If you are self-employed in Portugal, there are several obligations relating to Social Security that you should be aware of.
In this article, we share all the key information you need to know.
Read on to understand how to carry out your professional activity in compliance with Portuguese legislation.
Social Security: Understanding the Rules for Self-Employed Workers
Unlike employees, self-employed workers are responsible for declaring their income and paying the corresponding Social Security contributions.
It is therefore important to understand the rules and obligations that apply when starting a self-employed activity, in order to avoid potential problems in the future.
Below, we explain everything you need to know about the Social Security contribution system applicable to self-employed workers.
1 – Registration with Social Security
After registering your self-employed activity with the Portuguese Tax Authority (AT), the AT communicates the start of the activity to Social Security.
Based on the identification details provided, Social Security registers the worker and places them under the self-employed workers’ social security regime.
Once this process has been completed, the worker will be notified of their registration and applicable status. If they are already registered with Social Security, their information will simply be updated.
2 – Exemption from Social Security Contributions
In certain circumstances, self-employed workers may benefit from an exemption from Social Security contributions.
2.1 At the beginning of the activity
During the initial period following the start of a self-employed activity, the worker may benefit from an exemption from Social Security contributions, subject to the conditions established by the legislation in force.
For example, a person starting a self-employed activity for the first time may benefit from this exemption during the legally established period before contributions become payable.
It is important to note that during the exemption period, the worker may not have access to the same level of social protection as a worker who is making contributions.
2.2 Partial exemption
A partial exemption may apply when the worker’s average relevant monthly income, calculated on a quarterly basis, exceeds the threshold corresponding to four times the IAS (Social Support Index).
In this situation, contributions are calculated only on the portion of the relevant income exceeding that threshold, in accordance with the applicable rules.
2.3 Pensioners
Self-employed workers who receive an old-age, disability or occupational-risk pension may also be exempt from Social Security contributions, provided that the applicable legal requirements are met.
In the case of occupational-risk pensioners, the exemption applies, in particular, to individuals with a work incapacity of more than 70%, subject to the conditions established by law.
2.4 Minimum contribution
In certain circumstances, an exemption from contributions may also apply to self-employed workers who, during the previous year, were subject to the minimum contribution provided for under the applicable legislation.
This situation may arise, in particular, where there is no income or where the relevant average monthly income falls within the applicable threshold.
3 – Income Declaration
Income earned through self-employed activity must generally be declared to Social Security on a quarterly basis.
The amount of the monthly Social Security contributions is determined based on the income declared.
The quarterly declaration must generally be submitted by the end of April, July, October and January and covers the income received during the three preceding months.
For example, in April, the worker declares the income received in January, February and March of the same year.
In addition, at the beginning of each year, in January, certain categories of self-employed workers are also required to declare the income received during the previous calendar year.
Failure to submit the required declaration may result in a fine, in accordance with the applicable legislation.
Workers who are exempt from contributions because they combine self-employed activity with employment, certain pensioners and workers covered by the organised accounting regime may be exempt from this reporting obligation, provided that the relevant legal requirements are met.
4 – Payment of Social Security Contributions
Social Security contributions are generally paid on a monthly basis, between the 10th and 20th of the month following the month to which they relate.
Payments can be made through Multibanco, homebanking, direct debit, Social Security treasury offices or by certified cheque, depending on the payment options available.
5 – Ending Your Obligations
When a self-employed worker ceases their activity, they must notify the Portuguese Tax Authority (AT), which will subsequently inform Social Security.
Registration under the self-employed workers’ Social Security regime ends on the first day of the month following the cessation of activity, in accordance with the applicable rules.
However, certain reporting and payment obligations may continue after the activity has ended. The worker may, for example, still be required to submit a final quarterly declaration and pay the corresponding contributions.
In addition, in January of the following year, an annual declaration may be required if at least one quarterly declaration was submitted during the year in which the activity ceased.
There are many rules and details that self-employed workers need to keep track of, and these obligations can sometimes be difficult to understand.
To ensure that you comply with all your Social Security obligations, we recommend consulting a certified accountant.