Self-employed tax in Portugal for freelancers

The Portuguese tax system can be confusing to navigate for foreign workers, especially if you’re setting up a self-employed business or conducting freelance work.

Keep reading for advice on the following:

The self-employed tax system in Portugal

According to Eurostat, 13.3% of people in Portugal are self-employed workers or freelancers, identical to the European average.

Whether you’ll need to pay income tax or corporate tax on your profits in Portugal depends on the type of business you run. There are also several different accounting methods that freelancers in Portugal may wish to consider.

Self-employed income tax in Portugal

Tax for self-employed sole traders and freelancers in Portugal

Sole traders, freelancers, and people who run unincorporated businesses in Portugal have their income treated as personal earnings and pay Portuguese income tax rather than corporate tax.

Self-employment income from a business or profession is classed as category B income under the Portuguese personal income tax system.

Sole traders can set up a single-member limited company (Sociedade Unipessoal por Quotas) or an individual limited liability establishment (Estabelicimento Individual de Responsabilidade Limitada). However, in the second scenario, any business assets separate from personal earnings are subject to corporate tax.

Income tax rates in Portugal are progressive. As a result, you pay more tax the more you earn. Workers have a tax-free allowance of €4,104. There is a flat tax rate of 25% for non-residents.

Portugal’s rates for individuals for 2023 and 2024 are as follows:

2023 income tax bands

Portuguese income tax bands	Portuguese tax rate
up to €7,479	14.5%
€7,480–€11,284	23%
€11,285-€15,992	26.5%
€15,993-€20,700	28.5%
€20,701-€26,355	35%
€26,356-€38,632	37%
€38,633-€50,483	43.5%
€50,484-€78,834	45%
€78,835+	48%

2024 income tax bands

Portuguese income tax bands	Portuguese tax rate
up to €7,703	13.25%
€7,704–€11,623	18%
€11,624-€16,472	23%
€16,473-€21,131	26%
€21,322-€27,146	32.75%
€27,147-€39,371	37%
€39,372-€51,997	43.5%
€51,998-€81,199	45%
€81,200+	48%

Tax on partnerships in Portugal

Partnerships, where two or more people share all business profits and have liability for business debts, are taxed in the same way as sole traders.

Consequently, each partner will pay tax on their share of the profits through the income tax system.

Tax on limited companies in Portugal

Limited companies in Portugal must pay corporate tax on their profits.

If two or more people set up a business and incorporate it as a limited company, profits generated by the company that are not declared on personal income tax returns are subject to corporate tax.

The main limited company structures in Portugal are Private Limited Companies (Sociedade por Quotas), Public Limited Companies (Sociedade Anomina), and Limited Liability Partnerships (Sociedade em Comandita).

How do I register for self-employed tax in Portugal?

If you’re planning on setting up a business in Portugal, it’s important to check you meet the legal requirements as well as register with any necessary trade bodies.

Unlike in some countries, self-employed workers can’t simply start a business without gaining accredited status in their industry.

To set up shop in some industries, you’ll need professional qualifications. In some cases, this means that you may need to take a Portuguese language exam.

When setting up your business, you’ll need to apply for a fiscal number (Número de Contribuinte) at your local tax office. There are several online services specialize in helping newcomers with their NIF, bank accounts, and more. These include Anchorless, Bordr, and e-residence.

Self-employed tax deductions and credits in Portugal

When it comes to calculating your taxable income, you can deduct any business expenses that you’ve incurred as part of running your enterprise. For example, this can include the likes of rent costs for your office, material costs, product costs, and utility bills.

There are some limits, however. Expenses for travel and entertaining clients can only be deducted if they’re less than 10% of overall income. If you work from home, you can claim expenses up to a limit of 25%.

Accounting methods in Portugal

Self-employed workers in Portugal can declare their income tax liability by filing their full accounts on an annual basis (also known as the direct method). Alternatively, they can do so by using Portugal’s simplified tax regime.

In addition to this, some expats in Portugal can benefit from the special Non-Habitual Residency (NHR) tax regime.

Before deciding which method to use, you should take professional advice from an accountant, as the right choice will vary from business to business.

Direct/organized accounting

Direct accounting involves filing annual accounts as well as paying income tax at the standard rates on your profits.

If you use this method, you’ll need to employ an accountant who calculates your gross annual profit after your allowable business expenses have been deducted, however.

Simplified regime

The simplified regime involves paying income tax at the standard rates on 75% of your overall income and providing expense receipts to offset the remaining 25%.

Because all sole traders can make use of a tax-free deduction of €4,104, those with lower incomes may find the simplified regime a beneficial option.

New businesses start off using the simplified regime, but it’s possible to switch to another method at a later date. You can request to change systems until the end of March each year, but you’ll need to stick to the new system for three years after making the change.

