If you work as a self-employed professional, you have probably already heard of the simplified regime and organised accounting.

Both are tax regimes under which self-employed professionals may be taxed.

However, in order to choose the most appropriate regime for taxing your income, it is important to understand the specific requirements of each option, as well as their respective advantages and disadvantages.

In this article, we analyse the main characteristics of each regime. Keep reading to find out more!

Discover the Differences Between the Simplified Regime and Organised Accounting

How to manage accounting and taxation is one of the main concerns for self-employed professionals.

It is therefore important to understand the tax regimes currently in force in order to avoid problems with the Portuguese Tax and Customs Authority (AT).

When a self-employed professional registers their activity with the Portuguese Tax Authority, they are generally placed under the simplified tax regime.

However, this choice can be changed when the activity is registered or by March of each year.

The selected regime will then remain in force for one year. But which one should you choose?

There are several differences between the simplified regime and organised accounting that you should be aware of.

Below, we explain the main characteristics you should consider.

1 – Simplified Regime

To use the simplified tax regime, a self-employed professional must meet two requirements.

They must be a resident in Portugal and have annual net income below the applicable 200,000 € threshold.

The simplified regime is particularly suitable for smaller-scale activities, as it operates on the basis that part of the income is presumed to correspond to professional expenses.

Different coefficients apply depending on the type of activity. For example, certain professional activities are subject to a coefficient of 0.35.

Following this principle, if a professional working as a translator earns 20,000 € in annual income, under this regime 7,000 € is presumed to correspond to professional expenses and is therefore not directly subject to taxation.

Taxation would consequently apply to the remaining €13,000.

However, when income exceeds certain thresholds, some professional expenses must be properly justified in order to benefit fully from the deduction provided for under the regime.

These expenses may include fuel, transport, rent, property-related costs, energy and other professional expenses.

The main advantage of the simplified regime is that the self-employed professional is not required to hire a certified accountant and is generally subject to fewer accounting obligations.

2 – Organised Accounting

Organised accounting is the mandatory regime for companies and for self-employed professionals who exceed the applicable legal annual turnover threshold.

Those who choose this regime must appoint a certified accountant, which is one of the main differences compared with the simplified regime.

On the other hand, organised accounting allows a broader range of business expenses to be deducted, including accounting fees, equipment maintenance costs and other expenses related to carrying out the professional activity.

Another important aspect of this regime is compliance with certain legal and accounting obligations, including the preparation of annual tax documentation.

3 – How Should You Choose the Most Appropriate Regime?

In general, turnover is one of the main factors to consider when choosing the most appropriate accounting regime.

It is therefore essential to assess your turnover. The higher it is, the more advantageous organised accounting may become.

It is also important to consider the nature of the business or professional activity. For example, an activity involving limited assets and fewer professional expenses may be better suited to the simplified regime.

Therefore, there is no single regime that is universally better for every business or self-employed professional.

The specific circumstances and characteristics of each case must be analysed in order to determine the most appropriate accounting and tax regime.

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