Self-Employed in Portugal: Mastering Taxes and the Simplified Regime

  • Publication 19 February 2024

  • | Reference IN969

Portugal’s sunshine and relaxed lifestyle attract many aspiring entrepreneurs. However, before plunging into self-employment, understanding the unique tax landscape is crucial. This article sheds light on personal tax implications and the ‘simplified regime’, helping you to reach the right decision for you.

Tax Fundamentals

  • Residents: Pay progressive income tax on worldwide income (14.5% – 48%).
  • Non-Residents: Pay a flat 25% on Portuguese-source income.
  • Social Security: Contributions 21.4% to 35% based on profession and chosen regime.

Enter the Simplified Regime

This attractive option caters for self-employed individuals with specific conditions:

  • Annual turnover: Under €200,000 of income.
  • Business activities: Listed in the regime’s allowed activities list.

How it Works

  • Tax Rates: Depending on the nature of the activity, the income subject to taxation is reduced. The income subject to taxation for products is 15% and for services is 75%, which is then taxed at 20% (if NHR), or otherwise according to the progressive tax tables. Please note that expenses must be registered on the tax office website and validated, to benefit from the percentages detailed above.
  • Basic example: Product sales of €30,000 received by an NHR Portuguese tax resident. €30,000 @ 15% = €4,500 taxable income. Tax due to the Portuguese tax authorities: €4,500 @ 20% = €900.
  • Reporting:
    • Annual returns are required to be submitted by 30th June of the following year (example: tax year of 1 January to 31 December 2023 is due on 30 June 2024).
    • VAT on a quarterly basis (if applicable)
    • Social Security on a monthly basis (one year exemption)
  • Reduced Burden: Less administrative complexity compared to the regular regime.

Considerations

  • Not for Everyone: May not be suitable for all professions or high-earning individuals.
  • Record Keeping: Maintain accurate income and expense records for compliance.
  • Deadlines: Adhere to payment deadlines to avoid penalties.
  • Social Security: Contributions remain mandatory under the simplified regime.
  • Seek Advice: Consulting a tax advisor is crucial for eligibility assessment and maximizing benefits.

Beyond Taxes – Other Considerations

  • NIF: Obtain your Tax Identification Number (NIF) for financial transactions and tax purposes.
  • Health Insurance: Explore private health insurance options as social security coverage might not be comprehensive.
  • Accounting Support: Consider professional accounting assistance for managing finances and tax compliance.

Remember

Self-employment in Portugal offers exciting opportunities, but understanding the tax system is essential. Research diligently, stay informed, and seek professional guidance to navigate the simplified regime and optimize your entrepreneurial journey. By planning effectively, you can embrace the sunshine and success with peace of mind.

Additional Information

For further information on the self-employment taxes and the simplified regime in Portugal, please do not hesitate to contact the Dixcart Portugal office: advice.portugal@dixcart.com. Our team is ready to assist you with any questions or concerns regarding this topic.

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