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The Ultimate Guide to Debt Collection in Portugal

Welcome to the ultimate resource for navigating the complexities of debt collection in Portugal. At Debitura, we combine local savvy with a decade of international experience to offer unrivaled debt recovery services. This guide promises comprehensive insights to reclaim your finances effectively and efficiently.

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The debt collection process in Portugal

Understanding the process of debt collection in Portugal is crucial for creditors aiming to recover their funds efficiently. Below is a brief introduction to the strategic steps involved in Portuguese debt recovery, adapted to give you a fluent orientation through each phase of the process. With Debitura, navigating the complexities of Portuguese debt collection becomes streamlined and risk-free.

Amicable Collection Phase

Initiate with a friendly, out-of-court collection aimed at an amicable resolution. This phase generally includes: Direct Communication, Reach out to your debtor to understand the payment delay. Payment Reminders: Use various communication methods (email, SMS, letters) for sending reminders. Formal Notice: Issue a formal notice letter, outlining the debt and the consequences of non-payment.

Court Proceedings

If the amicable approach fails, escalate the matter through legal proceedings to obtain a court judgment, essential for debt enforcement.

Debt Enforcement

With a court judgment in hand, you can pursue coercive measures like asset seizure and sale, referred to as debt enforcement.

Bankruptcy Proceedings

In cases where the debtor has no assets for seizure, consider filing for bankruptcy. If the debtor is already bankrupt, submit your claim promptly for verification.

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Principal Participants in Portuguese Debt Recovery

Understanding the key actors in Portugal's debt collection ecosystem is crucial for navigating the process effectively. Below, we detail the roles of debt collection agencies, bailiffs, and lawyers—each playing a pivotal part in successful debt recovery.

Debt Collection Agencies in Portugal

Debt collection agencies in Portugal serve as the frontline in the debt recovery process. These entities specialize in the initial stages of collection, focusing on negotiations and communications with the debtor to facilitate voluntary payment. Utilizing various methods, including letters, phone calls, and email communication, they aim to secure debt repayment without resorting to legal action. The activities of these agencies are governed by strict regulations to ensure fair practice and consumer protection, such as the prohibition of abusive practices highlighted in the Consumer Protection Code. Their role is typically prior to any judicial involvement and is essential for creditors looking for a less confrontational resolution. However, their power is limited to non-judicial measures, requiring other entities' intervention when legal action becomes necessary.

Bailiffs in Portugal 

Bailiffs play a critical and authoritative role in the Portuguese debt collection process. They are legal officers empowered to enforce court judgments and carry out asset seizures, evictions, and the service of legal documents. While bailiffs operate under the umbrella of judicial authority, their involvement is necessitated when a debtor fails to comply voluntarily after a court order has been issued against them. They ensure that the creditor's rights are realized through legal enforcement actions. The activities and procedures undertaken by bailiffs are strictly regulated by Portuguese law, ensuring a balance between effective debt recovery and the protection of debtor's rights.

Lawyers in Portugal 

In Portugal, lawyers become indispensable particularly in complex debt collection cases that require judicial intervention. Their expertise is paramount in navigating the intricacies of Portuguese legal proceedings, drafting and filing of legal documents, and representing the creditor in court. Lawyers step into the debt recovery process when a dispute necessitates a legal resolution or when the amount in question exceeds certain thresholds that require formal litigation. Their deep understanding of the legal landscape, including the Consumer Protection Code and specific regulations regarding debt recovery practices, makes them invaluable for managing the judicial collection phase and ensuring that the creditor's rights are effectively upheld.

Tap into Debitura's expert network of local debt recovery bailiffs and lawyers. Start your claim now.

Mastering Amicable Debt Collection in Portugal

Amicable debt collection emphasizes a strategy centered around relationship-building to recoup outstanding payments, favoring empathy and dialogue instead of confrontational tactics. This approach seeks to keep a healthy relationship between creditor and debtor, aiming for mutually acceptable resolutions that acknowledge the debtor's circumstances while ensuring the creditor's reimbursement. It adopts a non-confrontational tactic suitable for uncontested claims, sidestepping the intricacies and expenses associated with legal proceedings.

We advocate for initiating with amicable debt collection, except in cases where your claim is contentious or entangled in complex legal matters.

The Integral Role of Collection Agencies in Amicable Resolution in Portugal

In the realm of amicable resolution, collection agencies play a crucial role, particularly when creditors are short on time or lack the necessary skills for efficient debt recovery. Entities such as Debitura provide tailored services, beginning with accurate identification of debts and debtors, and proceeding to engage through reminders or official notifications. Their neutral perspective, free from personal stakes, often results in more effective debt retrieval by offering unbiased, professional intermediation.

Benefits of Amicable Debt Settlement

Choosing amicable recovery is advantageous for both sides; creditors avoid legal expenses and maintain valuable business connections due to the process's courteous nature. Debtors are presented with more flexible repayment options, alleviating economic pressure and promoting goodwill towards the creditor. This method highlights mutual respect and comprehension, laying the groundwork for successfully meeting financial commitments.

Shifting from Amicable to Legal Recovery

Although amicable recovery presents numerous advantages, certain scenarios might compel a shift towards legal action. Indicators for transitioning to legal recovery include lack of response, consistent failure to honor commitments, or intentional avoidance by the debtor. This transition should be a well-thought-out final measure, considering the substantial costs and duration associated with legal actions, and is typically considered after all amicable avenues have been explored.

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The debt collection process in Portugal

Understanding the process of debt collection in Portugal is crucial for creditors aiming to recover their funds efficiently. Below is a brief introduction to the strategic steps involved in Portuguese debt recovery, adapted to give you a fluent orientation through each phase of the process. With Debitura, navigating the complexities of Portuguese debt collection becomes streamlined and risk-free.

Amicable Collection Process in Portugal

Pre-legal debt collection in Portugal involves direct, non-litigious efforts to recover debts, typically conducted by legally registered professionals. This section outlines the essential strategies and legal prerequisites for effective amicable debt recovery.

Amicable Collection - Key Takeways
  • Initial Communication: Starting with a professional demand letter outlining the debt specifics is crucial.
  • Legal Representation: Only registered lawyers and solicitors are authorized for debt negotiation in Portugal.
  • Documentation: Enforceable documents, post-2013, are key for successful amicable collection.
  • Judicial Transition: Should amicable efforts fail, the transition to judicial collection is the next step.
  • Interest Rates: Legal interest for late payments is defined semi-annually, with current rates at 12.5% for commercial transactions.
  • Statute of Limitations: The enforcement window varies by debt type, e.g., 20 years for general debts.
  • Retention of Title: For unpaid goods, creditors can retain ownership until payment is made.
  • Payment Reminders: Effective reminders include detailed information and a respectful tone.
  • Installment Agreements: Structured payments are permissible under specific legal frameworks.
  • Cost and Duration: Amicable recovery is often faster and cheaper than litigation, depending on the case complexity.

Mastering Amicable Debt Collection in Portugal

Amicable debt collection emphasizes a strategy centered around relationship-building to recoup outstanding payments, favoring empathy and dialogue instead of confrontational tactics. This approach seeks to keep a healthy relationship between creditor and debtor, aiming for mutually acceptable resolutions that acknowledge the debtor's circumstances while ensuring the creditor's reimbursement. It adopts a non-confrontational tactic suitable for uncontested claims, sidestepping the intricacies and expenses associated with legal proceedings.

We advocate for initiating with amicable debt collection, except in cases where your claim is contentious or entangled in complex legal matters.

The Integral Role of Collection Agencies in Amicable Resolution in Portugal

In the realm of amicable resolution, collection agencies play a crucial role, particularly when creditors are short on time or lack the necessary skills for efficient debt recovery. Entities such as Debitura provide tailored services, beginning with accurate identification of debts and debtors, and proceeding to engage through reminders or official notifications. Their neutral perspective, free from personal stakes, often results in more effective debt retrieval by offering unbiased, professional intermediation.

Benefits of Amicable Debt Settlement

Choosing amicable recovery is advantageous for both sides; creditors avoid legal expenses and maintain valuable business connections due to the process's courteous nature. Debtors are presented with more flexible repayment options, alleviating economic pressure and promoting goodwill towards the creditor. This method highlights mutual respect and comprehension, laying the groundwork for successfully meeting financial commitments.

