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How to work as a freelancer in Portugal

Updated: July 1, 2024
By: David Afonso

Working as a freelancer in Portugal can be an adventure, with the versatility of jobs and the flexibility of working hours and location. Plus, many benefits and support programs for young entrepreneurs! To help you get more informed, we’ve put together a guide with the most common questions from those just starting out in self-employment in Portugal.

Frederik Pohl
Frederik Pohl, CEO
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What areas can I work in as a freelancer in Portugal?

There are no defined areas in which you can work as a freelancer. Any activity or project that allows services to be provided can be used as a source of income for freelancers. Still, some areas have more freelance gigs:

  • Information Technology (IT): Web development, programming, digital marketing, etc.
  • Translation and Copywriting: Translating texts, writing content, proofreading, and editing.
  • Consulting: Consulting in various areas, such as marketing, business, finance, etc.
  • Arts and Design: Graphic design, web design, illustration, photography, videography, etc.
  • Education: Online teaching, tutoring, creation of teaching materials, etc.

How do taxes work for freelancers in Portugal (IRS, VAT, Social Security)?

IRS – Personal Income Tax

It is compulsory to submit the IRS declaration for the previous tax year every year. After the third year since you started your business, you have to make three payments on account throughout the year. The Tax Administration communicates the amount of each payment by registered letter.

IRS – Withholding Tax

This advance IRS payment is only compulsory for those who receive more than 10,000€ a year (but you can opt for withholding tax if you wish). The amount to be withheld can be up to 25% of the payment received by the freelancer (the percentage varies according to the activity code).

VAT – Value Added Tax

Freelancers are liable to pay VAT if they meet one of the following requirements:

  • Having organized accounting
  • Carrying out import, export, or related activities
  • Transferring goods or providing services as set out in Annex E of the CIVA
  • When they achieve a turnover of more than 10,000€ in the previous year

Social Security (‘Segurança Social’)

Payment is made every three months on the Social Security website. Workers are exempt from contributing for twelve months from the start of their activity. After this period, the deductions are 21.4% on 70% of the average income of the last three months. The minimum monthly contribution is 20€ to guarantee stability for the worker.

In case of doubt, it is advisable to consult an accountant to better understand your tax obligations and ensure compliance with them.

Working for a foreign company while in Portugal

If you are working for a foreign company as a freelancer in Portugal, there are some important considerations to keep in mind:

  • Taxes: As a freelancer, you must pay your taxes in Portugal. Depending on the tax agreement between Portugal and the country where the company is based, you may also have to pay taxes in that country. Understanding the tax obligations in both countries is essential to avoid future problems.
  • Bank transfers: To receive payments from abroad, it is advisable to have a bank account in Portugal that accepts international transfers. Ensure you provide all the necessary information to the foreign company to facilitate transfers.
  • Salary: The salary you receive as a freelancer can vary depending on the agreement with the foreign company. Discuss all the details, including fees and payment deadlines, before you start work.

How to freelance as a foreigner in Portugal

If you are a foreigner and want to work as a freelancer in Portugal, there are a few steps you need to follow.

Portugal Visas for freelancers

If you live outside the European Union, don’t have European nationality, and want to come to Portugal to work, you must know you need a work visa. This is the only way you’ll be able to come to Portugal to work legally and by current Portuguese legislation. But this visa depends on the activity you are coming to do. To be a freelancer, there are other options:

D2 Visa

The Portugal D2 Visa, also known as the Entrepreneur Visa, is aimed at providing residence authorization to non-EU entrepreneurs, freelancers, and independent workers. For the D2 Visa to be granted, you must make investment operations in Portugal or prove to have financial means available in the country. This mostly applies to people opening a new company in Portugal or a branch of their already existing business, so perfect if you plan on setting yourself up as a business (ENI).

Digital Nomad Visa (D8)

The Portugal Digital Nomad Visa is available to non-EU citizens who are employed by a company outside of Portugal or self-employed. This visa, which is officially known as the ‘residence visa for the exercise of professional activity provided remotely outside the national territory,’ allows holders to live and work in the country either temporarily or for up to a year (renewable). Plus, on the D8 Visa, you are charged a special tax rate of around 20% or less.

How to open activity at the Portuguese tax office

To start freelancing in Portugal, you need to open an individual activity (‘abrir atividade’). The process can be done in person, at a tax office, or online on the Finance Portal (you must go to “Citizens,” “Services,” “Start of Activity”, “Submit Declaration”).

At the moment of opening business activity as a freelancer, you have two choices: you must decide whether you want to be a service provider (working on green receipts (‘recibos verdes’) or an Individual Entrepreneur (ENI). 

