It is estimated that almost 300,000 people work as self-employed professionals in Portugal.

Although the number of people working with “recibos verdes” (green receipts) continues to grow, there are still many questions about the implications of this status, particularly from a tax perspective.

That is why, in today’s article, we explain the main rights and obligations you need to be aware of as a self-employed worker.

Discover the Rights and Obligations of Self-Employed Workers

Working with “recibos verdes” has both advantages and disadvantages. The flexibility and freedom it provides in terms of organising your working routine are among the main factors that attract people to this type of arrangement.

However, it is also important to consider the various obligations, particularly towards the tax authorities, in order to carry out your professional activity legally.

In this context, it is essential to understand the taxes you may have to pay, as well as your tax framework. (A tradução deste artigo em francês e em inglês encontra-se de seguida)

To help you, we have prepared this guide covering the main information every self-employed worker should know.

1 – VAT and Personal Income Tax (IRS)

These are two taxes that require particular attention. Below, we explain each of them in more detail.

VAT

VAT (IVA) applies to self-employed workers who exceed the legal threshold applicable to the VAT exemption regime.

To determine whether you are required to charge VAT, you need to take into account the applicable rules and your relevant turnover.

When you qualify for the exemption provided for under Article 53 of the Portuguese VAT Code, you do not charge VAT to your clients. When issuing your “recibos verdes”, you should select the option corresponding to this exemption.

Regarding personal income tax withholding (IRS withholding), certain situations may also allow you to benefit from an exemption, subject to the conditions established in the Portuguese Personal Income Tax Code (CIRS).

When the applicable legal threshold is exceeded, the self-employed worker must start charging VAT on their services and take the necessary steps with the Tax Authority to regularise their tax status.

The standard VAT rate in mainland Portugal is 23%, although certain activities may be subject to different rates.

It is therefore advisable to check the regime applicable to your activity on the Finanças website, as the VAT rate may vary depending on the type of service or activity carried out.

With regard to VAT, under Article 41 of the Portuguese VAT Code, a periodic VAT return must be submitted through the Finanças Portal.

The monthly VAT return is mandatory for taxpayers whose turnover reaches or exceeds the applicable legal threshold. Other taxpayers may, depending on their tax regime, be subject to quarterly VAT reporting.

The quarterly deadlines are generally as follows:

• 1st quarter: return to be submitted by 15 May and payment by 20 May; 
• 2nd quarter: return to be submitted by 15 August and payment by 20 August; 
• 3rd quarter: return to be submitted by 15 November and payment by 20 November; 
• 4th quarter: return to be submitted by 15 February and payment by 20 February. 
• Personal Income Tax (IRS)

As with VAT, personal income tax (IRS) is an important consideration for self-employed workers.

However, it is important to clarify that being below a certain turnover threshold does not automatically mean that you are exempt from IRS. The final amount of tax payable depends on several factors, including taxable income, the applicable tax regime, withholding tax and the taxpayer’s personal circumstances.

Regarding withholding tax, the applicable rates depend on the nature of the activity carried out and the provisions of the Portuguese Personal Income Tax Code.

Different withholding rates may therefore apply depending on the professional activity, in accordance with the legislation in force.

2 – Annual IRS Return

The annual IRS return must be submitted even by self-employed workers who benefited from withholding tax exemption or other tax relief mechanisms during the year.

This is where income is reported and, when it relates to self-employed activities, it is generally declared under Category B of the Portuguese IRS.

The tax return is submitted annually and generally between April and June.

Remember that the return relates to the income earned during the previous calendar year.

3 – Accounting Regime

Another important point to consider is the accounting regime applicable to your self-employed activity.

As a general rule, self-employed workers who meet the relevant requirements may remain under the simplified regime provided that they stay within the legal threshold. In certain circumstances, they may also voluntarily opt for organised accounting.

If you choose the simplified regime, you are generally not required to appoint a Certified Accountant (Contabilista Certificado), which can help reduce administrative costs.

However, taxable income is calculated using coefficients established by law, and the rules regarding the recognition of business expenses must be observed.

It is therefore important to assess the advantages and disadvantages of each regime before making your choice.

Organised accounting becomes mandatory when the legal requirements are met, particularly when turnover exceeds the threshold established by law.

Under this regime, appointing a Certified Accountant is mandatory. In return, taxable profit is calculated according to organised accounting rules and, subject to certain conditions, business-related expenses may be taken into account.

4 – Quarterly Social Security Return

As a general rule, Social Security contributions must be paid monthly, between the 10th and 20th of the month following the month to which they relate.

The income declaration, on the other hand, must generally be submitted quarterly, according to the following schedule:

• By 31 January: declaration of income relating to the final quarter of the previous year, namely October, November and December.

This is also an important deadline for confirming or declaring income relating to the previous calendar year, where applicable.

• By 30 April: declaration of income earned in January, February and March;
• By 31 July: declaration of income earned in April, May and June;
• By 31 October: declaration of income earned in July, August and September.

As you can see, there is a great deal of information that self-employed workers need to be aware of in order to carry out their activities in compliance with Portuguese legislation.

If you still have questions or would like personalised assistance, do not hesitate to contact us for specialised guidance!