Freelance in Portugal
Portugal is a common choice for people looking to work and live in another country. Portugal is a popular choice among freelancers, entrepreneurs and digital nomads because of its opportunities, warm climate and ease of living.
Freelance in Portugal
Please note that this article is in no way intended to replace the advice of a professional. If you wish to be accompanied from A to Z by an English-speaking accountant based in Portugal, use the button below and fill in the associated form.
If you want to work as a self-employed person in Portugal, a sole proprietorship (Empresário em Nome Individual) is the best choice. A certificate of residence, a tax number and a social security number are required if you work as an independent contractor. You are responsible for paying social security and payroll taxes.
The Empresário em Nome Individual is a good option for people who want to start their own business in Portugal, as there is no need for minimum capital or statutes. The main disadvantage of a sole proprietorship is that you are personally responsible for all the debts of the business. Thus, there is no separation between the business owner and his or her personal assets.
To register a sole proprietorship in Portugal, you will need the following documents:
- A resident card in Portugal
- A tax number (TIN), assigned by the Portuguese tax office
- A social security number, issued by the Portuguese Social Security Agency
Taxes and VAT for freelancers in Portugal
Income tax rates in Portugal are progressive and differ according to the amount of taxable income earned per year:
- Less than €7,112: 14.5% tax rate
- Tax rate of 23% between €7,113 and €10,732
- Tax rate of 28.5% between €10,733 and €20,322
- Tax rate of 35% between 20 323 € and 25 075 €.
- Tax rate of 37% between 25 076 € and 39 967 €.
- Tax rate of 45% between 39 968 € and 80 882 €.
- More than 80 883 € : tax rate of 45
Freelance taxation in Portugal is carried out under category B – Business and Professional Income under IRS, which in practice means submitting a single return. Your business income is therefore considered as your personal income.
If you are wondering whether VAT applies to your business, the answer depends on whether you expect your services to generate more than €10,000 per year. Companies with an annual turnover of more than €10,000 must pay VAT on taxable products and services in Portugal. Please note that the 23% VAT rate applies if you invoice customers in Portugal. If you invoice customers outside of Portugal but within the European Union, then your invoices will not have to have VAT.
If you earn more than €10,000 per year, you must inform the government before January of the following year. If your annual income exceeds €10,000, you will be required to charge VAT on top of your services. The amount of VAT you receive from your clients will be reported to the government and paid on a quarterly basis.
To recap:
- Turnover of less than 10 000€/year: No VAT
- Turnover of more than 10 000€/year: VAT for customers in Portugal and outside the EU (Switzerland) / No VAT for customers in the EU outside Portugal (France, Belgium..)
Freelance in Portugal: what are the advantages?
If you know that your turnover will quickly exceed 10k euros per year, then the freelance status is probably not the best choice to create your Portuguese business. I would advise you in this first case to go for the single person company status (UNIPESSOAL, LDA) which is very suitable for individual entrepreneurs who generate more than 10k euros per year.
If this is not the case and you are uncertain about the success of your business, then there are many advantages to this freelance status to start a business:
- Simplicity of creation : no big steps, the process can be done quickly
- VAT exemption: as seen above, as long as you earn less than 10k euros per year, you will not pay VAT which is still 23% in Portugal
- Exemption of expenses: many expenses such as travel with your car, meals, work or others can be considered as expenses of your company. An advantage for taxes
- Right to unemployment benefits if the freelancer has contributed for at least two years
- No minimum capital required to start your own business as a freelancer
- Low tax cost, as your business income is considered as your personal income (Category B)
The profile of freelancers in Portugal
The website Fiverr, where you can buy freelance services, conducted in September 2020 a study to know the profile of freelancers in Portugal. And since we’re talking about it here and we’re in Portugal, this is information that may be of interest to some. For this study, the website that connects clients and freelancers interviewed 250 people.
Income and location of freelancers
It emerges from this study that freelancers in Portugal are mostly men (81%), rather young between 25 and 44 years old and who live mostly around the capital since the most represented cities are Lisbon, Setúbal and Leiria at 29%. Then come the Algarve at 12% and Beira Alta at 11%. Half of the Portuguese freelancers declared an income between 12k and 18k euros per year, while the other half said they declared between 18k and 28k euros of annual income.
We can also note that the Covid 19 health crisis has pushed Portuguese people to start up since only 51% of the freelancers surveyed were already working before the crisis. Let’s also note that even if freelancers are known to be very nomadic, 39% defined as crucial to keep a strong proximity with their family.
Where do Portuguese freelancers find contracts?
Among the 250 Portuguese interviewed, half of them find their contracts through direct marketing and e-mailing. By direct marketing, we can certainly imagine the professional social network Linkedin or even Facebook which is widely used in the country even in a professional context.
52% of Portuguese freelancers find their contracts directly online via platforms that connect freelancers and individuals/companies such as :
- Freelancer for 45%
- Upwork for 39%
- Fiverr for 36%
With the minimum wage in Portugal being 635 euros per month, it is very important to note that freelancing offers for many the possibility to earn more. This opportunity to earn more money was cited by 44% of Portuguese freelancers surveyed as one of the main sources of motivation.
Finally, 78% of respondents indicate that the retail, restaurant and leisure sectors are the most favorable sectors for freelancing in Portugal.
Freelance in Portugal: what are the main services?
Find below the list of the most common services offered by freelancers in Portugal:
- Design professionals at 38
- Web development 35% of all freelancers
- Marketing 33% of the time
- Technical support 27%.
Retail, catering and leisure are the sectors with the highest demand for design professionals at 67%, while the last two are the most sought after by travel and transportation related companies.
Becoming a freelancer in Portugal: English-speaking support
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