Portugal’s Financial Reporting Requirements: A Guide for Companies
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As a member of the European Union, Portugal is required to comply with EU accounting and financial reporting regulations. In this guide, we will outline the key requirements that companies must follow when preparing and submitting their annual financial statements.
Preparation of Annual Financial Statements
According to the Commercial Companies Code, companies are required to file annual financial reports with the state authorities, including:
- A balance sheet
- Profit and loss statement
- Notes to accounts
- Directors’ annual report
Publicly traded companies, limited liability companies, and companies listed on a stock exchange must publish their financial statements.
Financial Year and Reporting Period
The financial year in Portugal typically corresponds to the calendar year. However, resident and non-resident companies with permanent representation in the country may choose a different reporting period. The same reporting period must be maintained for at least five years.
Language Requirements
Documents submitted to the authorities must be in Portuguese, Spanish, French, or English. In practice, all documents in languages other than Portuguese must be accompanied by a certified translation into Portuguese.
International Financial Reporting Standards (IFRS)
Companies are allowed to apply IFRS to prepare their annual consolidated financial statements. However, small and medium-sized companies may use the Portuguese Generally Accepted Accounting Principles instead.
Audit Requirements
Audit requirements vary depending on the type of company and its size:
- Public limited companies must be audited annually
- Private limited companies with a turnover of over €3 million, total assets of over €1.5 million, or an average of 50 employees per year must also undergo an annual audit
- Private companies that do not meet these thresholds may be exempt from the audit requirement
Approval and Submission of Accounts
The accounts must be approved by the board of directors and signed on behalf of all directors before being submitted to the Registration Chamber (ROC) 30 days prior to the general meeting of shareholders.
Shareholder Access and Approval
Directors must provide access to the accounts and supporting documents for shareholders during working hours for 15 days prior to the general meeting, and the accounts must be provided to shareholders for approval within three months after the end of the financial year.
Penalties for Non-Compliance
Failure to file accounts on time may result in penalties ranging from €500 to €5,000. Companies that fail to file their tax returns may also face penalties of up to €3,750.
Consolidated Accounts and Parent Company Exemptions
Consolidated accounts must be presented at a general meeting of shareholders within five months after the end of the financial year and must be prepared in accordance with IFRS. Parent companies are exempt from the obligation to prepare consolidated annual returns if their subsidiaries do not exceed certain thresholds.
Conclusion
Portugal has a set of strict financial reporting requirements that companies must comply with to avoid penalties and ensure transparency. Companies should carefully review these regulations to ensure compliance and maintain accurate financial records.
Remember, failure to comply with Portugal’s financial reporting requirements can result in significant penalties. Ensure you are aware of the specific requirements applicable to your company by consulting with a professional accountant or attorney specializing in Portuguese law.