Shifting from Amicable to Legal Recovery

Although amicable recovery presents numerous advantages, certain scenarios might compel a shift towards legal action. Indicators for transitioning to legal recovery include lack of response, consistent failure to honor commitments, or intentional avoidance by the debtor. This transition should be a well-thought-out final measure, considering the substantial costs and duration associated with legal actions, and is typically considered after all amicable avenues have been explored.

Explore our step-by-step guide for amicable debt collection

Step 1: Laying the Foundation for Successful Debt Recovery in Portugal

Effective preparation is crucial for successful debt recovery. This initial step determines the direction of the entire collection process, emphasizing the importance of a solid foundation. By thoroughly understanding the legal framework and requirements in Portugal, creditors can streamline the collection process and enhance their chances of recovery.

1.1 Verify the Validity of Payment Terms

In Portugal, the payment terms are distinctly outlined for business-to-business (B2B), business-to-consumer (B2C), and business-to-government (B2G) transactions. Adhering to these terms is critical for ensuring smooth commercial operations and legal compliance.

  • B2B Transactions: The standard payment period should not exceed 60 days. Nevertheless, this can be extended upon mutual agreement by both parties involved.
  • B2C Transactions: Although specific regulations for B2C transactions are not explicitly mentioned, consumer protection laws ensure that payment terms are fair and do not exploit consumers.
  • B2G Transactions: The deadline for payments in transactions involving businesses and public entities is initially set at 30 days. However, it might be extended to 60 days under specially negotiated terms.

Key regulations pertaining to payment terms include the Decree-Law No. 62/2013 and Decree-Law No. 28/2019, which aim to ensure prompt payments and fair practices within commercial transactions.

1.2 Check the Status of Limitations

The statute of limitations in Portugal varies according to the type of debt. Understanding these limitations is essential in the debt recovery process.

  • The general prescription period for debts is 20 years, with specific exceptions based on the type of debt.
  • Debts related to essential services have a prescription period of 6 months, while those to educational establishments and for health services have prescription periods of 2 and 3 years respectively.
  • Rents, maintenance payments, and other periodically renewable obligations have a 5-year limitation period.
  • Public education tuition fees and taxes are limited to 8 years.

Interruptions or suspensions of the prescription period can occur through judicial notification or acknowledgment of the debt by the debtor. Consulting a legal professional is recommended for specific situations.

1.3 Assembling Essential Documents

To initiate a debt collection process in Portugal, assembling the right documents is imperative. This includes:

  • Executive Titles: Documents deemed as "título executivo" such as judicial decisions, checks, promissory notes, or contracts authored/authenticated by a notary.
  • Ensuring documents like invoices and contracts are clear, authentic, and recognized legally as executive titles is crucial.
  • Communication Records: Retaining copies of communication with the debtor, including demand letters and payment reminders, is essential for evidence.

These documents form the basis for both extrajudicial and judicial phases of the debt collection process. The use of electronic documents and signatures is possible, provided they meet authentication standards.

Step 2: Initiating Communication with Your Debtor

As part of the amicable collection process, maintaining a direct line of communication with debtors is paramount. It paves the way to understanding, cooperation, and, eventually, finding mutually benefitting resolutions. Notably, phone calls serve as a highly effective channel for these purposes, offering immediacy and a personal touch that can significantly influence positive outcomes.

Introduction to Calling Your Debtor

Communication is the cornerstone of any successful debt recovery strategy. In the realm of amicable collection, it's not merely about reminding the debtor of their obligations but fostering a sense of cooperation that can lead to harmonious solutions. Phone conversations stand out for their ability to bridge understanding, offering a direct and personal means of engaging with debtors.

Preparing to Call Your Debitor

Portugal's debt collection laws prioritize fairness and transparency, mandating a respectful and dignified treatment of debtors throughout the collection process. Given these regulatory landscapes, it's crucial to navigate these conversations with a thorough understanding of what is legally permissible and what isn't. This ensures both parties’ protection and upholds the principle of good faith in collections. 

Equipped with the full context of the debt is essential before making the call. This includes having detailed records of the debt origin, an itemized breakdown of the amounts owed (principal, interest, fees), and notes on previous communication attempts. This preparation ensures the conversation can be as factual, straightforward, and productive as possible.

Best Practices When Calling Your Debtors


  • Maintain a respectful and professional tone, focusing on understanding the debtor's current financial situation.
  • Clearly articulate the purpose of your call and the specifics of the debt.
  • Work towards finding amicable solutions, such as feasible payment plans that align with the debtor's financial capabilities.


  • Avoid using aggressive or threatening language that could lead to accusations of harassment.
  • Steer clear of making demands or promises that fall outside the legal boundaries established by Portuguese debt collection laws.

Documenting the Call

Keeping meticulous records of the conversation is crucial. It not only aids in keeping track of the debtor's situation and your collection efforts but also serves as a vital piece of evidence should the case escalate to judicial proceedings. Additionally, it's important to follow up the call with a written summary of what was discussed and any payment agreements made, sending it to the debtor for their records.

Step 3: Sending a Payment Reminder (Free Template Included)

Among the initial steps of amicable debt collection in Portugal, sending a payment reminder plays a significant role. Positioned as a strategic communication effort, it can potentially resolve unpaid debts without escalating to formal legal action. This section elucidates the practical approach to crafting and dispatching a payment reminder, aligned with Portugal's legal framework.

Understanding Payment Reminders in Portugal

Within the landscape of Portuguese debt collection law, a payment reminder serves as a formal notification to the debtor, indicating overdue payments. It distinguishes itself from casual friendly nudges by adopting a more structured and legal tint, where necessary information regarding the unpaid invoice is clearly highlighted.

Legal Framework for Payment Reminders

Payment reminders in Portugal are aligned with the legal stipulations that aim to protect both parties involved. Although not directly delineated in the Civil Code, such reminders are carved out from a business's necessity to collect overdue debts. Timely notifications can alter the debtor's default status, adding a legal layer to the unpaid debt's urgency.

Preparing to Send a Payment Reminder

  • Invoice number, amount due, and due date.
  • Details of the products or services provided.
  • Suggested payment deadline (e.g., 14 days from the reminder).
  • Possible consequences of non-payment.
  • Previous communications regarding the debt.

Ensuring the accuracy of the debt before dispatching the reminder is paramount. The aim is to maintain clarity and factual correctness in all communications—this safeguards against potential disputes.

Crafting an Effective Payment Reminder

  • Retain a professional and courteous tone.
  • Clearly articulate the specifics of the debt.
  • Include mention of previous attempts to resolve the debt.
  • Specify a clear payment deadline.
  • Highlight the consequences of further delaying payment.

Striking a balance between professionalism and assertiveness is key. The objective is to prompt action without compromising future client relationships.

Sending the Reminder

Payment reminders can be transmitted via email or postal mail. Each method bears its own merits; emails offer immediacy and digital traceability, while postal mail may carry a weightier formal significance. Ensuring proof of delivery might be critical in potential future legal proceedings.

Follow-Up After Sending a Reminder

If the reminder goes unheeded, subsequent reminders may be necessary, albeit in a measured manner to avoid unnecessary escalation. Open to negotiation, proposing feasible payment plans could be a constructive next step for debtors unable to settle in full immediately.

Documentation and Record-Keeping

Documenting every exchange concerning the payment reminder is crucial. Detailed records should encompass communication dates, methods, and any debtor responses. This meticulous approach assists in building a robust case should legal action become necessary.

Free Reminder Template 

Subject: Friendly Reminder: Invoice [Invoice Number] Overdue

Dear [Debtor's Name],

I hope this message finds you well. We are reaching out to kindly remind you of the unpaid invoice [Invoice Number] for [Service/Product] that was due on [Due Date]. As of today, we have not received payment for this invoice, and it is currently [Number of Days] days overdue.

Invoice Details:

  • Invoice Number: [Invoice Number]
  • Amount Due: [Amount]
  • Services/Products Provided: [Service/Product Description]
  • Original Due Date: [Due Date]

We understand that circumstances can arise which may lead to payment delays, and we are more than willing to discuss any issues you might be facing. To assist in resolving this matter expediently, we kindly request that you settle the outstanding amount by [New Payment Deadline].

Possible Ways to Make Payment:

  • Bank Transfer: [Bank Details]
  • Online Payment: [Online Payment Link]
  • Contact Us: If you need assistance or wish to discuss alternate payment arrangements, please contact us at [Contact Information].

