Work in Portugal

Tips for self-employment in Portugal

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Expat Blogger Samantha Milner shares some tips on self-employment in Portugal, having set up an internet business from the Algarve.

It was back in 2010 when we finally had everything set up for self-employment in Portugal and, for someone who has no experience with the Portuguese tax system, it felt like one long nightmare…

I always completed my tax returns myself when I lived in England and never had a problem and found it very easy. My parents were self-employed for many years and I had watched over their shoulder on many occasions, so when I was in the same boat back home it was a piece of cake.

I thought that the tax system would be the same here, because with the amount of expats moving abroad I thought that they would be adjusted well.

The first thing we did when we planned to transfer our business over was visit an accountant.  We soon realised we were going to struggle based on what many of our businesses were doing at that particular time.

For example, when it was recommended we use the green receipts system (which, I may point out, weren’t green) we thought it would be an easy system to follow. All you had to do was log all your outgoings and incomings in one receipt book and then hand it to your accountant at the end of the task year and then they would do the rest for you.

However, if you intend on having a lot of business transactions, you are talking about a serious amount of form filling that will need doing. I have hundreds of different websites that form part of one business so this is a long job.

Another major negative part of the green receipts system is that you can only claim 30 percent of your turnover as expenses and I haven’t found anyone in the Algarve apart from those with rental properties who fall into this segment.

The majority of those who declare themselves self-employed in Portugal will be doing so for the very first time. If, say, like many expats moving to Portugal you open a bar or restaurant in your first year, then chances are every cent and euro you make will be going straight into your business so that you can make it a success. In this case you will have a profit level that is very low but with very high expenses.

I expanded my business by 60 percent last year, which meant I had high expenses and will now have to pay tax on my losses which feels very unfair, but as I signed up to the system there is little I can do to change it.

I will be consulting my accountant to move onto a different tax system, but I still love the simple green receipts system. If you are a mobile hairdresser or a plumber that doesn’t have large outgoings I highly recommend it.

Another expense that you will have to pay is your social security contributions, which are EUR 150 a month and are due each month regardless of whether your business has made a profit. So if you have a restaurant that closes in winter, you will still have to cover this cost.

I am sure you can see now why businesses fail to take off in Portugal due to the expenses involved. I recommend that if you are planning on setting up a business you have a standby savings account to cover this so that you can make it through your first year.

On a positive note though, you can claim more in expenses in Portugal. You can claim for everything from your kids’ schoolbooks to the cost of your trip to the doctor’s. When you think of this type of expense I bet you could save EUR 2,000 worth of taxable income a year if not more.

If your business will be turning over more than EUR 10,000 per year, you will also need to register for IVA even if your customers are not Portuguese based. I have a majority American customer network but I still have to deal with IVA.

This, again, can be set up by your accountant but needs to be dealt with at the beginning of the year.

A benefit of dealing with customers in another country is the different currencies. You can choose what day of the month to declare your income so you can do it when it is at the lowest against your own currency so that you are not losing out if the exchange rate goes up or down.

You can end up spending a small fortune through your accountants due to not knowing the language so that I suggest you employ a local person who speaks the language and can translate documents for a small fee.

A local will charge you EUR 20 to read a document whereas an accountant will charge you around EUR 200.

One final point to keep in mind is that the tax system runs from January to December in Portugal.


Samantha Milner / Expatica

Samantha Milner is a British expat who left her left behind in England for a new life in the Algarve and has a successful career in internet marketing. You can read her Algarve Blog that gives details of her new life living in the sun by clicking here.

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2 Comments To This Article

  • Ripp posted:

    on 9th November 2015, 01:04:13 - Reply

    Hello, I've been researching self employment in Portugal and find it much more confusing. There doesn't seem to be a simple answer.

    I want to move and become a permanent resident in Portugal next year and all I want to know are the self employment tax bands (among other fees) i'd have to pay.

    i operate as a sole trader selling things online, basic stuff. Turns over just enough a month to live.

    Any tips/advice/pointers/other warnings?

    I'd really appreciate it.

  • Amy posted:

    on 16th July 2015, 23:55:46 - Reply

    Thanks for your article. I'd like to do freelancing over internet but really fear of paying social security and high tax as I don't intend to earn a lot. Do you have to pay social security even if oyu earn very little a year?