Have you thought of plunging into the freelance area? So, if this is what you are concentrated on right now, we are ready to help you deal with it and reveal the peculiarities of becoming a freelancer in Portugal.
Self-employed tax system in Portugal
The statistics say that around 17% of Portuguese people belong to the category of freelancers or self-employed. By the way, this number is more relevant if we compare it with the average figure in the EU.
You are going to pay a corporate or income tax but it is linked to the type of business you will start. As for the accounting methods, freelancers can stick to a few of them too. Let us cover them a bit too.
The first option to stick to is direct accounting. In this case, you will deal with filing annual accounts and paying taxes at the standard rates. And, you will have to hire a person who will be responsible for this.
Another option is a simplified regime. Here, you pay an income tax at the standard rates on 75% of your income and suggest expense receipts to offset 25%.
Also, there is a special non-habitual residency regime with a 20% flat rate.
Self-employed income tax in Portugal
Now, we would like to deal with tax for self-employed freelancers and sole traders. This category of people (including those who own unincorporated businesses) is about to pay an income tax (all they earn is thought to be personal earnings).
Self-employment income obtained as a result of being involved in a certain profession or business is considered to be a category B income.
If a sole trader makes a decision to establish a limited liability company, he should be aware of this: the assets that are not included in the personal earnings are subject to corporate tax.
By the way, in Portugal, the more you earn, the more tax you will be obliged to pay. Non-residents will come across a flat tax rate of 25%.
Registering for self-employed tax in Portugal
You cannot simply start a business in Portugal. But this process is linked to certain steps in other countries too. You need to go through the registration procedure to begin working.
Opening a business in particular spheres requires knowledge of Portuguese. Therefore, you may have to take an exam.
Self-employed must register on the Tax Office. A vital step to take in this case is submitting a self-employment registration certificate. You can do all of this either online or on location.
Self-employed tax deductions and credits in Portugal
Let’s imagine that you are involved in calculating the taxable income. In this case, you are free to deduct some of the business expenses. They may be represented by product costs, rent payments, etc.
Note that expenses for entertaining customers and travel can be deducted only in case they are less than 10% of all income you managed to receive. For those working from home, these expenses can reach the limit of 25% and it is the absolute maximum.
How to file self-employed tax in Portugal
The first thing to bear in mind is this: the tax year in Portugal runs from January 1st to December 31st. If we speak about completing the tax returns, it works this way: if you want to do this for the year 2021, the process has to be over between April 1st and June 30th.
Self-employed are free to pay the tax in three contributions: July, September, and December.
Submitting the self-employed tax takes place online. Payments you should proceed with are linked to the assessment of the previous year.
VAT in Portugal for self-employed people
VAT has to be paid by those whose turnover exceeds 10,000 euros on taxable services and stuff. Here are the rates applicable to Portugal:
- A reduced rate which is a figure of 6% on essentials such as books, newspapers, some kinds of food (fruit, veggies, meat, cereals), accommodation, medicines, transportation;
- Intermediate rate – 13% on food and drinks;
- The general rate which is 23% on taxable services and goods.
In case your business turns out to be liable for VAT, you will have to get a VAT number or NIF.
VAT has to be paid to the Portuguese Tax Authority quarterly or monthly (it is up to you to decide on this) a week after the reporting deadline periods.
Social security for self-employed workers in Portugal
Remember that all self-employed workers have to make the Social Security contributions on their own. So, it is fully their responsibility (if you have an employer, he is going to do this for you).
Most Portuguese self-employed people pay the contributions we are talking about through Portuguese Social Security. The general rate is 21.4% but the sum you personally will be charged is a variable figure. You should proceed with the payments between the 1st and 20th of each month.
Once you make these contributions, you can expect to receive proper help in the following life situations:
Help is expressed in the allowance you are about to obtain. Besides, you can expect to get a pension in Portugal too. This is a really important aspect for those thinking of how to register as a freelancer in Portugal.
After 12 months you will pay according to the taxable income of the previous year.
Self-employed tax fines in Portugal
It is significant to note that you are going to be fined for filing late or incomplete income tax returns. The sum you will be fined with varies but usually, it ranges from 200 to 2,500 euros.
In case we deal with a late corporate tax return, interest is going to be charged as 4% on the tax due (a daily rate). You are going to be fined more if you are subject to deliberate delay (such sums as 165,000 euros can take place). The figure is going to be less in case of negligence.
The company you own can come across fines of between 30% and 100% of the tax due in case you are going to pay the taxes too late.
That is why try to deal with taxes on time. Do not postpone activities linked to them because otherwise, you will have to come across the fines we have listed here. and we bet that this is not going to be pleasant at all.
Associations for entrepreneurs in Portugal
It is really nice to find those involved right in what you are doing on a regular basis, right? Therefore, you can get acquainted with some of the best associations for businessmen:
- Startup Portugal. Here, you can get a useful piece of advice and just familiarize yourself with some helpful data;
- EO Portugal. This is a Portuguese part of the huge global community for the business owners;
- Portuguese Association of Women Entrepreneurs. A rather cool organization for businesswomen.
How to find an accountant or financial adviser in Portugal
There are several ways to do this. However, one of the most effective ones is this: you just should stick to the international directory of the Institute of Chartered Accountants in England and Wales. The accountant is going to speak English which turns out to be really convenient.
A good accountant is going to be eager to provide you with a consultation first where he will tell you about the peculiarities of opening a business in Portugal. What is more, you will receive a thorough analysis of risks speaking of your particular situation and will be certain of your future decisions.
Do not be afraid to deal with the accountants working independently. They are able to provide you with qualitative services too! Do not neglect reading the reviews about an expert first though.
How to become a freelancer in Portugal with E-residence
Portugal freelance visa and other aspects are the topics that interest those who would like to join the best Portuguese freelancers. Well, today it is going to be real if you make a decision to collaborate with E-residence.
The first thing you have to keep in mind is this: if you choose to deal with E-residence, you can count on getting as qualitative services as possible. Everything will be done quickly and effectively. It means that you will become a freelancer and will be able to pay taxes soon after you start the collaboration.
Another cool thing is that after becoming a freelancer, you will have an opportunity to apply for a residence too.
This is how things are going to work if you deal with E-residence: you will just have to provide all the necessary info and documents and expect a result of the request. Also, you will have to pay a fee for assistance. Look at the list of the stuff to suggest:
- A Portuguese bank account (it is not a big deal if you do not have it; it does not take much time to open it);
- Data regarding what services you intend to promote as a freelancer;
- NIF. This is a tax number in Portugal. Again, don’t worry if you didn’t manage to get it as long as this can be done rather quickly without any issues;
- Date when you are supposed to start working;
- The sum you plan to earn by the end of the fiscal year (approximate figure).
As you see, there isn’t as much to introduce. The procedure will be as carefree as possible!
Wish you the best of luck and hope you will manage to earn as much as you want as a freelancer very soon!