We wish to highlight the importance of prompt payment to ensure uninterrupted services and to avoid any potential additional charges or formal debt recovery actions, which may include further costs. Your cooperation in resolving this matter at your earliest convenience would be greatly appreciated.

If you have already settled this invoice recently, please accept our sincere thanks and disregard this reminder. We would appreciate it if you could confirm the payment to help us update our records accordingly.

Should you have any questions or require further clarification, feel free to reach out to us. We are here to help.

Thank you for your attention to this matter and your continued business.


[Your Name]

[Your Position]

[Your Contact Information]

Step 4: Send a Letter of Formal Notice 

A demand letter in Portugal, more than a mere payment reminder, serves as a formal notification to the debtor about their overdue obligations. It's distinguished by its formal tone and the outlining of potential legal consequences should the debt remain unpaid. This essential step in the debt collection process is backed by Portugal's legal framework, ensuring the debtor is fully aware of the seriousness of their situation. Unlike a simple reminder, a demand letter is a precursor to possible legal action, making its reception by the debtor crucial.

Legal Foundations for Demand Letters

Portuguese law provides a structured approach to debt collection, emphasizing the importance of demand letters as a formal notice of payment default. Such letters serve as official notifications, potentially pivotal in legal disputes, ensuring that debtors cannot claim ignorance of their obligations.

Preparing a Demand Letter

  • Essential Information: A legitimate demand letter must include the debtor's full name and address, the exact amount due, details of the original invoice (such as invoice number and date), and a clear payment deadline. This precision is pivotal to prevent disputes and uphold the letter's legal validity.
  • Accuracy and Completeness: Ensuring all information provided in the letter is accurate and comprehensive is crucial, as any discrepancies may weaken the creditor's case in potential legal proceedings.

Crafting an Effective Demand Letter

  • Professional Tone: While it's necessary to convey the seriousness of the debt situation, maintaining a professional and respectful tone is crucial. This helps to keep open the possibility of amicable resolution.
  • Clarification: Clearly stating previous attempts at resolution and communication can remind the debtor of the ongoing efforts to settle the debt outside of court, emphasizing the importance of prompt action on their part.
  • References: Mentioning any previous agreements or negotiations that have taken place can also strengthen the position of the creditor.

Delivery Methods and Considerations

Delivering the demand letter through a method that ensures proof of receipt is essential. Registered mail with acknowledgment or email (with read receipt) is preferred, establishing a verifiable record that the debtor has been formally notified. Choosing the most appropriate delivery method depends on factors like the debtor’s history of response and the existing relationship between the creditor and the debtor.

Actions Following the Demand Letter

If the demand letter goes unanswered, creditors might need to prepare for further steps, including sending additional reminders or considering legal action. However, any response or payment proposal from the debtor should be carefully reviewed to negotiate a feasible solution, always with meticulous documentation.

Documentation and Compliance

Meticulous record-keeping of all documents and correspondence related to the demand letter process cannot be overstated. Such records are crucial for legal compliance and can significantly influence the outcome in the event of formal legal proceedings. Ensuring all actions and communications comply with Portuguese law protects creditors and supports a clear, streamlined collection process.

Step 5: Calculation of Collection Costs

Understanding the structure and legal boundaries for applying late payment and debt collection fees in Portugal is crucial for creditors. This section will outline the permissible fees, provide an illustrative example, and delve into the regulatory landscape governing these charges, aiming to strike a fair balance between protecting creditors' rights and safeguarding debtor welfare.

Part 1: Detailed Overview of Permissible Fees

When engaging in the recovery of outstanding debts, creditors in Portugal can levy the following:

  • Late Payment Fees: Fixed amounts that creditors may add to the outstanding debt to cover the costs associated with the delay in payment.
  • Debt Collection Fees: Additional costs relating to the recovery process, which can include administrative expenses, correspondence, and any third-party collection services engaged.

Note: The exact structure and amounts of these fees can differ based on the nature of the transaction (B2B or B2C) and any prior agreements between the contracting parties.

Fee Table for Reminder and Amicable Collection Process

The following table showcases typical fees applicable in the reminder and amicable collection process, highlighting distinctions between individual consumers and businesses.

Type of Fee
Consumer Debt
Business Debt
Late Payment Fee
Fixed amount up to €40 (as guided by the Late Payment Directive)
Fixed amount or percentage of the debt, up to a reasonable cost of recovery
Debt Collection Fee
Varies with costs incurred; must be fair and not excessive
Subject to agreement; generally higher than consumer debt due to increased complexity

Example Calculation

Scenario: A debt of €5000 is owed by a business and has remained unpaid past the agreed payment date.

Assuming: Late payment fee of €50 and debt collection fees amounting to 3% of the debt for engaging a professional collection service.


  • Late Payment Fee: €50
  • Debt Collection Fee: €5000 * 0.03 = €150
  • Total Fees Added: €200

Total Amount Due: €5000 (principal) + €200 (fees) = €5200

Regulatory Framework and Limitations on Fees

Portuguese legislation sets clear boundaries on the imposition of late payment and collection fees to protect debtors from unfair practices. The inclusion and magnitude of these fees must be justifiable, reasonable, and transparently communicated to the debtor prior to enforcement. Moreover, there are caps on the amount of late payment fees, as determined by the Late Payment Directive for consumer transactions, ensuring that fees remain within reasonable bounds.

Creditors must also be mindful of their obligation to provide detailed breakdowns of any fees added to outstanding debts, permitting debtors to understand the basis of these charges.

For debtors who feel unfairly charged, there are legal avenues available for dispute resolution, including mediation and, if necessary, litigation. Creditors are advised to maintain meticulous records of all communication and costs incurred as part of their debt recovery efforts to substantiate their claims in such instances.

Step 6: Calculate Interest Rates

When it comes to debt collection in Portugal, interest rates play a pivotal role in compensating creditors for late payments. Understanding and applying the correct interest rates is essential for fair and lawful debt recovery. This section aims to guide creditors through the landscape of interest rates in Portugal, focusing on late payments across various transactions including B2C (Business-to-Consumer), B2B (Business-to-Business), and B2G (Business-to-Government). It provides clarity on the statutory rates applicable, calculation methods, and the balance between creditor rights and debtor welfare.

Statutory Interest Rates for Late Payments

In Portugal, the landscape of interest rates on late payments is dictated by clear legal guidelines, distinguishing between civil and commercial transactions. The applicable rates are subject to change, highlighting the importance of staying updated with the latest regulatory adjustments.

Interest rates for late payments are categorized based on the nature of the transaction:

  • B2C Transactions: Civil legal interest rates, as set by joint order of the Ministers of Justice and Finance, apply to debts owed by consumers.
  • B2B Transactions: Commercial legal interest rates for transactions between companies, or between companies and public entities, are determined semi-annually. For the first semester of 2024, the suppletive interest rate is set at 12.5% for certain transactions under Decree-Law No. 62/2013.
  • B2G Transactions: Similar to B2B transactions, commercial legal rates apply, with specific rates for dealings with public entities.

Calculations are generally based on the formula: 

(Debt Amount x Interest Rate / 365) x Number of Days Delayed, substituting 365 with 360 days for banking or financial entities.

Example - Interest on a €5,000 B2B Debt

Consider a scenario where a business owes another business (B2B) €5,000, and the payment is 30 days late. Assuming the applicable interest rate for the first semester of 2024 is 12.5%, the interest calculation would be as follows:

Interest = (€5,000 x 12.5% / 365) x 30 = €51.37

This example demonstrates how the interest on the overdue amount is computed, emphasizing the importance of accurately applying the prescribed interest rates.

Regulatory Framework and Limitations on Interest Rates

The regulatory framework for late payment interest rates in Portugal includes the Portuguese Civil Code and Commercial Code, with specific decrees and orders setting the applicable rates. It's imperative that creditors understand these regulations to ensure compliance and ethical practice.

Legal caps and guidelines establish maximum permissible interest rates, safeguarding against unreasonable charges. The distinction between civil and commercial rates, and the periodic setting of these rates by governmental decree, underscore the necessity for creditors to stay informed about current rates and calculation methods.

For the most up-to-date information and additional guidance on applying interest rates to late payments in Portugal, creditors can refer to resources such as the European e-Justice Portal and professional legal advisories.

