Portugal is a popular destination for people who want to work and live abroad. Freelancers, entrepreneurs, and digital nomads often choose Portugal for its opportunities, warm weather, and ease of living. If you are considering registering as a sole trader in Portugal, this article will take you through the process.
Disclaimer: Be aware that this article is not a substitute for legal advice. Please always check official websites or seek legal advice before you take action.
The Business Structures in Portugal
There are several legal business structures in Portugal:
- Sole Trader (Empresário em Nome Individual in Portuguese*)*
- Single Shareholder Limited Liability Company (Sociedade Unipessoal por Quotas in Portuguese*)*
- Individual Limited Liability Establishment (Estabelecimento Individual de Responsabilidade Limitada in Portuguese).
Freelancing in Portugal
If you are planning on working as a freelancer in Portugal, you should opt for the sole proprietorship. If you are in the independent trade, you are required to have a residence permit, tax number, and social security number. You are responsible for income tax payments and social security contributions.
Who Is the Sole Trader (Empresário em Nome Individual) in Portugal?
People who want to start an individual business in Portugal can opt for the Empresário em Nome Individual (sole proprietorship) since there is no minimum capital or articles of association required to set up. The only downside of a sole proprietorship is unlimited liability for business debts. This means that there is no distinction between a proprietor and their business assets.
Registering as a Sole Trader (Empresário em Nome Individual) in Portugal
There are a few document requirements to register a sole proprietorship in Portugal:
- Portuguese residency card
- A tax Number (NIF—Número de Identificação Fiscal in Portuguese), assigned by the Portuguese Tax Office
- Security Number, assigned by the Portuguese Social Security institution
How to Obtain a Business Visa for Portugal
To start a business in Portugal, you need to hold a Portuguese residence permit.
EU and EFTA Citizens
If you are an EU or EFTA (The European Free Trade Association) citizen who has been a Portuguese resident for less than five years, you need a Certificate of Registration.
Non-EU or EFTA Citizens
If you are a non-EU/EFTA national and want to come to Portugal to work as a freelancer, you will need a Portuguese work visa and a residence permit. The process of obtaining a residence permit depends on a person's citizenship.
How to Get a Social Security Number (NISS) in Portugal
Getting a Portuguese SSN (NISS in Portuguese) requires a residence permit. To register your NISS, visit one of the several Lojas do Cidadao.
The Documents Required for a Social Security Number (NISS) in Portugal
To register for SSN in Portugal, you will need the following documents:
- Passport copy
- Proof of residence in Portugal
- NIF copy (Tax Number, details below) or the national insurance number from home country
- Residency card or Evidence of Application.
Self-employed workers must complete Form RV1000/2007-DGSS for self-employed.
Tax Number (NIF) in Portugal
The NIF number (tax ID number in Portugal) is fundamental for administrative processes such as opening a bank account, signing a mobile phone contract, etc. Anyone who lives in Portugal, whether residents, citizens, or foreign non-residents, need a NIF number.
How to Register for a Tax Number (NIF) in Portugal
To register for a Tax Number in Portugal, you need to visit a local government tax office (Finanças in Portuguese).
The Documents Required for a Tax Number Registration in Portugal
Here are the documents you need in order to register for a Tax Number (NIF):
- Valid ID card (if you are a citizen of EU, EEA or Switzerland)
- If you are not from the EU, EEA or Switzerland, you need to provide a passport.
- Proof of residency.
- If you are a non-Portuguese citizen, a bank statement containing your home country address should be enough.
Tax Rates in Portugal for Sole Traders
In Portugal, income tax rates are progressive and vary depending on the annual taxable income.
- less than €7,112- 14,5% tax rate
- €7,113– €10,732- 23% tax rate
- €10,733– €20,322- 28,5% tax rate
- €20,323– €25,075- 35% tax rate
- €25,076- €39,967- 37% tax rate
- €39,968- €80,882- 45% tax rate
- more than €80,883- 48% tax rate
Value Added Tax (VAT) in Portugal
If you are wondering if VAT will be applicable to your business, the answer depends on whether you anticipate your income more than €10,000 per year for your services or not. In Portugal, VAT must be paid by businesses with an annual turnover exceeding €10,000 on taxable goods and services.
Annual Income Exceeding €10,000
If you earn more than €10,000 in a year, you need to declare it to the state until January of the following year. If your earnings are more than €10,000 per year, you will have to charge VAT on top of your usual fee. You will then declare the value of the received VAT from your clients to the state quarterly.
VAT Rates in Portugal
There are three different rates of Value Added Tax (VAT) in Portugal:
- The general rate of 23% on taxable goods and services
- The intermediate rate of 13% on food and drinks
- The reduced rate of 6% applicable to the supply of foodstuffs, water supplies, pharmaceutical and agricultural products, passenger transport, etc.
Accounting Requirements for Sole Traders in Portugal
There are two types of accounting regiment in Portugal: the simplified regiment, and the organized regiment.
The Simplified Accounting Regiment
The simplified accounting regiment is applicable for any company whose annual turnover doesn't exceed €200,000. It is also the default regiment assigned by the tax authorities upon registration.
The biggest benefits of a simplified regiment are its simplicity and low cost.
The Organized Accounting Regiment
When your gross annual income exceeds €200,000, organized accounting becomes compulsory for sole proprietorships. You will need to hire an accountant who will handle the "Finanças" and Social Security matters on your behalf. With an organized regiment, you have to keep yearly tax files.
There you have it, a step-by-step guide on how to set up as a sole trader in Portugal.
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