Businesses with an annual turnover of more than €200,000 aren’t eligible for the simplified regime. They must instead file their annual accounts using the direct method.

Non-Habitual Residency (NHR) regime

The NHR tax code offered preferential tax rates and exemptions for 10 years to qualifying foreign residents of Portugal.

Since 31 December 2023, the NHR scheme has been closed to new applicants. However, though those who already have NHR status can still benefit from the regime. People who were in the process of applying can continue their application.

The NHR scheme is to be replaced with an employment-based scheme which will focus on attracting international workers for specific jobs, such as scientific researchers and teachers. The new scheme will allow those who qualify to pay tax at a flat rate of 20%.

Corporate tax in Portugal

Corporate tax rarely applies to self-employed workers and freelancers in Portugal.

However, businesses pay corporate tax in Portugal at a flat rate of 21% of their taxable profits. The rate has gradually come down in the last decade, leaving it slightly below the EU average of 21.9%. Businesses in Madeira and the Azores pay 14.7%.

Businesses in Portugal may also need to pay surcharges on top of their corporate tax bill, depending on where they’re located and their overall profits.

Small- and medium-sized businesses pay a reduced Portuguese corporate tax rate of 17% (11.9% in Madeira, 12.5% in the Azores) on their first €50,000 of taxable profit.

From 2024, companies considered start-ups benefit from an even lower rate of 12.5% on the first €50,000 of income.

How to file self-employed tax in Portugal

The Portuguese tax year runs from 1 January to 31 December. Workers must complete their tax returns for 2023 between 1 April and 30 June 2024. Self-employed people can pay their tax in three installments, in July, September, and December.

You’ll need to submit your self-employed tax online. Again, tax payments are made in three installments, and payments are usually based on the previous year’s assessment.

VAT in Portugal for self-employed people

VAT in Portugal (Imposto Sobre o Valor Agregado, or IVA for short) is payable by all businesses with a turnover of more than €14,500 on taxable goods and services. This will rise to €15,000 in 2025.

There are three rates of IVA in Portugal:

• General rate: 23% on taxable goods and services
• Intermediate rate: 13% on food and drink
• Reduced rate: 6% on essential necessities including certain foods (e.g., meat, fruit, vegetables, cereals), books, newspapers, medicines, transport and hotel accommodation

Madeira (22%/12%/5%) and the Azores (16%/9%/4%) apply slightly different rates, however.

If your business is liable for VAT in Portugal, you will also need to apply for a VAT number, or NIF (Numero de Identificacao Fiscal).

IVA is payable to the Portuguese Tax Authority seven days after the reporting deadline periods, either quarterly or monthly.

Social security for self-employed workers in Portugal

Self-employed workers are responsible for making their own social security contributions. While employed workers’ contributions are topped up by payments from their employers, those who are self-employed have to pay the full contribution themselves.

The vast majority of self-employed workers in Portugal must pay contributions through the Portuguese social security (Segurança Social). How much you’ll need to pay varies, but the general rate of contributions for self-employed workers in Portugal is 21.4%. Payments need to be made monthly between the first and 20^th of the month.

In return for social security contributions as a self-employed worker, you are entitled to unemployment benefits, an allowance for sickness, parenting benefits, family allowance, invalidity benefit, as well as pensions and survivor’s pensions.

After 12 months, however, you’ll start paying based on the previous year’s taxable income.

Self-employed tax fines in Portugal

The financial penalties for filing late or incomplete Portuguese income tax returns range from €200 to €2,500. Late payments can be penalized from 10% of the outstanding tax to double its value up to a maximum of €55,000 (plus interest).

If you file your corporate tax return late, interest is charged at a daily rate of 4% on the tax due. Penalties are capped at €165,000 (if the delay is deliberate) or €45,000 (if it’s due to negligence).

If you pay your taxes late, your company could face fines of between 30% and 100% of the tax due, capped at €45,000.

Associations for entrepreneurs in Portugal

• EO Portugal – Portuguese branch of the global peer-to-peer organization for business owners
• Startup Portugal – Organization offering advice and information for people starting businesses in Portugal

How to find an accountant or financial advisor in Portugal

You can get advice on tax and social security issues from an English-speaking chartered accountant through the Ordem dos Contabilistas Certificados (Order of Certified Accountants).

Plenty of firms specialize in tax affairs for foreigners. These include:

• Anchorless – offer tax consultations
• Bordr – provide an income tax filing service for internationals
• e-residence – count tax filing among their many offerings tailored to those living abroad
• Tytle – have a range of services for internationals living in Portugal, including tax advice

Useful resources

• Autoridade Tributária e Aduaneira – the Portuguese tax authority
• British-Portuguese Chamber of Commerce
• Find an English-speaking accountant
• Ordem dos Contabilistas Certificados – find a certified chartered accountant
• Segurança Social – Portuguese social security