With a clear understanding of how to correctly calculate and apply interest rates on late payments, creditors can ensure they are compensated for delays while maintaining fair and legal practices.

Step 7: Formulating a Payment Plan

Offering a settlement or payment plan is not merely a generous gesture towards a debtor in financial distress; it is a pragmatic strategy that benefits both parties involved in a debt collection process. A well-structured payment plan can serve as a bridge to resolve financial impasses while ensuring that creditors recover the owed amount in a feasible manner. This approach is particularly relevant in Portugal, where legislative frameworks, such as Decree-Law No. 125/2021, facilitate installment payments for debts, including those resulting from taxes.

Understanding the Formalities

To ensure that a payment arrangement is legally sound and acknowledges the debt effectively—thereby resetting the statute of limitations—it is imperative to adhere to formal requirements. In Portugal, debtors can request installment payment plans electronically within 15 days post the voluntary payment deadline. Such requests must encapsulate the debtor's identification, the debt nature, and the preferred installment count, possibly up to 36 months, ensuring compliance with legal stipulations.

A crucial aspect to bear in mind is making the agreement formal. A documented agreement, including the payment terms, total amount, and acknowledgment of the debt, is essential. This document acts as a renewed acknowledgement of the debt, which can influence the statute of limitations. It's advisable to have this agreement signed by both parties, cementing its validity.

Crafting a Compliant Payment Arrangement Sample

Below is a sample of a payment arrangement that aligns with Portuguese law and embodies best practices:

Between [Creditor's Name], henceforth referred to as "Creditor", and [Debtor's Name], henceforth referred to as "Debtor", an agreement has been reached on [Date]. 

The Debtor acknowledges the outstanding debt amounting to [Total Debt Amount] euros. 

Considering the Debtor's current financial situation, both parties have agreed to a payment plan to settle the debt in a structured manner.

Terms of Agreement:

  • The total debt amount of [Total Debt Amount] euros shall be paid in [Number of Installments] monthly installments.
  • Each installment payment of [Installment Amount] euros will be due on the [Due Date] of each month, starting from [Start Date] until [End Date].
  • A failure to make timely payments as outlined may result in the revocation of the payment plan and initiation of further collection efforts.
  • This agreement serves as an acknowledgment of the total debt by the Debtor and resets the statute of limitations from the date of signing.

This agreement is signed by both parties as a testament to their commitment to the terms outlined.

[Creditor's Signature] ____________________ [Debtor's Signature] ____________________

Date: [Date]

By structuring a payment agreement that is clear, comprehensive, and compliant with local laws, creditors can pave the way for a smooth debt recovery process, accommodating the financial realities of the debtor while safeguarding their own rights.

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Free Demand Letter Template

Demand Letter Template for Late Payment - Portugal

This template is designed to help international creditors draft an effective demand letter for late payment that aligns with Portuguese law and best practices.

Letter Template

[Your Company’s Name]

[Your Company’s Address]

[City, Postal Code]


[Email Address]

[Phone Number]

[Today’s Date]

[Recipient’s Name]

[Recipient’s Address]

[City, Postal Code]


Subject: Outstanding Payment Notification – [Invoice Number]

Dear [Recipient’s Name],

I am writing on behalf of [Your Company’s Name] regarding the outstanding payment for [describe the product/service supplied] as detailed in invoice [Invoice Number] dated [Invoice Date]. As per our records, the amount of [Amount Owed] remains unpaid, despite the due date of [Due Date] having elapsed.

Invoice Details:

  • Invoice Number: [Invoice Number]
  • Invoice Date: [Invoice Date]
  • Due Date: [Due Date]
  • Outstanding Amount: [Amount Owed]

We understand that oversights happen, but this outstanding amount is critical for our operational continuity. As indicated in our terms and conditions [and/or any agreements], failure to settle invoices in a timely manner can lead to further actions.

We kindly request you to address this payment by [Proposed Deadline, ideally 14 days from the date of the letter]. If payment has already been made, please disregard this letter.

Consequences of Non-Payment:

Should this matter not be resolved by the stipulated date, we reserve the right to initiate legal proceedings to recover the debt without further notice. This may include additional costs and interest, as per Portuguese law.

Payment Instructions:

[Provide details on how the payment can be made, including bank account details, online payment options, etc.]

We prefer to resolve this matter amicably and avoid any unnecessary legal actions. Please do not hesitate to contact us at [Your Contact Information] to discuss any payment issues or to confirm settlement of this account.

Thank you for your prompt attention to this matter.


[Your Name]

[Your Position]

[Your Company’s Name]

Invoking Retention of Title and Right of Reclamation Under Portugal Law for Unpaid Goods

In the landscape of commercial transactions in Portugal, the concepts of retention of title (RoT) and right of reclamation (RoR) serve as pivotal mechanisms for creditors to safeguard their financial interests. These legal provisions ensure that creditors have a viable recourse in the event of non-payment or insolvency of the debtor. This section delves into the intricacies of RoT and RoR under Portuguese law, offering invaluable guidance for international creditors engaging in the Portuguese market.

Understanding Retention of Title in Portugal

The principle of retention of title allows a creditor, who has provided goods to a debtor without receiving payment, to retain ownership over those goods until full payment is settled. This provision acts as a security interest, prioritizing the creditor’s claim over the goods, especially in scenarios where the debtor faces insolvency or bankruptcy.

In the event of the insolvency of a promissory seller, a scenario might arise where a promissory buyer has made a payment (e.g., a deposit) and received goods (e.g., keys to a property) but where the sale is incomplete or unregistered. In such cases, the buyer may exercise a right of retention over the property, securing a claim for either double the return of the deposit or enforcement of the sale's completion. Notably, this right can supersede existing mortgages, even if the mortgage was registered prior to the establishment of the retention claim, particularly when the promissory buyer is deemed a consumer.

To effectively invoke RoT, creditors must possess clear, written agreements detailing the retention clause until full payment is completed. These documents are crucial in disputes or insolvency proceedings to demonstrate the creditor’s entitlement. The application of RoT and RoR may depend on various factors, including the nature of the goods, contract terms, and the buyer’s status as a consumer.

Navigating the Right of Reclamation in Portugal

The right of reclamation empowers creditors to assert their entitlement to financial interests or goods supplied in cases of non-payment or insolvency. This legal facility complements the retention of title, offering an additional safeguard for creditors against financial loss.

Legal interpretations suggest that the applicability of RoR for promissory buyers in insolvency situations predominantly benefits consumers. This distinction raises pertinent questions about its reach to non-consumer buyers and the practicalities of such differentiation. The efficacy of RoR, akin to RoT, is influenced by case-specific contexts, available documentation, and interpretations of consumer status.

These mechanisms, embedded within Portugal’s legal framework, equip creditors with means to protect their interests. Nonetheless, the success of RoT and RoR is contingent on the particulars of each case, the comprehensiveness of documentation, and legal interpretation regarding consumer identification.

Practical Tips for Utilizing RoT and RoR in Portugal

To maximize the benefits of retention of title and right of reclamation in Portugal, businesses should meticulously revise their terms of service and contracts. Incorporating explicit, unambiguous clauses regarding RoT and RoR ensures these provisions are binding and enforceable. Such attention to detail not only solidifies creditors' security interests but also delineates clear expectations and processes in instances of dispute or insolvency.

By adopting a proactive stance in contract formulation, coupled with a clear understanding of Portuguese legal principles concerning RoT and RoR, creditors can significantly enhance their operational security within the Portuguese market.

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Find a Debt Collection Lawyer

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Le Droit au Portugal - Lawyers

Lawyers Office - Dr - Tiago Coelho and Dr. Marcio Pereira Goncalves - we have been practising law for 19 years, in various areas with a special focus on commercial law - credit recovery and seizures, employment and support for foreign investment

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Calcada & Associados, SP RL

At Calcada & Associados we like to get to know our clients's interests and goals deeply, and in this way we are able to add value with our work. Our growth is due to an united team hard work and the feeling of being part of our clients' and partners' team. Your success is our commitment!

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LEGACIS Law Office

Discover LEGACIS Law Office in Coimbra – your trusted partner in legal success. Leveraging decades of multidisciplinary law expertise and a focus on real estate and investment operations, we deliver top-notch legal solutions across Portugal.

