Opening a company for a highly qualified IT professional in Portugal

In this article, we present a case study of one of our clients. We will cover the initial request, the solution proposed by Kilobanan, and the financial results of the solution.

Client Situation

The client is a highly qualified IT professional who recently moved to Portugal with his spouse. His main employer is an American company, which was ready to work with him on a contractual basis.

The initial requests from the client were:

• How much will it cost him from a tax perspective to receive all his income as clear cash?
• How can he provide income for his spouse that could be considered legitimate to present to immigration authorities?

Kilobanan's Solution

During the initial consultation, a Kilobanan specialist interviewed the client, asking questions about his long-term financial goals.

In the interview, the client expressed his plans to invest the cash received from his main job into a new business venture in real estate.

After the initial consultation, a financial simulation was prepared for the client with three different scenarios:

1. The client will be a sole entrepreneur with a contract for the American company.
2. He and his spouse will continue as sole entrepreneurs, each having half of the value of the contract with the American company.
3. Open a company where the client and his spouse would be employees of the company.

Following the simulation results and considering the client's request to re-invest earned money into the business, the most optimal solution was to open a company.

This solution was selected for several key reasons:

1. It would allow both of them to obtain official employment status in Portugal, which is sufficient for immigration authorities.
2. Despite higher company opening and maintenance costs, lower company tax (IRC) compared to personal tax (IRS) allows accumulation of money in a corporate account, saving from 10% to 30% depending on the situation.
3. Future business expenses generated by the company could be used to reduce the tax base, saving even more on taxes compared to the IRS situation where the entire income is subject to taxation.

Overall, our solution allowed our client to reduce their tax by 25% compared to the sole contractor regime and save 10% of overall revenue.

Conclusion

Although this case is highly specific, it shows how the correct selection of a tax regime and proper financial planning can reduce taxes in full compliance with the law. However, this solution is not universal for everyone. If you’d like your case to be examined, feel free to schedule a consultation with one of our specialists and get 20% discount with promo code KILOBLOG.

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