Overview
Aiming to align with Europe in the digital domain, Portugal has focused on digitalization as the country’s strategic priority and economic growth engine. In 2020, Portugal approved the National Action Plan for the Digital Transition, prioritizing digital inclusion and training of people alongside the digital transformation of businesses, public administration, and education. These objectives are consistent with the Portuguese Recovery and Resilience Plan (RRP) digital transition strand. Portugal supports advanced technologies such as artificial intelligence (AI), advanced computing, and open data.
According to the United Nations Conference on Trade and Development, Portugal ranks 33rd among 166 countries in the 2023 Readiness for Frontier Technologies Index. Portugal fosters innovation and technological development through infrastructure, human capital, and technology investments.
The National Initiative for Digital Skills e.2030, Portugal INCoDe.2030, aims to develop digital skills in paving the way for a future-oriented society focused on new opportunities arising from the rapid adoption of information and communication technologies (ICT). Portugal INCoDe.2030 focuses on five strategic pillars: inclusion, education, qualification, specialization, and research. These pillars are associated with public policy goals and implementation measures by various institutions and organizations. The Foundation for Science and Technology (FCT) coordinates the measures related to the five strategic pillars. The government aims to improve Portugal’s position in the European Commission’s DESI Index (Digital Economy & Society Index) to strengthen the country’s digitalization competitiveness.
In parallel, Portugal has launched the second phase of its Indústria 4.0 national strategy to further digitize the economy, including two significant strategies on Artificial Intelligence (AI) and advanced computing.
Portugal is also positioning to enhance security criteria to identify high-risk vendors from suppliers outside the European Union (EU), the North Atlantic Treaty Organization (NATO), and the Organization for Economic Co-operation and Development (OECD) countries and to exclude or restrict them from the national 5G network. The three leading operators in Portugal are cooperating with the national government to adopt these criteria.
Between 2020 and 2022, Portugal ranked fourth among European countries to attract the highest number of projects in software and IT. Portugal has one of the highest numbers of unicorns (six Portuguese-DNAed) per capita and has six startup incubators among 125 European innovation hubs. Two of these are among the top 10: Startup Braga (7th) and Startup Lisboa-Unicorn Factory (10th).
Portugal continues to attract investments for a resilient economy rooted in innovation, digital transformation, and sustainability, which are key principles of the national Recovery and Resilience Plan (RRP). Additional measures have also been implemented, such as the Startup Voucher for young entrepreneurs and the Digital Nomads Visa to attract remote workers.
Portugal’s strategic location is fueling the growth of the submarine cable sector. Sines, which hosts Portugal’s deepwater port and a new Atlantic hub, is a key player with several cables landing there. Sines’ strategic position has attracted significant investments, boosting the growth of the data centers. Start Campus, a €3.5 billion ($3.8 billion) super data center controlled by the U.S. firm Davidson Kempner, is a testament to this. Data centers such as Start Campus are poised to benefit from the submarine cable infrastructure landing on the shores of Portugal. According to the Atlantic Convergence study report, by 2026, it is anticipated that submarine cable initiatives landing in Portugal will extend to 115 cable landing stations worldwide, establishing direct cable connections with no fewer than 60 countries across five continents and extending as far as Australia.
Portugal is home to all major global tech companies, such as Amazon Web Services, Cisco, Google, Salesforce, IBM, Meta, and Microsoft. Recently, Microsoft launched its AI Innovation Factory in Portugal in partnership with Accenture, Avanade, and Unicorn Factory Lisbon, boosting private-public sector collaboration.
Market Challenges
Artificial Intelligence
The AI Act (Regulation (EU) 2024/1689 of the European Parliament and of the Council of June 13, 2024) came into force on August 1, 2024, initiating a transition period for its application. Various provisions will take effect at different times, allowing stakeholders ample time to meet their obligations.
Artificial Intelligence is not uniformly regulated in Portugal. The current legal framework includes both horizontal and sector-specific regulations at the national and EU levels, which apply to AI systems. The AI Act will be directly applicable in Portugal, and an implementing law will be adopted.
The Center for Responsible AI, established in 2022, brings together 10 AI startups, including two unicorns, eight research centers, a law firm, and five industry leaders. The Center aims to position Portugal as a global leader in AI regulation and technological developments, contributing to the EU legislation and attracting top AI talent worldwide. The Portugal Recovery and Resilience Plan (PRR) under the NextGenerationEU program funds the Center.
Cross Border Data Flows
Transatlantic data flows are a critical element of transatlantic trade and investment relations. Numerous undersea communication cables and a growing presence of data center operators support Portugal’s goal of being a major European digital hub.
The renewed EU-U.S. Data Privacy Framework, established in 2023, directly impacts Portugal, as U.S. tech companies operating in Portugal need to comply with this legal mechanism for data transfers. These companies frequently interact with the Portuguese Data Protection Authority (CNPD), which oversees EU’s General Data Protection Regulation (GDPR) compliance. The CNPD has investigated U.S. companies such as Cloudflare and Google for data privacy adherence.