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Debt Enforcement in Portugal

Understanding debt enforcement is essential for effective debt recovery. This section explores the comprehensive process, legal framework, and significant considerations in Portugal.

Debt Enforcement - Key Takeways
  • Court Order: A court order is mandatory for initiating the debt enforcement process in Portugal.
  • Enforceable Title: Debt enforcement must be based on a document recognized legally as an enforceable title. 
  • Execution Authority: Enforcement agents manage execution processes, with judges intervening only for dispute resolution. 
  • Documentation Required: Before enforcement, having an enforceable title demonstrating the debt or obligation is necessary. 
  • Debtor Consequences: Debtors with insufficient seizable assets are listed on the Public List of Executions, impacting their financial credibility.
  • Legal Regulations: The Civil Procedure Code and specific decrees outline debt execution procedures and enforcement agents' roles. 
  • Asset Seizure: Real estate, vehicles, and other valuable assets can be seized to satisfy debts. Essential personal items and income are protected to an extent.
  • Wage Garnishment: Up to one-third of a debtor's net salary can be garnished, with protections ensuring a minimum income for subsistence. 
  • Creditor Considerations: Creditors should assess legal proceedings costs against expected recoveries from debtor's assets. Engaging enforcement agents involves costs.
  • Businesses Tracing Debtors: Essential for preparing for debt enforcement, including evaluating hidden assets.
  • Enforcement Timeframe: The typical timeframe varies based on case complexities and legal proceedings durations.
  • Debtor Rights: Debtors have rights to challenge executions, request garnishment reductions, and protect certain assets from seizure.

The Role of Bailiffs in Debt Enforcement

In Portugal, the enforcement of debts is a legal process that requires the intervention of specialized professionals known as enforcement agents or bailiffs (agentes de execução). The role of bailiffs in debt enforcement is crucial for executing court orders and managing the seizure and sale of debtors' assets, aiming to satisfy creditors' claims.

  • Authority and Powers: Bailiffs, with public powers granted by law, are responsible for directing and managing execution processes, including asset seizure and sale, under court jurisdiction.
  • Intervention by Judges: Judges intervene only in matters requiring definitive decisions on disputes arising during the execution, such as opposition to execution or complaints about bailiffs' acts.
  • Operational Procedures: Bailiffs carry out various execution tasks like notifying debtors, identifying and valuing seizable assets, conducting asset seizures, organizing sales through auctions, and distributing proceeds among creditors.

The Process of Debt Enforcement

The debt enforcement process in Portugal is a judicial mechanism designed to compel debtors to fulfill their obligations, through the seizure and sale of their assets if necessary. This process involves several legal and procedural steps:

  1. Initiation: Debt enforcement proceedings begin with the submission of a documented claim, supported by an enforceable title (título executivo), establishing the debtor's obligation.
  2. Enforceable Titles: These include judicial or arbitral decisions, credit titles (checks, promissory notes), or other notarized documents acknowledging the debt.
  3. Asset Seizure and Sale: Seizable assets of the debtor are identified, valuated, seized, and sold. The proceeds are used to cover the debt and associated legal fees.
  4. Settlement to Creditors: After the sale of assets, the proceeds are distributed to the creditor(s), settling the outstanding debt partially or in full.

Legal Framework for Bailiff Operations and Debt Enforcement

The legal framework governing bailiff operations and debt enforcement procedures in Portugal is comprehensive, ensuring clarity and equity:

  • Civil Procedure Code: Outlines the execution process, roles of bailiffs, enforceable titles, and execution methods.
  • Regulations and Amendments: Specific decrees like the "Portaria n.º 282/2013," along with its amendments, provide detailed procedural guidance for bailiff operations and electronic management of executions.
  • Protection of Debtors: Laws include provisions to safeguard debtors from excessive burdens, ensuring they retain essential means for living

Pre-enforcement Actions

Preparing for debt enforcement in Portugal encompasses several critical actions taken before initiating formal legal processes:

  1. Documentation and Title Verification: Creditors must ensure they possess an enforceable title, properly documented and verified, outlining the debt and the debtor's obligation.
  2. Demand for Payment: Often, a formal demand for payment is issued to the debtor, offering a final opportunity to settle the debt voluntarily.
  3. Injunction Procedure: For debts up to €15,000 or arising from commercial transactions, creditors can seek an expedited injunction, securing an enforceable title for judicial execution.
  4. Opposition to Execution: Debtors may oppose execution on various grounds, requiring creditors to prepare for potential legal challenges.
Explore the cost and time frame for debt enforcement
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Explore asset seizure and salary attachment options

Seizure of Assets in Portugal 

In the context of debt collection in Portugal, seizing assets is a pivotal method that enables creditors to recover owed amounts by taking control of a debtor's tangible or intangible assets. This method is particularly utilized when other pre-legal collection efforts have failed, and a court has granted an enforceable title.

  • When to Use in Debt Collection: Seizure of assets is employed after obtaining an enforceable judgment against the debtor, indicating that voluntary payment methods have been exhausted.
  • Advantages: Ensures the repayment of debts by directly accessing the debtor's assets, acting as a strong deterrent against non-payment.
  • Assets That Can be Seized: Practically any asset owned by the debtor, such as real estate, vehicles, bank accounts, and wages, subject to legal protections and exemptions.

The process of asset seizure in Portugal involves the following steps:

  1. Obtaining an Enforceable Title: The creditor must possess a judicial, arbitral, or officially recognized document that establishes the debt amount and the debtor's obligation.
  2. Engagement of an Enforcement Agent: A licensed professional is commissioned to carry out the seizure, under court authority.
  3. Identification and Seizure of Assets: The enforcement agent identifies assets eligible for seizure, adhering to legal guidelines about what can be seized.
  4. Sale of Seized Assets: Assets are sold, often through public auction, with proceeds used to cover the debt and associated legal fees.

For more information on the specifics of asset seizure in Portugal, refer to the ePortugal guide.

Garnishment Rights and Salary Attachments in Portugal 

Garnishment and salary attachments involve legally withholding a portion of the debtor's earnings or bank account balances to satisfy a debt. Unlike asset seizure, which targets tangible assets, garnishment focuses on incomes and accounts.

  • When to Use in Debt Collection: When the debtor has a steady income or funds in bank accounts but is either unwilling or unable to make payments towards the debt.
  • Advantages: Provides a continuous payment stream until the debt is settled, and legally compels employers or banks to comply.
  • Debtor Protection: Portuguese law safeguards a portion of the debtor's income to ensure their basic needs and those of their dependents are met.

The process of garnishment and salary attachments follows these steps:

  1. Legal Authorization: A court order or an enforceable title permitting garnishment is required, specifying the amount that can be legally diverted from the debtor's income.
  2. Notification: The debtor's employer (for salary garnishment) or bank (for account attachment) is formally notified and required to withhold the specified amount.
  3. Payment to Creditor: The withheld amounts are directly paid to the creditor or the court, depending on the arrangement, until the debt is cleared.
  4. Review and Termination: Garnishment orders may be reviewed, and if the debtor's financial circumstances change significantly or the debt is paid off, the garnishment can be terminated.
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Insolvency Proceedings in Portugal: A Creditor's Guide

Insolvency and bankruptcy are key mechanisms in debt recovery within Portugal's legal framework, offering structured processes for creditors to recover claims. This section explores how insolvency procedures can be effectively utilized by creditors.

Insolvency Proceedings - Key Takeways
  • Governing Laws: Portugal insolvency proceedings are governed by the Insolvency and Recovery Code (CIRE).
  • Bankruptcy Strategy: Utilized as a last resort for debt collection, emphasizing creditor's rights and debt recovery potential.
  • Filing Requirements: Must demonstrate debtor's inability to meet financial obligations promptly.
  • Priority Rules: Secured creditors have precedence over unsecured ones, impacting debt recovery chances.
  • Associated Costs: Includes court, administrative, and legal fees, varying based on the complexity of the case.
  • Timeframe: Typically spans 6 to 12 months, influenced by the case's complexity and judicial workload.
  • Debt Recovery Chances: Varies, secured creditor claims are prioritized, increasing recovery likelihood.
  • Bankruptcy Petition Process: Involves submitting necessary documentation and attending a court hearing.
  • Creditor Rights: Secured creditors have significant rights, including challenging the prioritization of claims.
  • Post-Bankruptcy Scenarios: Possibility of asset liquidation, with a proportional distribution of proceeds to creditors.
  • Documentation: Requires detailed proof of claim and the debtor's financial obligations and assets.
  • Legal Challenge Options: Creditors may appeal insolvency decisions, request judicial review, or oppose claims prioritization.
  • Creditor Participation: Creditors can play an active role in proceedings, including voting on recovery plans and committees.

