If you do not want to bind yourself with an employment contract with any company or to register a legal entity, you can declare yourself as an independent worker, Trabalhador Independente, the analogue of the Ukrainian FLP. Let’s look into this question together with Good Portugal.

The taxation system of the private entrepreneur in Portugal depends on the type of activity and type of profession. You can choose a simplified or regular tax regime.

Simplifiedaccounting regime – characterized by the definition of income category B by applying coefficients to the total business or professional income Art.31 CIRC. If gross annual income is equal or less than 200000 euros, a chartered accountant is not required.

Organizedaccounting treatment. The organized accounting system is characterized by the determination of category B income, carried out on an accounting basis, in accordance with the rules of the CIRC Code.

Category B income is:

  • related to the conduct of any commercial, industrial, agricultural, forestry, or livestock activity;
  • those earned from any service activity, including scientific, artistic or technical, whatever their nature, even if related to the activities mentioned in the preceding paragraph;
  • those arising from intellectual or industrial property, or from the provision of information on experience gained in the industrial, commercial or scientific sector, when it was obtained by the original owner.

Article 31 of the IRS code regulates the values of the ratios for determining taxable income. A factor of 0.75 of gross income applies to Category B professional income, and 0.25 of the amount is automatically taken as an expense.

Please note that if your annual turnover is up to 12,500 euros, you fall under the IRS and IVA tax exemption, Art. 53 CIVA: Taxable persons who, not having or not being required to keep accounting records for IRS or IRC purposes, do not carry out import, export or related activities, and do not carry out activities related to ferrous and non-ferrous metal, have not reached in the previous calendar year a turnover of more than 12,500 euros.

Also, if you have not been resident in Portugal for the last 5 years, you can take advantage of the non-permanent resident RNH tax regime “Residente não habitual”. Portugal is interested in qualified professionals, and in 2009 launched the RNH regime to attract immigrants with high potential and economic value, in order to increase the international competitiveness of the country.

RNH status then fixes an income tax rate of 20% for 10 years, but the tax is imposed on 100% of the gross annual income from activities that are registered in Portugal and expenses are not deductible. The application for RNH status is submitted by March 31 of the following year. You can use the status if you wish, but it is more advantageous to stay on the general system if your income is small. Before filing, always compare and calculate which system is more profitable. You can be RNH-eligible if you are an independent contractor or self-employed person.

Tax office in Cascais

Taxes

IRS– Income Tax. On 75% of the gross income of category B, from which expenses are deducted, an income tax is imposed according to the progressive scale of Art. 68 CIRS:

Up to 7,116 euros – 14.5%
From 7,116 to 10,736 – 23%
From 10,736 to 15,216 – 26.50%
From 15,216 to 19,696 – 28.5%
From 19,696 to 25,076 – 35%
From 25 076 to 36 757 – 37%
From 36,757 to 48,033 – 43.5%
From 48 033 to 75 009 – 45%
Above 75,009 – 48% From 80,000 to 250,000 euros an additional solidarity contribution of 2.5% arises and from 250,000 – 5%.

The IRS individual income tax is levied on the annual amount of income from the following categories, even if they arise from illegal activities, after appropriate deductions and surcharges
Category A – Income from dependent employment.
Category B – Business and professional income.
Category E – Capital income.
Category F – Income from construction.
Category G – Equity increments.
Category H – Pensions.

For both businesses and individuals, filing an annual IRS return is mandatory. The return can be filed personally for yourself or as a family return. The family return shows business income, spousal income, the number of children, and other family members to be supported. The reporting period is three months – April, May and June.

IVA– VAT, value added tax. VAT rates in Portugal are 23%, 13% or 6%, depending on the type of goods or services. The tax arises on gross annual income over 12500 euros.

Contribution tothe Segurança Social, the analogue of ERU in Ukraine. Private entrepreneurs are exempt from paying the contribution for the first 12 months. On the 13th month a payment arises, which is calculated according to the formulas: The income of the previous three months is multiplied by 70% and multiplied by 21.4% if you provide services, and the income of the previous three months is multiplied by 20% and multiplied by 21.4% if you produce and sell goods. The resulting figure is divided by three and paid each month from the 10th to the 20th. If you have zero income – 20 euros per month. You have to submit a declaration on a quarterly basis.

If you do not use the NRH status, you can enter family expenses in the declaration: medicine, food, clothes, appliances, real estate rent, car repairs, etc., some costs will be written off. All payments in which you have named your NIF will go to your personal account on the Finance Portal.

A private entrepreneur can hire employees, but it is not financially profitable for him.

Password request for registration on the Finance Portal

To register a Trabalhador Independente you need to:

To declare yourself and start a business: can be online through the tax portal https://www.portaldasfinancas.gov.pt/, or in person offline. To identify and access the portal, use one of the options:

  • Chave Móvel Digital mobile key;
  • Request a Senha access password, through the same portal, which, within 5 business days, the letter carrier will deliver to your mailbox in an envelope. If it is urgent or difficult for you to do it yourself, the tax office will help you within a day.
    After logging in to the Finance Portal, you need to file a business start-up declaration. You can also go to the IRS.

You will need data to fill out the declaration:

  1. NIF number
  2. Identity document (residence permit, citizenship card or passport – if you do not already have an issued residence permit);
  3. IBAN (your bank account ID). You can use a personal bank account.
  4. Type of activity, CAE or CIRS code, 1 primary and 19 additional.
  5. Year-end revenue forecast. The income forecast is important information for determining the regime. If the turnover does not exceed 12 500 euros per year, you are exempt from tax.
  6. The option of taxation regime – simplified or organized regime.
  7. Tax address

After the registration of the declaration, you can write accounts Recibos Verdes. This is what people call private entrepreneurs. Bills are written out on the portal of finance, you can print them out, or send them in Pdf format to the client.