Self-employment in Portugal

Self-employment is an increasingly popular choice among professionals from various sectors in Portugal.

Flexible working hours, being able to choose projects aligned with your own interests and values, and the opportunity to work from anywhere are just a few of the advantages that are drawing more and more people to this model of self-employment in Portugal.

Advantages of Self-employment in Portugal

Portugal is one of the best countries in the world for self-employment. In Portugal, self-employed workers, also known as liberal professionals or freelancers, can enjoy:

• Quality of life
  Portugal is known for being a first-rate tourist destination, with beautiful beaches, rich and varied cuisine, a mild climate, and a relatively low cost of living compared to other European countries. What’s more, the Portuguese are friendly and welcoming and English is widely spoken.
   
• Stability and Safety
  Portugal has a low crime rate and is one of the safest countries in the world (according to data from the Global Peace Index). Additionally, Portugal is an example of political and social stability, which ensures a favorable environment for self-employment, opening a business, and starting a family.
   
• Growing Entrepreneurial Ecosystem
  Portugal has invested heavily in its entrepreneurial ecosystem, which translates into more opportunities, support communities, and resources for self-employment, freelancers, and entrepreneurs. The country offers specific visas for various types of work, making the transition easier for those wishing to settle in Portugal.

How to Move to Portugal as a Self-employed Worker

If you are not a Portuguese citizen and want to move to Portugal as a freelancer or self-employed worker, you can do so.

However, there are essential differences for citizens of an EU (European Union) country and for citizens of non-EU countries.

The process of moving to Portugal as a self-employed worker involves several important steps such as obtaining a residence visa (if necessary), obtaining a Tax Identification Number (NIF) and a Social Security Identification Number (NISS), as well as the declaration of starting an activity as a self-employed worker in Portugal.

Taxes on Self-employment in Portugal?

If you want to be a freelancer in Portugal it is crucial that you fulfil all of your tax and contributory obligations in Portugal, especially those associated with self-employment.

We recommend you get help from an expert local partner such as NEWCO, who can help you navigate the complexities of the Portuguese tax system, ensuring that all your tax obligations are met in full.

Should you operate as a freelancer or start a business?

One of the issues that many freelancers in Portugal struggle with is deciding whether or not they should start a company to provide their services.

The possibility of setting up a company should be assessed taking into account several factors, such as growth potential, long-term stability, protection against liability, implementation costs, operating costs and the tax implications of a company versus self-employment in Portugal.

In Portugal, the most common type of company is the limited company (Lda.) because it offers greater flexibility and a less complex administrative and supervisory structure.

However, we recommend a case-by-case analysis.

What accounting regime should you choose?

Self-employed workers in Portugal can choose between two accounting regimes: the simplified regime or the organized accounting regime.

The choice you make is important because it will influence how your income taxation is calculated, i.e., the amount of tax you will pay as a self-employed worker.

The simplified regime is applied by default and is the most common, as it does not involve the hiring of a certified accountant. The way the simplified regime works is that a coefficient is applied to the gross amount of your income in order to deduct what is considered normal labor expenditure for your sector of activity.

However, you can only opt for the simplified regime if:

• Your turnover does not exceed €200,000 in two consecutive taxation periods; or
• Your turnover does not exceed €200,000 by more than 25% in a single taxation period.

If you exceed either of these limits, you must change your self-employed worker regime in Portugal to organized accounting by appointing a certified accountant who will be responsible for rigorously assessing the net taxable income from your professional activity.

Personal Income Tax

Personal income tax (IRS) is a tax that is payable on the overall income of tax residents of Portugal.

Your professional income earned in Portugal as a self-employed worker will be taxed according to the progressive rates set out in the IRS tables in similar fashion to any other worker in Portugal.

If you earn professional income abroad, this should be counted along with your earnings in Portugal and the normal IRS rates applied to your total income.

There is an exception to this for non-habitual residents (NHRs) whose activity is considered to be high value-added. 

In these cases, income earned in Portugal from high value-added activities will be taxed at the fixed rate of 20%; meanwhile, your income earned outside Portugal may be exempt from Portuguese tax if it is taxed in the country of origin under an applicable Double Taxation Agreement.

VAT

Services provided by self-employed workers in Portugal are subject to the VAT Code (value added tax).

Your NIF functions as your VAT number and becomes valid for intra-Community transactions after you start your activity as a self-employed worker.

Self-employed workers in Portugal are entitled to VAT exemption provided that all of the following conditions are met:

• They do not have organized accounting and are not obliged to have it;
• They do not perform operations pertaining to import, export, intra-Community transfers of goods or intra-Community supply of services;
• Their turnover, in the previous calendar year, has not exceeded €14,500 (€15,000 from 2025).

If you do not meet all of these conditions, you will be subject to the general VAT regime.

Social Security 

As mentioned above, all self-employed workers in Portugal must contribute part of their gross income to social security. 

But it’s not all bad news, because you are entitled to an initial exemption for 12 months after starting your activity.

After this period of exemption, a fixed rate of 20% applies for two months, following which your monthly social security contributions will be calculated at a rate of 21.4% of 70% of your average income during the previous quarter.

Specific reporting obligations for self-employed workers

Self-employed workers in Portugal need to be mindful of several legal deadlines related to their professional activity.

For example, all self-employed workers must issue an invoice after each service provision. They must also submit their periodic VAT and Social Security declarations.