The Legal Framework for Insolvency Procedures in Portugal 

Portugal's insolvency framework is designed to provide a systematic approach for dealing with cases of insolvency, ensuring fair treatment for all parties involved. 

  • Types of insolvency proceedings: Portugal recognizes several insolvency proceedings, including regular insolvency proceedings, special revitalization processes (PER), and extrajudicial recovery procedures (RERE).
  • Conditions for declaring insolvency: Insolvency can be declared when a company or individual cannot meet its financial obligations as they come due. Both debtors and creditors can initiate insolvency proceedings.

Creditor's Rights and Priorities in Insolvency Proceedings

Creditors play a vital role in insolvency proceedings in Portugal. Their rights and claim priorities are crucial for understanding how they can recover debts from insolvent estates.

Ranking and priority of claims: Secured creditors generally have priority over unsecured creditors and equity holders. Claims are categorized into classes, with claims related to wages, taxes, and secured debts being prioritized.

Understanding the insolvency table and registering claims is essential for creditors to assert their rights. Claims must be timely filed and substantiated with evidence.

Strategies for Maximizing Recovery from Insolvent Estates

Creditors should employ strategic approaches to maximize recovery from insolvent estates, considering the legal nuances and creditor rankings.

  • Actively participate in the insolvency procedures by attending meetings, voting on the insolvency plan, and monitoring the estate's liquidation.
  • Consider purchasing assets from the insolvent estate or seeking arrangements with other creditors to optimize recovery efforts.

The Cost and Duration of Insolvency Proceedings

The complexity and specifics of each case affect the cost and duration of insolvency proceedings in Portugal.

  • Costs: Legal fees, court costs, and the insolvency administrator’s fees constitute the primary costs. These vary based on the estate size and proceedings complexity.
  • Duration: Regular insolvency proceedings can take several months to a few years, influenced by the need for asset liquidation, litigation, and creditor agreement on the insolvency plan.
Explore our step-by-step guide for insolvency proceedings

A Comprehensive Guide to Debt Recovery Through Insolvency in Portugal

Embarking on insolvency proceedings in Portugal to recover debts can seem daunting. However, with a meticulous approach, creditors can navigate this process effectively. This step-by-step guide provides a practical roadmap for international creditors to utilize bankruptcy proceedings as a strategy for debt recovery in Portugal. Following these steps diligently will significantly enhance your chances of recovering your claims from debtors undergoing insolvency.

Step 1: Check the Conditions for Filing for Bankruptcy

Before initiating bankruptcy proceedings against your debtor in Portugal, it's crucial to verify if the conditions for filing are met. The process can be initiated against individuals, collective entities, latent estates, and even associations without legal personality. However, entities like public collective persons, insurance companies, credit institutions, financial companies, and investment firms holding third-party funds or securities are exempt due to special regimes. It's paramount to confirm your debtor's eligibility for bankruptcy to ensure a smooth start to the recovery process.

Step 2: Filing a Bankruptcy Petition

The next pivotal step involves the actual filing of an insolvency petition against the debtor. This can be initiated either by the debtor themselves or by a creditor. The petition requires careful preparation, including legal formalities and the submission of specific documents, such as proof of the debtor's inability to meet their obligations and a detailed list of outstanding debts. Precision in this step is paramount to avoid delays or rejections.

  • Documentation: Prepare comprehensive documentation including financial statements and evidence of unpaid debts.
  • Legal Advice: Seek legal advice to ensure your petition complies with Portuguese legal requirements.
  • Filing: Submit the petition to the competent court. The jurisdiction depends on the debtor's location.

Step 3: Notice of the Hearing

Upon submitting your bankruptcy petition, a hearing date will be set by the court, and notices will be sent to all parties involved, including the debtor. It is a critical juncture for the preparation of evidence and arguments that will be presented during the hearing. Staying well-informed and prepared can significantly influence the outcome.

Step 4: Your Debtor Can Object to Your Application (Defence)

In the period leading up to the hearing, the debtor has the opportunity to object to the bankruptcy petition. They can present a defense against the claim, arguing their financial solvency or disputing the debt's validity. Being aware of the possible defenses can help creditors prepare counterarguments and supporting evidence to fortify their position.

Step 5: The Hearing

Once your bankruptcy petition is filed and the notifications are served, both parties move forward to the hearing phase—a critical step where the destiny of the bankruptcy process is significantly shaped. Based on our decade of experience at Debitura in managing debt collection processes in Portugal, here's an insightful breakdown of what to anticipate:

  • Examination of Details: The hearing phase thoroughly examines the case details, including the debtor's financial health, claims by creditors, and any objections or defenses raised. This comprehensive review helps judges form a holistic view of the circumstances leading to the bankruptcy petition.
  • Presentation of Evidence: Both parties are allowed to present evidence to support their stands. Creditors should come prepared with detailed documentation of the owed debts, while debtors might present their financial records and any facts that could support their defense against the bankruptcy claim.
  • Testimonies: Witnesses may be called to provide testimony that could shed light on the debtor's financial operations and obligations. It's a crucial part that could sway the case's outcome, reflecting the integral role of tangible evidence and truthful accounts in legal proceedings.
  • Judicial Assessment: The judge assesses presented evidence, testimonies, and legal arguments to make an informed decision. This phase emphasizes the impartial and thorough evaluation of the case, ensuring that the eventual decision serves justice and balances the interests of all parties involved.

Step 6: Decision

Following the hearing, the court will issue a decision regarding the bankruptcy petition. This verdict determines whether the debtor is declared bankrupt and sets into motion the subsequent debt recovery processes. Here's what creditors need to know about this decisive step:

  • Declaration of Bankruptcy: If the court rules in favor of the bankruptcy petition, the debtor is officially declared bankrupt. This declaration marks the starting point for asset liquidation and debt recovery procedures.
  • Implications: The court's decision also outlines the scope of the bankruptcy, specifying which assets are included in the estate for liquidation and how creditors will be classified and repaid according to their priority status.
  • Notification: All parties involved, including creditors, are officially notified of the court's decision. This notification provides detailed insights into the court's ruling and the forthcoming steps in the bankruptcy proceedings.

Step 7: Opposition, Appeal, and Judicial Review

The decision issued by the court isn't necessarily the end of the road. There are provisions for both debtors and creditors to oppose or appeal the court's ruling, aiming to ensure justice and fairness in every case. Let's delve into these post-decision processes:

  • Opposition: Parties who disagree with the decision have the right to file an opposition. This step must be based on solid legal grounds and new evidence that was not previously considered.
  • Appeal: If the opposition does not yield the desired outcome, parties can escalate the matter through an appeal. Appeals are more formal and require substantial evidence and legal argumentation to challenge the initial court decision.
  • Judicial Review: In certain cases, a judicial review can be sought, especially if there are questions about the legal correctness of the decided procedure or interpretation of laws.

Step 8: Post-Bankruptcy Scenarios for Creditors

The conclusion of the bankruptcy process leads to various scenarios for creditors regarding debt recovery. Here's what creditors can expect in the aftermath:

  • Asset Liquidation and Distribution: Post-bankruptcy, the debtor's assets are liquidated, and proceeds are distributed among creditors based on their priority ranking. This process is overseen by a court-appointed trustee or liquidator.
  • Settlement Agreements: In certain cases, creditors might negotiate settlement agreements with the debtor or the trustee to expedite recovery or secure a higher repayment percentage.
  • Residual Claims: After the liquidation process, creditors might have residual claims if full repayment wasn't achieved. These claims could be pursued through other legal avenues, although the likelihood of significant recovery is often low.

Source: European e-Justice Portal

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Recovering International Debts in Portugal

In the globally interconnected business environment, creditors often face the challenge of recovering debts across borders, including within Portugal. For foreign creditors seeking to navigate this complex terrain, partnering with a local debt collection agency like Debitura, which boasts 10 years of experience and established partnerships with local attorneys, is a strategic move. Debitura’s expertise lies in understanding Portugal’s unique legal system and cultural nuances, ensuring a smoother and more effective debt recovery process for international businesses.

