine resources.

Tourism is one of the fastest-growing sectors of the Azorean economy. Registering a company in the Azores in this sector might include developing ecotourism routes or services related to the maritime and natural features of the region. The strategy for sustainable tourism development in the Azores has received international recognition, making the region attractive for investment in this area.

The islands attract significant investments in scientific research and innovation, especially in the fields of marine sciences and technologies. Opening a company in the Azores in this area means taking advantage of opportunities to participate in European scientific projects and programs. The Azores are also in the process of developing infrastructure for launching small satellites, which is of interest to companies in the space technology sector.

These sectors demonstrate diverse opportunities for business and can provide stable growth and development for companies registered in the Azores.

What are the optimal locations?

The Azores are an archipelago consisting of nine inhabited islands, each with its unique features and advantages for doing business. When registering a company in the Azores, it is important to choose a location that optimally matches the specifics and needs of the enterprise. Below is a review of the most promising areas for establishing a firm on various Azorean islands.

São Miguel is the largest and most populous island, often considered the economic and administrative centre of the Azores. Here is located the city of Ponta Delgada, which is the main transport hub of the region with the most developed infrastructure. Opening a company in Ponta Delgada means ensuring easy access to logistical, financial, and tourist resources. This is especially relevant for the tourism business, IT companies, and service enterprises.

The island of Terceira is known for its historic city of Angra do Heroísmo, which is listed as a UNESCO World Heritage site. Establishing a firm in this region can be beneficial for enterprises related to cultural tourism and educational projects. Angra do Heroísmo also serves as an administrative centre and offers good opportunities for government and legal services.

The island of Faial, whose centre is the city of Horta, is known for its research institutions and developed infrastructure for research and education. Creating an enterprise in Horta means integrating into an active scientific community, which is particularly attractive for startups in the fields of biotechnology and ecology.

The island of Pico is known for its wine-making traditions, and its vineyards are also included in the UNESCO heritage list. Registering an Azorean company on Pico can be advantageous for agricultural sector enterprises, especially in winemaking and ecotourism.

Santa Maria offers unique opportunities for investment in the maritime industry and related technologies due to its strategic position. Opening a company here can facilitate the development of projects in the field of marine bio-resources and renewable energy.

SEZ "Santa Maria"

Special attention from businessmen wishing to establish a company in the Azores should be given to the SEZ "Santa Maria". It is located on the island of the same name within the Azores archipelago and represents a key zone for attracting business and investment. This zone offers unique conditions for enterprises aiming for international expansion and tax burden optimization.

One of the main advantages of the SEZ is the significantly reduced corporate tax rate for companies registered in this zone – down to 5% under certain conditions until 2027. This creates favourable conditions for founding a firm aimed at international trade and export.

The government of Portugal and the autonomous administration of the Azores provide additional support in the form of simplified bureaucracy and administrative procedures, which eases the process of registration and management of the company.

Located at the crossroads between Europe, Africa, and America, SEZ "Santa Maria" offers unique logistical advantages for companies engaged in transatlantic trade.

The island of Santa Maria has a developed transport and technology infrastructure, which is crucial for creating an enterprise with a high degree of dependence on reliable transport and communication networks.

Companies operating in the SEZ have access to local resources, including a skilled workforce and natural resources, which can significantly reduce operational costs.

Fiscal and financial obligations in the Azores

The CIT in the Azores is levied at a reduced rate compared to mainland Portugal. The primary CIT rate here is 14.7%, which is lower than the mainland's standard rate of 21%. This favorable rate positions the Azores as a beneficial locale for business registration, particularly for entities aiming to optimize their tax responsibilities.

Regarding VAT, the Azores apply three distinct rates:

• Standard rate: 16% (in contrast to 23% on mainland Portugal and 22% on Madeira),
• Intermediate rate: 9% (compared to 12% on Madeira and 13% on the mainland),
• Reduced rate: 4% (5% on Madeira and 6% on the mainland).

Procedure for incorporation

The establishment of a company in the Azores involves a structured approach, incorporating various legal steps and the submission of requisite documentation.

1: Name selection and reservation

The initial stage requires choosing a unique business name, ensuring there is no duplication with existing entities. This name must be confirmed and secured via the Central Register of Business Names.

2: Documentation of legal entities

Based on the selected legal structure, necessary statutory documents such as the memorandum of association and company charter need to be drafted. These documents are critical as they outline the governance framework, equity distribution among founders, stipulated capital, and core business operations.

3: Official registration

The culminating step involves the formal registration of the company with the pertinent Registration Authority, resulting in the issuance of a NIPC, which acts as both the legal and fiscal identifier for the business.

Registration fees and relevant taxes, determined by the type of legal entity and the volume of authorized capital, must be settled through the financial system, with all payments corroborated by valid receipts.

• Required documentation
• Articles of Association
• Company Bylaws
• Identification documents and criminal record certificates for C-level managers
• Lease agreement or property ownership certificate
• Proof of capital contribution