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Folders  |  Starting a self-employed professional activity in Portugal
Starting a self-employed professional activity in Portugal
Starting a self-employed professional activity in Portugal
Starting a self-employed professional activity in Portugal

Before you start, you need to find out the best way of getting paid for your work in Portugal (either as an employee; as manager of your own company  either in your own name or with another legal denomination; as self-employed; as a mix of two situations; as a one-off, and so on).

One option – for example if you want to work as a consultant – is to take self-employed status. You will therefore need to do the following:

1) First things first: if you have not already done so, you must ask for a numero de contribuinte from the tax authorities or one of the Loja do cidadão offices.

2) You will then need to make a start-up declaration.
This declaration can be done via the Internet (serviços Online/entregar/actividade) or in a tax office. If you chose to use the Internet, you must request a username and password beforehand in order to be able to carry-out all of the operations in a protected manner on the Ministry of Finance’s website. You can ask for the username very easily on the same website (pedir senha).

As well as straightforward information (i.e. when the activity will start), you will need to give an activity code for your work from the list prepared by the CIRS. This is a code corresponding to the sort of work you will perform, for example 1320 for consultancy, 1334 for translations, and so on.

You can pay tax on revenue from a self-employed professional activity in two ways:

a) Through the ‘simplified’ system (used by default if the turnover for services provided is under  € 99 759.58 per year, or the turnover from sales of products or goods is less than € 149 739.37).

Under this system, you do not need to maintain formal accounts, showing revenue and expenses, etc. You just need to have a sales or services register and the total of fixed assets acquired. However, this means that you will not be able to deduct any expenses. The tax authorities will take it for granted that 70% of your income is taxable if you are in the services sector, or 20% if you are selling goods or products or are in the hotel/restaurant sector or selling drinks.

b) Formal accounting system:

This system always applies if estimated annual turnover when you register is more than € 99 759.58 (as a service provider) or € 149 739.37 (for sales of goods or products). You can also choose to opt for this system regardless of planned turnover (valid for a three-year period).

In this case, you must keep up-to-date accounts (using a specific accounting software package) and nominate a TOC (Técnico Oficial de Contas) to ensure your accounts are audited. This system allows you to deduct real costs linked to your activity and to present a balance sheet and accounting details at the end of the year.

3) All you need to do next is buy a book of green receipts available from any Ministry of Finances office. These green receipts must be used for each operation. Do not forget to fill-in all relevant details on each receipt.

4) Lastly, you must also purchase a services recording book in an authorised stationery shop (modelo 8), as well as a model 9 register, should you wish to pay and recover VAT (IVA in Portuguese).  

An activity supposes some form of IVA: you need to decide if your activity is exempt  from IVA, subject to IVA or if you have exemption due to a low income, i.e. an estimated income of less than 10 000 € per year.

Note that all documents must be kept for 10 years.

5) Social security registration/declaration

The social security offices are automatically informed of the start up of a professional activity via the declarations you make to the tax authorities as described under point 1. Therefore, once you have presented the tax declaration starting up your activity, you must register with the self-employed social security system. You usually are exempt from paying any duties during the first year of activity (check with your local social security office).
You will need to choose how much you contribute in accordance with estimated income (with a minimum set contribution). Exemptions may apply for a person who is already registered for another activity where he or she already pays into the system for at least the minimum amount, and for pensioners. Exemption from payment must be requested, by filling-in a special form.

Once you have taken all five steps, you can then start your self-employed professional activity.

Important extra information:

To pay or not to pay IVA?
The green receipts allow you to recover IVA. You must levy (and of course pay to the state) IVA in the following cases:
If your estimated (or real) yearly invoices exceed a total of 10 000 euros
If you are carrying out import-export activities
If you have opted for the formal accounting system

Some professions are by nature exempted from paying VAT: doctors, nurses and other paramedical professions.

Will you pay tax as you earn?

The green receipts provide for an automatic deduction of IRS (personal income tax) as long as the tax is paid by an entity that either has, or should have, a formal accounting system.
If your income does not exceed 10 000 €, it is up to you whether you want to have tax deducted at the source or not, i.e. deducted from the green receipt amounts (20% by default). Up to an annual income of 10 000 €, you are exonerated from compulsory deduction - this is optional. You indicate which option you want by ticking a box on the green receipt.

In all other cases, when you work for a company with a formal accounting system, the latter will deduct 20% at source (this is the normal rate, however there are exceptions – call the tax information line on 808 200 148 for details).

When you have an income of over 10 000 euros per year, you must deduct tax from the source on your green receipts.

Should there be a deduction of tax at the source, this is paid to the state by the company or companies you have worked for. When filling-in your income tax return form, you will indicate the amount of tax deducted at source (the company/companies who have used your services must provide you a declaration of the amount of tax deducted at source on your behalf in year n+1).
For other cases, you must declare your income and indicate that no deduction at source occurred. Be warned: the Portuguese tax authorities cross-check information to make sure the declarations they receive correspond.

Note: the information in this article was updated in May 2008 and details may change at any time.

Cédric Lecler in collaboration with Mazars & associates, Portugal

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