Collecting cross border claims - Key Takeways
  • Cultural Understanding: Acknowledging Portugal's unique culture facilitates smoother communication with debtors.
  • Legal Variance: Portugal's distinct legal system requires specialized knowledge for debt recovery.
  • Language Proficiency: Full fluency in Portuguese can overcome communication barriers and miscommunications.
  • EU Regulations Compliance: Adherence to GDPR and other EU laws, essential for managing data during collection.
  • European Payment Orders: Utilize to bypass lengthy and complex court procedures for uncontested cross-border debts.
  • European Small Claims Procedure: An expedited process for claims not exceeding €5,000, vital for small debt recoveries.
  • European Enforcement Order: Enables judgments from one EU member state to be recognized in Portugal, simplifying cross-border enforcement.
  • Patience is Key: International collections may extend over longer periods due to complexity.
  • Professional Support: Hiring an agency like Debitura mitigates the hassle, leveraging local expertise and resources.
  • Late Payment Directive: Allows charging interest on delayed payments, fortifying creditor rights in Portugal.
  • Consumer Protection Laws: Understanding these laws is crucial to navigating debt collection without infringing on debtor rights.
Explore cross border collection options

Challenges for International Creditors Recovering Debt in Portugal

Recovering debt across international borders in Portugal presents several challenges to creditors. These issues stem from a range of factors, including:

  • Legal diversity: Portugal has its own set of laws and regulations for debt collection, which may differ significantly from those in the creditor's country.
  • Cultural differences: Cultural norms and business practices can affect the debt recovery process. Understanding and respecting these nuances is crucial.
  • Language barriers: Non-Portuguese speaking creditors may face difficulties due to language differences, potentially complicating correspondence and legal proceedings.
  • Logistical complexities: Physical distance and the need for local legal representation can make the process slower and more expensive.

Despite these hurdles, informed strategies and the use of cross-border legal instruments can facilitate successful debt recovery in Portugal.

EU Wide Regulation - The European Late Payment Directive in Portugal

The European Late Payment Directive (Directive 2011/7/EU) aims to combat late payments in commercial transactions and is fully enforced in Portugal. The directive:

  • Shortens payment terms: Requires payments for commercial transactions to be made within 60 days, unless agreed otherwise and provided it’s fair to both parties.
  • Set Interest Rates: Allows creditors to charge interest on late payments, calculated over the European Central Bank’s reference rate plus 8 percentage points.
  • Compensates recovery costs: Grants creditors a fixed compensation for recovery costs and the possibility to claim further reasonable costs.

The implementation of this directive in Portugal supports businesses in receiving timely payments and offers a legal framework to address late payments more effectively. More information on the European Late Payment Directive can be found here.

Enforcing Cross-Border Claims in Portugal via the European Enforcement Order (EEO)

The European Enforcement Order (EEO) simplifies the enforcement of uncontested claims across EU borders, including in Portugal. Key aspects include:

  • No need for declaration of enforceability: Judgments certified as an EEO in one EU member state are automatically recognized in others, including Portugal.
  • Expedited process: The EEO streamlines the process by removing the need for reviewing the jurisdiction or the substance of the claim.
  • Uncontested claims: Applies to cases where the debtor has not disputed the debt, providing a smoother path for creditors.

For detailed guidance on applying for an EEO, creditors can visit the e-Justice portal.

Recover Uncontested Monetary Cross-Border Claims via European Order for Payment (EOP)

The European Order for Payment (EOP) procedure is designed to recover uncontested monetary debts across EU countries smoothly, including Portugal. Notable features are:

  • Simplified process: Utilizes standardized forms for straightforward case submission.
  • Uniformity: An EOP issued in any EU member state is automatically enforceable across the EU without the need for a declaration of enforceability.
  • Efficiency: Debtor has a limited timeframe to oppose the order, after which it becomes enforceable, speeding up the collection process.

More information on the EOP procedure is available on the e-Justice portal.

Resolve Minor Cross-Border Disputes via the European Small Claims Procedure (ESCP)

The European Small Claims Procedure (ESCP) provides an efficient way to resolve cross-border civil and commercial disputes involving claims up to €5,000 in the EU, including Portugal:

  • Cost-effectiveness: Reduces legal fees and other associated costs.
  • Simplicity: The process predominantly utilizes standardized forms and can be conducted in writing, minimizing the need for personal appearances.
  • Automatic Recognition: Decisions under the ESCP are enforceable throughout the EU without further procedures.

For in-depth information on the ESCP, creditors can consult the e-Justice portal.

Freeze Portugal Debtors' Assets via the European Account Preservation Order (EAPO)

The European Account Preservation Order (EAPO) allows creditors to prevent the transfer or withdrawal of funds by the debtor in any bank account within the EU, including Portugal:

  • Rapid enforcement: The EAPO can be issued quickly and without the debtor’s knowledge, ensuring the preservation of assets.
  • Cross-border applicability: Effectively freezes debtor’s assets across EU member states, safeguarding the creditor’s recovery potential.
  • Evidence requirement: Creditors must provide sufficient evidence of the urgency and the risk of non-recovery without the freeze.

Detailed guidance on obtaining an EAPO can be found on the e-Justice portal.

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Country Risk Rating

Understanding the Business Landscape in Portugal

An insightful journey into Portugal's business environment reveals why it's crucial for creditors to grasp local payment practices and recognize potential risks. This section will explore economic behaviors, structural choices, and various risks associated with doing business in Portugal.

Our analysis concludes that the risk of doing business in Portugal is low. Based on this low score, You can feel reasonably confident that you will be able to get paid when trading with customers in Portugal. Nonetheless, we always recommend doing a specific credit analysis on an individual customer basis before offering any credit. The low risk score is based on the following factors:

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Key Takeways
  • Average DSO: Portugal has a noticeable DSO figure, reflective of payment practices.
  • Late Payments: Late payments and bad debts pose challenges, particularly with public sector delays.
  • Corporate Structures: Various corporate structures exist, affecting liability and external financing access.
  • Economic Risk: Portugal's economy shows resilience, but vulnerabilities exist due to external factors.
  • Financial Risk: Companies face financial risks from late payments and access to financing.
  • Business Risk: The legal environment and market competition contribute to business risks.
  • Political Risk: Portugal scores low in political risk, indicating stability and favorable conditions for business.
  • Legal Payment Deadlines: Legal frameworks define deadlines to mitigate late payments.
  • Insolvency Solutions: Legal provisions for insolvency address uncollectible debts and firm recovery.
  • Limited vs. Unlimited Liability: Choice of corporate form influences liability and creditor protection.
  • Public Sector Payment Practices: Slow payments by public entities impact liquidity and cash flow for businesses.
  • Bankruptcy Trends: Late payments are a significant factor in company bankruptcies.
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Understanding DSO and Payment Behaviour in Portugal

In Portugal, the days sales outstanding (DSO) presents a significant challenge for businesses, averaging around 80 days. This lag in payment times can be attributed to the lenient standards set by national regulations in accordance with EU rules. Despite the adoption of Directive 2011/7/EU, aimed at normalizing payment practices within the business-to-business sector to a 60-day maximum, actual average payment terms extend to 66 days.

  • All companies in Portugal must make their balance sheets and accounts publicly available, ensuring a level of transparency and reliability in financial dealings.
  • With Allianz Trade’s grading system, companies are continually assessed for their financial health and business conduct, aiding in informed management decisions.

Exploring Solutions and Strategies

To combat prolonged DSO and mitigate financial risk, companies operating in Portugal can adopt a variety of strategies geared towards enhancing credit control and improving payment behavior among clients.

  • Utilizing the diverse range of payment methods such as Swift bank transfers, and Documentary Letters of Credit can streamline transactions and reduce delay.
  • Advance payments and down payments, though signaling a possible trust issue, can significantly lower credit risk.
  • Implementing thorough credit checks, possibly aided by Allianz Trade’s grading system, allows for informed decisions and proactive risk management.

Considering Risk Mitigation Tools

Adopting various legal and financial instruments can provide additional security to creditors, helping to reduce DSO and credit risk in Portugal. Legal mechanisms like Retention of Title clauses and leveraging swift electronic transfers can expedite payments and secure transactions.

