For companies with American owners, though, the win comes with a catch.

The United States is one of the only countries in the world that taxes its citizens on their worldwide income no matter where they live, and that same logic extends to businesses those citizens own abroad. Under U.S. law, foreign companies with American owners are subject to a special set of rules most other countries' citizens never have to think about. On top of whatever tax is owed locally, American owners can also owe U.S. tax on the company's profits, even on profits that stay in the business and are never paid out to anyone.

There's long been a way around that. If the company is already taxed at a high enough rate where it's based, those profits are generally left alone by the U.S. That rule survived a major rewrite of the U.S. tax code in 2026, but the bar for qualifying moved along with everything else in the rewrite.

"The rule is still there," said Sasha Young da Silva, a U.S. tax attorney at Areia Global, who advises American owners of Portuguese companies on their U.S. tax obligations. "It's just gotten harder to reach as Portugal cuts its corporate tax rate."

That's the problem. Portugal's tax rate used to sit comfortably above what the U.S. requires, and now it's getting closer, especially for smaller companies that already qualify for an even lower rate on their first €50,000 of profit. For some businesses, that cushion may already be gone, meaning a piece of the company's profit gets taxed by the U.S. even if nothing about the business itself has changed. As Portugal's rate keeps dropping over the next couple of years, more companies are likely to find themselves in the same position.

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None of this appears to be slowing interest from Americans looking to start businesses in Portugal. If anything, Young da Silva said, she's seeing the opposite. She's continued to field steady demand from early-stage American founders wanting a fuller picture of what building a cross-border company in Portugal actually involves before they get started rather than after the fact. She points to a self-paced masterclass her firm runs on American entrepreneurship in Portugal as one sign of that interest, noting that enrollment has held up even as the underlying rules have gotten more complicated.

Part of the appeal, she said, is that Portugal remains genuinely easier to set up in than a lot of the alternatives. Incorporating a company here can take days rather than months, and the tax authority itself is digital and relatively easy to work with, especially compared to what founders in some other countries have to navigate.

"You can do everything right in Portugal and still owe U.S. tax you weren't expecting," she said. "It usually isn't anyone's mistake. Two systems are just moving on their own schedules."

Portugal's corporate rate is scheduled to fall again in 2027 and once more in 2028.

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