What is company liquidation?
This article outlines the essential requirements for liquidation and provides a step-by-step overview of the process—from initial dissolution to final closure—helping company owners understand their obligations and the stages involved in closing a company legally and transparently.
What is company liquidation?
It's the process of legally closing down a company, paying off debts and dividing up what's left between the shareholders.
What is the difference between dissolution and liquidation?
Dissolution is the decision to close the company. Liquidation is the process of paying off debts, selling assets and closing records.
Can I close a company with debts?
Yes, but it is compulsory to pay off the debts before closure.
What documents are needed to liquidate a company?
For the Registry Office, the minutes of dissolution and liquidation are sufficient.
To close the company completely, including at the Tax Office, accounting documents are also required, such as the final liquidation balance sheet and the declaration of cessation of activity.
Can a company with outstanding debts still be liquidated?
Yes, but it’s not advisable. The process starts with the dissolution, and the shareholder then has up to two years to settle all debts. If the debts aren’t paid, the liquidation can’t be completed, and there may be legal or financial consequences. It's best to seek advice before proceeding.
Do we need to inform the Portuguese Tax Authority?
Yes. It is mandatory to inform the Portuguese Tax Authority during the liquidation process. You must file the declaration of cessation of business activity, submit all final tax returns (such as IRC and VAT), and ensure that any outstanding tax obligations are fully settled.
In which situations do I need a fiscal representative to liquidate my company?
You will need a fiscal representative if none of the shareholders are fiscal residents in Portugal. The fiscal representative ensures compliance with tax obligations during the liquidation process and serves as the point of contact with the Portuguese Tax Authority.
How is the VAT refund request processed during the liquidation process?
During liquidation, if the company is entitled to a VAT refund, the request must be made through the final VAT return submitted to the Portuguese Tax Authority. The refund will only be processed if there are no outstanding tax debts and all legal requirements are met. In some cases, the Tax Authority may request additional documentation or carry out a review before approving the refund. Additionally, the amount to be refunded must be greater than €25 to be eligible.
Where do the debts of the AT and SS come from?
In the liquidation process, debts to AT and Social Security arise from the company’s failure to meet its tax and social contribution obligations. Debts to AT typically include unpaid corporate income tax (IRC), value-added tax (VAT), and withheld income tax (IRS) not delivered to the State. Debts to Social Security come from unpaid employer contributions and employee deductions that were not transferred. All such debts must be settled before issuing the liquidation balance sheet, so that it accurately reflects that the company has no outstanding debts or pending payments.
Why is the last day of activity date only an estimate?
The last day of activity is considered only an estimate because the company may still have pending obligations, such as submitting final tax declarations or settling debts, and administrative delays at the registry office can also affect the timeline. Additionally, if any corrections or adjustments are needed in the submitted documents, the process can be extended, making the initially indicated date merely provisional.
What are the stages of the liquidation process?
The liquidation process of a company in Portugal includes the following key stages:
- Appointment of a fiscal representative, if necessary, when none of the shareholders are fiscal residents in Portugal.
- Regularização de dívidas na AT e na SS
- Finalization of accounting records, ensuring all financial movements, assets, and liabilities are accurately registered.
- Cessation of activity for VAT and Social Security, with formal communication to the respective authorities.
- Preparation of the liquidation balance sheet, confirming that all debts have been fully settled.
- Drafting of the minutes of dissolution and liquidation, which must be signed by the shareholders.
- Submission of the required documents to the Commercial Registry and notification to the competent authorities, formalizing the closure.
- End-of-year closure, including submission of the final IRC declaration and the IES, if applicable.
What is the balance sheet of the company?
The balance sheet is a financial statement that shows what the company owns (assets), what it owes (liabilities). In the context of liquidation, the final balance sheet must reflect that all debts have been settled, especially to the Tax Authority and Social Security, ensuring the company has no outstanding obligations before it is officially closed.
Why does the liquidation process take so long at the registry office?
The liquidation process often takes additional time at the registry office for several reasons. A significant factor is the high volume of cases managed by a limited workforce, which naturally leads to processing delays. Each submission must undergo thorough manual verification, including review of the minutes of liquidation and confirmation that there are no outstanding debts to the Tax Authority or Social Security. In certain situations, coordination with external entities is also necessary, further extending the timeline. Additionally, many registry offices must manage backlogs of pending cases, which contributes to longer waiting periods overall.