  • Inclusion of clear late payment terms in contracts, adhering to the European Central Bank’s refinancing rate plus a minimum of 7 percentage points, can deter late payments.
  • Agreements that incorporate Retention of Title clauses provide an added security by retaining ownership of goods until full payment is received.
  • Exploring alternative dispute resolution methods before resorting to the complex court processes can save time and resources.

Through a combination of proactive management, legal safeguards, and strategic financial planning, companies can effectively navigate the challenges of doing business in Portugal, minimizing DSO and enhancing profitability.

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Understanding Corporate Structures in Portugal: Implications for Creditors

Grasping the corporate structure of businesses in Portugal is vital for creditors, as it directly affects the process and success rate of debt collection efforts. Understanding whether a business is a sole proprietorship, limited liability company, or a public limited company, among others, helps determine who holds the financial responsibility in the event of default. This knowledge allows creditors to tailor their approach when seeking to recover debts, ensuring that their strategies align with the legal framework governing each type of corporate entity.

Overview of Company Types in Portugal

Portugal's corporate landscape features several company types, each with distinct characteristics, liability approaches, and implications for creditors. Here, we delve into each structure to provide a clear understanding of who is liable and under what conditions.

  • Sociedade Individual (Sole Proprietorship): The simplest structure, where the business is owned and run by an individual. The owner faces unlimited liability, meaning personal assets can be targeted for debt recovery.
  • Sociedade de Responsabilidade Limitada (LDA) (Limited Liability Company): One of the most common structures, offering protection to owners' personal assets from business liabilities.
  • Sociedade Anonima (SA) (Public Limited Company): Suitable for larger businesses, this structure involves shares that can be offered to the public. Shareholders face liability limited to their investment.
  • Sociedade em Nome Coletivo (SNC) (General Partnership): In this structure, partners share unlimited liability, making personal assets available for debt recovery.
  • Sociedade por Quotas (Partnership Limited by Shares): A mix between a partnership and a corporation, offering some partners limited liability while others have unlimited liability.
  • Grupo de empresas (Group of Companies): This formation promotes collaboration among different companies but also shares liability among the group.

Implications for Creditors

For creditors, the primary concern is recovering owed debts, a process significantly influenced by the debtor's corporate structure. Entities with unlimited liability offer a more straightforward path to debt recovery, as creditors can target both business and personal assets. Conversely, corporations and limited liability companies provide a buffer for owners' personal assets, often requiring creditors to focus on business assets or pursue more formal legal avenues for debt collection.

It's essential for creditors to conduct due diligence on a debtor's corporate structure before extending credit. This awareness can guide risk assessment, loan terms, and recovery strategies should the business default. Additionally, understanding these structures supports better-informed decisions about engaging in business in Portugal, potentially affecting contract terms, interest rates, and collateral requirements.

Given these complexities, creditors are advised to consult with legal professionals knowledgeable in Portuguese corporate and insolvency law to navigate the legal implications effectively. This precaution is vital in formulating a sound debt recovery strategy that aligns with both the creditor's objectives and the legal rights of all parties involved.

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Explore detailed country risk analysis

The economic risk in Portugal

Our analysis shows that the economic risk in Portugal is medium (3 out of 6). An economic risk of 3 out of 6 is pretty average in Europe.

GDP and economic growth are critical drivers for economic risk.
The GDP of Portugal is 249,89 bn. USD (2021), growing by 4,88% per year.

In terms of the size of its economy, Portugal ranks #48 out of 183 countries and has a medium-sized economy.

Looking at the growth rate, it is ranked #81 out of 183 countries and is therefore considered an excellent growing economy.

GDP per capita is 24262 USD, ranking Portugal number #37 out of 183 countries. This means the purchasing power of citizens in Portugal is high compared to the rest of the world.

You can see a more throughout picture of GDP and economic growth in Portugal in the table below:

GDP and economic growthLatest value
Economic growth: the rate of change of real GDP4,88%
Gross Domestic Product, billions of U.S. dollars249,89
GDP per capita, current U.S. dollars24262,18
GDP per capita, Purchasing Power Parity33514,27

Another huge impact for the economic risk score is the inflation rate and the interest rates. You can see a more throughout picture of monetary KPIs in Portugal in the table below:

Monetary KPI'sLatest value
Inflation: percent change in the Consumer Price Index1,3%

The inflation in Portugal was 1,3% in 2021 which is considered a very low inflation rate.

The business environment risk in Portugal

Our analysis shows that the business environment risk in Portugal is very low (1 out of 6), which is a relatively low risk score in Europe.

The business environment risk are determined by the level of economic freedom and rights in a country. The critical facts for Portugal in the table below:

Economic freedom indexLatest value
Property rights index (0-100)74
Freedom from corruption index (0-100)68
Fiscal freedom index (0-100)60
Business freedom index (0-100)76
Monetary freedom index (0-100)85
Trade freedom index (0-100)84
Investment freedom index (0-100)70
Financial freedom index (0-100)60
Economic freedom, overall index (0-100)68

As you can see above, the property rights index is 74 in Portugal, which is considered pretty average in Europe.

The business freedom index is based on 10 indicators, using data from the World Bank’s Doing Business study. The Index is 76 in Portugal, a quite average score for a country in Europe.

Portugal's overall economic freedom index is 68 out of 100 and is based on factors such as the rule of law, regulatory efficiency, and market openness.

The political risk in Portugal

The political risk in Portugal is very low, with a score of 1/6. This is a low political risk score in Europe.

The governance and political stability indicators are critical drivers for political risk. An overview of Portugal can be seen in the table below:

Governance and political stability indicators Latest value
Rule of law index (-2.5 weak; 2.5 strong)1,13
Government effectiveness index (-2.5 weak; 2.5 strong)0,99
Control of corruption (-2.5 weak; 2.5 strong)0,77
Political stability index (-2.5 weak; 2.5 strong)0,95
Corruption Perceptions Index, 100 = no corruption62
Shadow economy, percent of GDP17,82%

The rule of law index analyses to which extent agents have confidence in and abide by the rules of society, in particular the quality of contract enforcement, property rights, the quality of the courts, and the police's ability to enforce court orders.

When trading with businesses in a country, the rule of law index is critical as it describes your ability to enforce commercial contracts.

In Portugal, the rule of law index is at 1,13 points, with the score going from -2.5 (weak) to 2.5 (strong). Portugal has, therefore, a very high rule of law index, which means you have a very good chance of enforcing your contracts. If your individual customers have good creditworthiness, you should therefore feel relatively safe when providing credit.

Other drivers for the very low political risks are the average control of corruption, the average political stability index, and the normal shadow economy that is 17,82% of Portugal's GDP.

The commercial risk in Portugal

In Portugal, the commercial risk score is 3/4, which in our model is a medium score. This medium commercial risk score is pretty average compared to the average in Europe.

The commercial risk is impacted by a country's international trade relationships. You can see some of the key facts for Portugal in the table below:

International trade and investment Latest value
Exports of goods and services as percent of GDP42,03%
Exports of goods and services, annual growth13,07%
Imports of goods and services as percent of GDP45,02%
Trade balance as percent of GDP-2,99
Trade balance, billion USD-6.56
Foreign exchange reserves, billion currency units32.54

Portugal has a foreign exchange reserve of 32.54 bn. USD.

Portugal has a negative trade balance of -2,99% of GDP. This means that Portugal imports more goods and services than the country exports.

The annual growth of exports of goods and services has been growing 13,07% annually - now 42,03% of GDP. Import of goods and services represents 45,02% of the GDP in Portugal.

The financing risk in Portugal

We have calculated the financing risk to be 1/4, which equals a very low risk. A very low financing risk score is relatively low for countries in Europe.

The country's banking system, efficiency, and stability influence the financing risk. You can find the extra information for Portugal in the table below:

Banking system efficiency and stabilityLatest value
Index of legal rights for creditors and borrowers (0 = weak to 12 = strong)2
Credit information sharing index, 0 (low) - 8 (high)7

In Portugal, the credit information sharing index is 7 on a scale from 0 (low) to 8 (high). The result of this, is that the access and trustworthiness of the credit information in Portugal is medium-high.

This makes it easy for you to understand the credit risk of your counterpart in Portugal. You would be able to find a good local credit rating agency that can help you analyse the creditworthiness of your specific customers.

Your rights as a creditor are 2 out of 12 and, therefore, very weak.

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