Accounting Regimes in Portugal
If you are thinking about opening a company in Portugal, one of the first decisions you will have to make is which accounting regime you will adopt.
There are two accounting regimes in Portugal: contabilidade organizada e a simplified accounting.
Both have their advantages and disadvantages, so it’s important to learn more about each before making a decision.
Organized Accounting
Organized accounting is the most widely used accounting system in Portugal. This system is mandatory for companies that exceed a certain annual turnover threshold and for companies that provide accounting services to third parties.
The main advantage of this regime is that it allows for more detailed management of the company's finances. With organized accounting, it is possible to record all of the company's financial transactions, which facilitates decision-making and allows for better management of financial resources. In addition, this regime allows for the deduction of a wider range of expenses, which can result in a significant reduction in the tax burden.
Simplified Accounting
Simplified accounting is a simpler and less demanding accounting regime than organized accounting. This regime is mandatory for companies that do not exceed a certain annual turnover threshold.
The main advantage of this regime is its simplicity. With simplified accounting, it is possible to record only the most relevant financial transactions, which makes the company's financial management easier and less expensive. In addition, this regime implies fewer tax and accounting obligations, which can be an advantage for companies with fewer financial resources.
However, it is important to keep in mind that simplified accounting has some limitations. For example, it does not allow the deduction of all expenses, which can result in a higher tax burden. In addition, this regime does not allow for such detailed management of the company's finances as organized accounting.
In short, the choice between organized accounting and simplified accounting depends on your company’s needs and resources. If your company is small and has fewer financial resources, simplified accounting may be the best option. However, if your company is larger and needs more detailed financial management, organized accounting may be the best choice.
Selection Criteria
When choosing between organized or simplified accounting, it is important to consider several factors. Here are some criteria you can use to make an informed decision.
Legal requirements
The first criterion to consider is whether your company is subject to specific legal requirements regarding accounting. If your company has a turnover of more than €200,000 or if you are required to issue invoices, then organized accounting may be the best option for you. On the other hand, if your company has a turnover of less than €200,000 and is not required to issue invoices, then simplified accounting may be more appropriate.
Turnover
Your company’s turnover is another important factor to consider. If your company has a turnover of more than €200,000, then organized accounting may be the best option for you. This is because organized accounting allows you to have a more detailed view of your operations and can better manage cash flow. On the other hand, if your company has a turnover of less than €200,000, then simplified accounting may be more appropriate.
Complexity of Operations
The complexity of your business operations is also an important factor to consider. If your business has complex operations, such as selling products subject to special taxes, organized accounting may be the best option for you. This is because organized accounting allows you to have a more detailed view of your operations and better manage cash flow. On the other hand, if your business has simple operations, such as providing services, simplified accounting may be more appropriate.
In short, the choice between organized or simplified accounting depends on several factors, including legal requirements, turnover, and complexity of operations. By considering these factors, you can make an informed decision and choose the option that best suits your business needs.
Advantages and disadvantages
When choosing between organized or simplified accounting, it’s important to understand the advantages and disadvantages of each. Here’s some information to help you decide which option is best for your business.
Benefits of Organized Accounting
Organized accounting is a more structured and complete option. It offers benefits such as:
- Greater accuracy and detail in your business's financial and tax information;
- Possibility of better financial management, with more complete reports and analyses;
- Compliance with legal and tax requirements, which can avoid fines and legal problems;
- Possibility of deducting expenses that are not allowed in simplified accounting.
Benefits of Simplified Accounting
Simplified accounting is an easier and more affordable option for small businesses or individual microentrepreneurs. It offers benefits such as:
- Less bureaucracy and lower costs to keep accounting up to date;
- Possibility of simpler financial management, without the need for complex reports and analyses;
- Possibility of a more advantageous tax framework for your business.
Limitations and Challenges
Both options have limitations and challenges. In organized accounting, greater complexity can be an obstacle for small businesses, in addition to having a higher cost. In simplified accounting, the lack of detailed information can make financial management and decision-making difficult.
In short, the choice between organized or simplified accounting depends on the needs and characteristics of your business. It is important to evaluate the benefits and challenges of each option before making a decision.
Decision and Implementation
When deciding between organized or simplified accounting, it is important to carefully evaluate your company's situation and needs. The choice should not be made solely based on financial criteria, but also on strategic considerations.
Strategic Assessment
Before choosing between organized or simplified accounting, it is important to consider the type of business you have and your growth strategy. If your company is small and has a simple structure, simplified accounting may be the best option. On the other hand, if your company is large and has a complex structure, organized accounting may be more suitable.
Another factor to consider is the need for financing. If your business needs external financing, organized accounting may be a more attractive option because it provides more detailed and accurate financial information.
Transition Process
If you decide to switch from simplified to organized accounting, it is important to keep in mind that the transition process can be lengthy and require a significant investment of time and resources. It is important to carefully evaluate the costs and benefits of the transition before making a decision.
To make the transition, you will need to hire an accountant or accounting firm to manage the process. The accountant will help you organize your financial records and prepare the financial statements necessary for organized accounting.
In short, choosing between organized or simplified accounting is an important decision that should be made based on your company’s needs and strategy. It is important to carefully evaluate the costs and benefits of each option before making a decision and, if you decide to switch to organized accounting, be prepared for a lengthy and demanding transition process.
Frequently Asked Questions
The main difference between organized accounting and the simplified regime is the way taxable profit is calculated. While in organized accounting, all expenses and revenues are recorded and calculated, in the simplified regime a coefficient is applied to the company's turnover to determine taxable profit.
The choice between organized accounting and the simplified regime should be based on several factors, such as turnover, the complexity of the company's operations and the possibility of deducting expenses. It is important to carefully evaluate each option before making a decision.
Organized accounting offers greater accuracy in calculating taxable profit, allowing for greater deduction of expenses and reducing the risk of accounting errors. However, it can be more complex and costly in terms of time and resources. The simplified regime is easier and faster to implement, but may limit the deduction of expenses and may not be suitable for companies with a high turnover.
The change from organized accounting to the simplified regime can be made at any time, as long as the legal requirements are met. It is necessary to submit a declaration of changes to the taxation regime to the Tax and Customs Authority.
Companies with an annual turnover of more than €200,000 are required to adopt organised accounting. However, companies with a turnover of less than this amount may choose to adopt organised accounting.
To adopt organized accounting, it is necessary to comply with several legal requirements, such as keeping organized accounting records and recording all of the company's operations. It is also necessary to submit tax and accounting returns within the stipulated deadlines.
