Freelancers in Portugal have more rights than ever before. From protections such as parental leave and illness allowance, the Social Security system ensures you are taken care of when necessary. There are also a few exemptions, such as not having to pay for social security for your first year and a VAT exemption for those making less than €10,000 a year. For non-habitual residents who have not been tax residents in Portugal in the last five years, the benefits are even higher. Some NHRs are taxed at a flat rate of 20% on their income and are exempt from paying taxes on global income. Take a look at this guide to find out if you are eligible.

However, being a freelancer in Portugal can be confusing and you must make sure you are making the right social security contributions and tax payments as these will not be taken care of by a company. Luckily, this guide to freelancing in Portugal has everything you need to know, from taxes to registering as a trabalhador independente.

How to Register as a Freelancer in Portugal

If you’re looking to become a freelancer in Portugal, make sure you meet all the legal requirements and register with the necessary institutions. Let’s go through the steps of becoming and registering as a freelancer in Portugal.

• First off, make sure you can legally reside and work in Portugal. If you are not an EU citizen, take a look at our guide to visas in Portugal. 
• You must then get your tax number called a NIF which is free and open a bank account. You can do this remotely but this will cost you some money as you will need to pay for a representative with power of attorney. When you get your NIF, ask for your password to log in to the tax authority’s website, known as Portal das Financas.
• Get your social security number (NISS) by calling 300 502 502 to make an appointment or head to your closest social security office. To obtain one, you need to show your residency card, NIF, and identification. It can take a few months until you obtain your social security number.
• You can then register as a freelancer, either online or at a tax office near you. If you do this online in the Portal das Financas, search for “beginning of activity”, “Services > Activity > Beginning of Activity”, and then “deliver the certificate”. This will include the service you provide which for most freelancers falls under Article 151 of the CIRS, the date of the beginning of your activity, the amount you estimate you will earn between January to December (for VAT exemption), and your IBAN.
• You will then also need to choose your accounting regiment: simplified or organized.
• The simplified regiment is the default one you get from the tax authority where you do not need an accountant. You can only have this regiment if you make less than €200,000 a year. This regiment allows you to pay taxes on 75% of your overall income and the remaining 25% is offset with expense receipts.
• Under the organized regiment, you are obligated to have an accountant. In this regime, all your expenses count, not just 25%, and your accountant takes care of social security and tax payment. This regiment is like a freelancer being an actual company in a way with added costs such as accounting and you will need complex tax files.
• You have now officially “opened activity”, a process that allows you to bill and send invoices to your clients through recibos verdes which we will address later. This will inform the tax authority about your income.

Tax System for Freelancers in Portugal

Green Receipts Invoice System: What are Recibos Verdes in Portugal?

Recibos verdes means green receipts or invoices. This is the way freelancers officially invoice clients and declare income for tax and social security. You need these recibos verdes to know how much you must pay monthly for social security and how much you must pay for income tax (IRS). After you have successfully registered as a freelancer and have access to your Portal das Financias (tax platform online), you can start issuing recibos verdes.

Step By Step: How to Invoice Clients Using Recibos Verdes

So, how do you issue a recibo verde? The whole portal is in Portuguese and is complex for even Portuguese speakers. We recommend doing this with a friend who knows the language until you get the hang of it. Here are the steps to issuing a recibo verde:

1. Go to the Portal das Financas and log in with your NIF and password.
2. Under services, pick “Faturas e Recibos Verdes” and then “Emitir”.
3. You will then choose between a “Fatura ou Fatura-Recibo” which is the classic recibo verde and a “Recibo” (this is a receipt if you have already sent the bill and want to confirm you received the money).
4. You then choose the service or activity you provided and the date of the service.
5. Insert the client’s Portuguese tax number known as NIF. If your client is not in Portugal, select their country first and then fill in their tax number.
6. Under the “Importância recebida a título de:” you can choose “pagamento dos bens ou dos services” (payment of goods and services). This field just asks why you are charging your client.
7. Then describe the service in the “Descricao” box.
8. Insert the value in “Valor Base”.
9. Select the VAT (IVA) regiment under the field “Regime de IVA”. This is either exempt or normal, we will address this later on.
10. Under the “Base de Incidencia em IRS” choose “isento” (exempt) if you did not make more than €10,000 or choose 100% if you made more than that a year.
11. The “Imposto de Selo” (tax stamp) is usually 0.
12. Then just click the blue “Emitir” button, print the document, sign it, and send it to your client! All done!

