Lunes, 13 Mayo 2019

Hiring of employees by non-resident entities with no fixed establishment

VolverIrrespective of their country of origin, non-resident entities with no fixed establishment who wish to take on new staff to work in Portugal, on an employed basis, are able to do so without first having to constitute a company or any other legal structure in the country. Neither tax nor employment law requires the setting up of any structure/investment vehicle before a company can hire employees in Portugal.

There are a number of obligations that do have to be met before hiring can take place. The entity must be registered with the National Register of Legal Persons, the Tax and Customs Authority and the Social Security Office.

The first step would be to register the entity with the National Register of Legal Persons, which will assign a Portuguese tax number. This will then allow the entity to fulfil its Social Security and Tax and Customs Authority obligations (specifically as regards the monthly payroll report).

The next step is to file a start of business declaration with the Tax and Customs Authority. Under the Corporate Income Tax Code, legal persons and other entities that have no installed management structure in Portugal will only be subject to Corporate Income Tax on the earnings obtained in the country. Those entities that have no fixed establishment in Portugal are not required to have organised accounts or to calculate their taxable profit.

The entity must also register with the Social Security Office, to obtain the respective identification number.

Assuming that any new employees will be working in Portugal, the non-resident entity will have to comply with a number of periodic social security and tax obligations (in the same way that a resident entity does).

Employees will have to be enrolled in the Portuguese social security system as employed staff and all the contributory obligations inherent in such an enrolment will have to be complied with. Article 21, number 2, of European Parliament and Council Regulation (EC) no. 987/2009, dated 16 September, (which establishes the procedure for implementing Regulation (EC) no. 883/2004 on the coordination of social security systems) is pertinent here. The regulation states that an employer who does not have a place of business in the Member State whose legislation is applicable and the employee in question may agree that the latter may fulfil the employer’s obligations on its behalf as regards the payment of contributions without prejudice to the employer’s underlying obligations. The employer shall send notice of such an arrangement to the competent institution of that Member State. Each month, it will have to inform the Social Security Office of the amounts paid to the employee and any social security contributions that are due.

In relation to tax obligations, and specifically employee income withholding tax, the Personal Income Tax Code states that entities paying employees are required to withhold the tax when salaries are paid or made available to the employees in question. Amounts that are withheld must be paid to the tax office by the 20th of the month following the month in which they were deducted. A monthly payroll report must be filed with the Tax and Customs Authority and the tax that has been withheld must be paid, on a monthly basis.

As regards the type of work contract, the non-resident entity may choose any of the types of employment contract allowed under Portuguese employment law, in accordance with their needs. It is perfectly possible, and quite common, to opt for a fixed-term contract.

The non-resident entity must comply with various obligations inherent in the employment relationship. These include, amongst other things, contributing to the Worker's Compensation Fund, taking out workers’ compensation insurance, complying with safety, hygiene and health standards in the workplace and filing the Single Report.

The Labour Department at Belzuz Abogados, S.L. - Portugal Office has extensive experience in providing advice on legal compliance and on the hiring of employees to non-resident entities with no fixed establishment in Portugal.

 Sónia Lopes Ribeiro Sónia Lopes Ribeiro 

Departamento Derecho laboral | (Portugal)

 

Belzuz Abogados SLP

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