On the other hand, to operate legally as a freelancer in Portugal, you must also obtain a NIF (Portuguese Tax Number). Obtaining a NIF is essential not only for issuing invoices and fulfilling all your tax obligations, but also for daily activities such as acquiring a cell phone number, renting a house, or opening a bank account.

NISS for Social Security

To access social security benefits in Portugal, such as healthcare and social support, you need to obtain a social security identification number (NISS). You can apply for it at the Social Security website.

Working in Portugal: Simplified or Organized Accounting?

  • Simplified Regime: This model can include self-employed workers and sole proprietors who live in Portugal and have a gross annual income of up to 200,000€. For these professionals, this is usually the option most often chosen.
  • Organized Accounting: This system is compulsory for all taxable persons and sole proprietorships. It is also mandatory for self-employed workers and sole proprietors with a gross annual income of over 200,000€.

In the end, the size of your business is the determining factor in whether you choose the simplified or organized accounting system. The higher your turnover, the more advantages you will have in selecting an organized accounting system. If your business has fewer expenses and smaller assets, opting for a more straightforward system will be more beneficial.

How to issue green receipts (‘recibos verdes’) in Portugal

In Portugal, green receipts are the most common way for self-employed people to declare their income. In fact, it is an essential piece of information on how to work as a freelancer in Portugal. To issue green receipts, follow these steps:

  • Access the Finance portal and log in with your NIF and password.
  • Select the “Issue Green Receipts” option and fill in the required fields, such as your NIF, the client’s NIF, the service value, and the issue date.
  • After filling in all the details, click “Issue Receipt,” the receipt will be automatically generated in PDF format.
  • Keep a copy of the receipt for your records and send another copy to your client.
Faro is the main town of Algarve, Portugal
Faro is the main town of Algarve, Portugal
What to look out for when filing your personal income tax return as a freelancer in Portugal

As a freelancer in Portugal, you must declare your income with the Personal Income Tax (IRS). Here are some essential tips:

  • Keep detailed records of all your income and expenses related to freelance work
  • Use the deductible expenses allowed by Portuguese law to minimize the tax you must pay.
  • Make sure you meet the IRS filing deadlines to avoid penalties.

Once again, it is advisable to consult an accountant to better understand your tax obligations and ensure your compliance with them.

Working in Portugal: Freelancer vs Sole Proprietor

Freelancer

Both options have advantages and disadvantages, but the main difference is related to the activity you will carry out. If you only sell services, opt for the freelancer regime (green receipts), as the Social Security contribution rate is lower (21.4% vs. 25.2% for ENI).

Sole Proprietor

If you want to sell services, goods, and/or products, setting yourself up as an ENI is the best option. An Individual Entrepreneur is a legal form that portrays companies where only one person owns the business. If you choose this alternative, you can deduct expenses, but you must hire a chartered accountant.

Pros & Cons being a freelancer or self-employed in Portugal

Like any field, working in this way has advantages and disadvantages. Let’s take a look at some of them. The main advantages of working as a freelancer are:

  • Flexibility (work and financial);
  • Autonomy in your professional decisions;
  • The satisfaction of doing something in your name.

Legally, freelancers who are up to date with their social security contributions have certain rights in Portugal, such as specific allowances in the event of illness, unemployment, disability, and old age pensions, among other benefits (see the complete list on the Social Security website).

But some of these advantages, particularly flexibility, also have their downsides:

  • Long-term uncertainty;
  • Losing some benefits of salaried work (such as meal allowances, Christmas bonuses and paid vacations);
  • Having to manage everything yourself (or find someone who can help).

FAQ – Frequently Asked Questions

Yes, as long as your employment contract does not stipulate exclusivity of services with the company you are working for.

For citizens of the European Union, you don’t need a work visa to work as a freelancer in Portugal. However, citizens of countries outside the EU may need to obtain a work or residence visa, depending on the duration and purpose of their stay.

You can issue invoices in two ways: through the Tax Office Portal or using certified invoicing software.

You must obtain a NIF (Tax Identification Number) to work as a freelancer in Portugal. This number is used to identify taxpayers to the tax authorities and is required to open a tax account, issue receipts, and declare income.

Yes, you must declare your income to the Portuguese tax authorities yearly, even as a foreigner. The IRS declaration can be submitted online on the Finance portal or in person at a Finance office.

In order to qualify for this program you must be a highly qualified professional who hasn’t been a tax resident in Portugal in the past 5 years. Plus, in June of 2024, the program (NHR 2.0) is more restrictive. Your income must fall under specific categories in order for you to be accepted.

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