As an EU member state, Portugal adopts all EU laws related to the digital economy. These laws align with the WTO Government Procurement Agreement and EU Public Procurement Directives. Portugal aims to reduce procurement costs and improve value through its Public Procurement Guidelines. U.S. suppliers must register on Portuguese procurement portals to bid for digital technology tenders.
The European Union Cloud Services Scheme (EUCS) is a certification framework for cloud services introduced under the EU Cybersecurity Act.
Once established, the EUCS will allow cloud service providers (CSPs) to voluntarily obtain certification to demonstrate that their services meet high-security standards for customer protection. The certification scheme that Portugal will also adopt is expected to replace existing national certification schemes after a transition period.
One of the most controversial aspects of digital sovereignty under the EUCS is that cloud services and their data must be located within the EU. Additionally, CSPs must register their head office and global headquarters in an EU member state to obtain certification. These requirements would exclude the U.S. and other non-EU cloud providers from specific public cloud tenders in Europe, conflicting with EU-U.S. standard practices and the mutual trust built around safeguards for government access to data.
Cybersecurity
The Portuguese National Cybersecurity Centre (CNCS) serves as the operational coordinator and national authority for cybersecurity in Portugal. It collaborates with state entities, operators of essential services, and digital service providers to ensure that cyberspace remains a domain of freedom, security, and justice, protecting all sectors of society.
The CNCS has consolidated internationally recognized standards, primarily incorporated from the U.S. National Institute of Standards and Technology (NIST), into Portugal’s National Cybersecurity Framework to enhance cybersecurity. This framework enables organizations to adopt a risk-based approach to counter cyber threats, laying the groundwork for the voluntary implementation of security measures for networks and information systems. The framework is structured around five key cybersecurity objectives: identification, protection, detection, response, and recovery.
Portugal faces challenges ranging from a shortage of skilled cybersecurity professionals to inadequate investment in training and education over the years and limited public awareness regarding cybersecurity threats. Despite ongoing efforts, Portugal will require continuous attention to ensure the country’s digital resilience.
Crypto and Digital Assets
At present, there are no specific laws or regulations that govern issues related to cryptocurrency (except for the rules established in the Portuguese Anti-Money Laundering (AML) and Counter-Terrorist Financing (CFT) law). However, Portugal actively aligns with evolving EU regulations, particularly the Markets in Crypto-Assets (MiCA) framework. The MiCA Regulation, which became law in 2023, aims to bring greater security and predictability for operators and consumers and greater transparency. As the EU works to advance its regulatory framework, implementation remains a challenge; in the case of Portugal, the country has yet to define a national authority.
Portugal’s relatively relaxed stance on cryptocurrencies has made it an attractive destination for crypto businesses and investors. Lisbon, in particular, has become a hub for blockchain technology and cryptocurrency startups. The government’s 2020 Digital Transitional Action Plan, which includes the creation of “Free Zones” to test innovative technology, reflects its ambitions to spur growth through cryptocurrency. Cryptocurrency companies must be licensed by the Bank of Portugal as Virtual Asset Service Providers (VASPs) before commencing operations.
In 2023, Portugal introduced new tax rules for crypto assets, further clarifying residents’ tax obligations. This move aims to balance promoting innovation with regulating the sector effectively.
Most laws are set at the EU level. The Digital Economy Chapter of our Country Commercial Guide for the European Union provides a more comprehensive overview.
Digital Trade Opportunities
The demand for cloud-based software solutions, which offer greater flexibility and scalability, is on the rise. In Portugal, the software market is increasingly adopting artificial intelligence and machine learning technologies. Open-source software remains popular among both businesses and individuals.
The Portuguese government is actively promoting the development of the country’s technology sector through various initiatives to support startups and encourage innovation. With hyperscale data centers and several subsea cables, Portugal is poised to become a significant data hub connecting Europe, the Americas, Africa, and beyond. This will drive strong demand for U.S. products and services across these segments.
A 2022 Deloitte report highlights Portugal’s strategic position as a key player in the European data strategy. The report indicates that Portugal has the potential to attract major technological players looking to expand their presence in the global data market, meeting Europe’s infrastructure needs with competitive, robust, and extensive connectivity.
Digital Economy: related trade events
The Web Summit is the world’s premier high-tech conference and gathers policymakers, heads of state, CEOs, and founders of unicorns and fast-growing startups. It features more than 1,200 speakers, 1,200 investors, 2,100 startups, 300 event partners, 2,500 journalists, 80,000 attendees, and 160 countries. It typically introduces disruptive new technologies and raises thoughtful meta-issues by industry experts across related fields, such as big data, education, enterprise, entertainment, finance, health, lifestyle, machine, marketing, philanthropy, social and travel, and e-commerce.
Resources
Blockchain & Cryptocurrency Laws and Regulations 2024