Freelancers Under Non-Habitual Resident (NHR) Tax Regime

While there is some confusion surrounding this, freelancers can enjoy the Non-Habitual Resident (NHR) tax regime, if they fit the requirements. The NHR tax regime was introduced in 2009 and is available to all new tax residents in Portugal that were not tax residents in Portugal for the 5 years prior. Some NHRs are taxed at a flat rate of 20% on their income and are exempt from paying taxes on global income.

Those who work in Portugal (freelance or regular employment) under the NHR tax regime only pay a 20% flat rate on personal income tax (IRS). To be considered “high value”, the job must be related to activities of scientific, artistic, or technical character. Considering the general tax rate for those making over €25,076 is 37% and for those making over €39,968 is 45%, this is an astronomical tax benefit.

You will also not pay any tax on dividends, interest, royalties, capital gains, rental income from real estate outside Portugal, and income from employment in another country. These will be paid in the source country if your country has a Double Taxation Agreement (DTA) with the country/ These benefits only last 10 years.

Guide to the NHR Tax Regime

Income Tax (IRS) as a Freelancer in Portugal

If you are eligible for the NHR tax regime, you will not have to pay the general income tax rate. However, even if you obtain this type of residency, you will have to be the general income tax rate after 10 years. In Portugal, self-employment income is classed as category B for income tax (IRS). You will have to submit your annual IRS declaration between April 1 and June 30 of the year after. However, you do not have to pay your IRS only once a year. Using the “retencao da fonte”, your can pay your IRS in “installments”.

You can also deduct business expenses such as the rent of your office and utility bills, which will not be calculated in your taxable income. However, there are limits to this. Expenses for travel and entertaining clients can only be deducted if they amount to less than 10% of your overall income. If you work from home, you can claim expenses up to 25% of your overall income.

Freelancers can also take advantage of the simplified regime where they pay income tax on 75% of their overall income and the remaining 25% is offset with expense receipts. If you make over €200,000 you aren’t eligible for the simplified regime.

VAT (IVA) as a Freelancer in Portugal

In Portugal, there are two situations for freelances concerning VAT: regime normal (normal regime) and regime de isencao (exemption regime). To be exempt from paying VAT or IVA, you must not have a turnover of more than €12,500 on taxable goods and services. If you need to charge your clients IVA, then you must send a declaration every three months to the tax authorities online. The VAT rate is 23% in mainland Portugal, 18% in the Azores, and 22% in Madeira.

Social Security Contribution as a Freelancer in Portugal

You will also have to pay social security which will one day assure you a retirement pension. The Portuguese Social Security is a system that also secures the basic rights of citizens and ensures equality in opportunities, providing measures of support such as unemployment allowances, paternal leave, and other financial support. HOWEVER, you are exempt from paying social security in your first 12 months as a freelancer in Portugal.

Get your social security number (NISS) by calling 300 502 502 to make an appointment or head to your closest social security office. To obtain one, you need to show your residency card, NIF, and identification. It can take a few months until you obtain your social security number.

Freelancers under the simplified regime (which is the most common) pay 21.4% to social security on 75% of their income. You must pay this yourself between the 10th and 20th of the following month.

Social security in Portugal is a system that assures basic rights to citizens. Contributing to social security is mandatory and guarantees the following benefits: unemployment allowance, retirement pension, sickness benefit, parental allowance, and more.

Guide to Taxes: The Tax System in Portugal