Portuguese Market

General economic indexes Portuguese market:

Located in the South-Western Europe Portugal serves as a gateway to Europe. Its GDP equals to 188,700,000,000 USD, GDP per capita equals 17,900 USD; inflation rate equals to 4.4 percent, unemployment rate equals to 4.4 percent, Portuguese external debt equals to 13,100,000,000 USD . Portugal is a member of European Union since the previous century. Its economy is stable and transparent. Thus people can make business in accordance to the laws of market economy. It can be assumed that the average statistical Portuguese can afford drinking whiskey from average and expensive price categories if other things being equal.

Drinking preferences:

Portuguese Madeira is a symbol of wine. Portuguese prefer drinking wine, but spirits consumed with pleasure too. A statistical research in 1997 – 1998th discovered that “In Azores about 15 percent of population over 14 (190.000) drink from one to more than five times a day (and it is estimated that at every time 2 to 3 drinks are consumed), while other 15 percent drinks 2-3 times a week, also with 2-3 drinks a time” . Consequently it can be assumed that Portuguese market can consume lots of spirits and alcoholic beverages.

Investment Climate

a. General information:

Portugal is considered to be open for foreign investments and its government even established an Agency for investment in Portugal, which “acts as a one-stop shop for investors with projects over 25 million Euros”. This agency provides all necessary steps to improve Portuguese investment climate, prints articles and guides about its economy, provides different kinds of incentives (subsidies, credits and tax cuts) etc. Moreover Agency for investment in Portugal has developed very flexible conditions when determining which subsidies and grants should be given to each foreign investor depending on amount of investments, business sector and other factors (detailed information can be found at agency’s web-site http://www.investinportugal.pt/). Most Portuguese industries are open for foreign investments except for several (defense, water supply, transport, telecommunications etc) which require additional licensing and other procedures but this situation is typical for all countries of the European union.

About 74 percent of investments in Portuguese economy come from European Union, then from United States and Japan. Political risks are minimal in Portugal.

Portugal is a member of World Trading Organization, World Customs organizations, Organization for Economic Cooperation and Development and other international economical and trading organizations.

b. Taxation:

Portuguese income taxation system bears progressive character: individual income tax rates varies from twelve up to forty percent of the taxable income; corporation income tax rate equals 27.5 percent (consists of 25 percent federal rate plus 2.5 percent local rate) of the taxable income. A good news that companies which operate in free-trade zone of Madeira pay reduced income tax (5 percent - 12.5 percent).

Value added tax (VAT) applied to all goods and services sold within Portuguese but in free-trade zones it is significantly reduced. Its rate varies from 5 percent to 21 percent: standard rate – 21 percent, intermediary rate – 12 percent and reduced rate – 5 percent; in free-trade zones these rates are 15 percent, 8 percent and 4 percent correspondingly . Excise duties on alcohol and alcoholic beverages are driven by European Union’s one: minimum 2.2 Euro per litre of a product (considering spirits). Social obligations are quite significant and equal to 27.5 percent of the wages fund.

Moreover, 25 percent of tax is levied from the corporation dividends. In general taxation in Portugal is quite significant but it can not be considered as too heavy. But taking into consideration possible benefits from subsidies, grants and tax cuts available for foreign investors, Portuguese taxation can be considered as moderate.

c. Legislation:

Unfortunately legislation and all other ‘nodes’ (court system, registering committees etc) which are closely connected to the law can be characterized with bureaucracy and extreme slowness. For instance, as it is stated in the “2005 Investment Climate Statement – Portugal” by US Department of State: “It takes, for example, an average of 420 days for a bounced check case to wend its way through court system, double the EU average”. However Portuguese legislation includes all the laws regulating economy and its issues (bankruptcies, mergers etc) in accordance to European Union’s laws and international law. In general Portuguese regulation are transparent and consistent enough.

d. Corruption:

“Corruption is a relatively limited but enduring aspect of the business culture in Portugal … Portugal ranked 27th out of 145 countries considered (listed from least to most corrupt)” . In the same source it is stated that American companies facing bribery and corruption do not consider it to be serious obstacles.

e. Competition:

There are all major whiskey producers presented in the Portuguese market in supermarkets, restaurants, bars and free-trade zones. It is possible to buy almost any kind of whiskey online with delivery within several days. So competition is quite serious but of course there is a space for new ‘players’.

f. Entering barriers and other disadvantages:

There often occur problems with Value added tax (VAT) calculations and foreign companies registration in Portugal.

One more disadvantage of the Portuguese market is that there are only two tax-free (duty-free) trade zones (Madeira and Azores) but they are developed enough.

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