Working for yourself can be both thrilling and challenging. In Portugal, the self-employed worker regime (Trabalhador Independente) offers flexibility but requires careful consideration of responsibilities and obligations.
This guide will provide a comprehensive overview of becoming a self-employed worker in Portugal, covering everything from the definition and legal framework to advantages, disadvantages, and essential steps involved.
Defining the Self-Employed Worker Regime
A self-employed worker in Portugal is a natural person who carries out a professional activity without being subject to an employment contract. They are not obligated to provide the results of their work to an employer. Essentially, they work for themselves, with income solely dependent on the work produced.
Who Qualifies as a Self-Employed Worker?
The self-employed worker regime encompasses a wide range of professionals, including:
- Commercial, Industrial, or Service Providers: This category includes individuals engaged in activities of a scientific, literary, artistic, or technical nature.
- Sole Traders: Individuals who own an individual establishment with limited liability and generate income from commercial or industrial activities.
- Agricultural Producers: Individuals who operate their own agricultural holdings.
- Agricultural Holding Managers: Individuals who hold rights over agricultural holdings and exercise management functions on a repeated and permanent basis.
- Partners in Professional Societies or Group Agriculture: Only partners in group agriculture fall under this category.
- Members of Production Cooperatives: Members of cooperatives who, according to their statutes, opt for the self-employed worker regime.
- Spouses or Civil Partners of Self-Employed Workers: If spouses or civil partners actively contribute to their partner’s professional activities on a regular and permanent basis, they are also covered by the regime.
Exclusions from the Self-Employed Worker Regime
Certain individuals are not included in the self-employed worker regime, including:
- Agricultural Holding Owners: Those whose products are primarily for personal and family consumption and have an annual income below €1,755.24.
- Lawyers and Solicitors: These professionals are regulated by specific legal frameworks.
- Category B Income Holders: Individuals earning income from electricity production for self-consumption, small renewable energy units, or urban rental contracts for local accommodation.
- Fishing Vessel Owners and Crew: Individuals who own or work on local and coastal fishing vessels.
- Collectors of Marine Species: Individuals engaged in this activity.
- Farmers Receiving Common Agricultural Policy Support: Farmers whose support under the Common Agricultural Policy is less than €1,755.24.
- Temporary Self-Employed Workers: Individuals who engage in temporary self-employed activities in Portugal but are covered by a mandatory social protection regime abroad that covers old age, disability, and death.
Advantages of Being Self-Employed in Portugal
The self-employed worker regime offers several advantages, particularly for those seeking flexibility and control over their work:
- Flexibility in Work Hours and Location: Self-employed workers can choose when and where they work, allowing for remote work, flexible schedules, and a better work-life balance.
- Control over Client Selection: As service providers, self-employed workers have the autonomy to choose the clients they work with, ensuring alignment with their values and professional goals.
- Greater Autonomy and Freedom: Self-employed workers have the freedom to structure their work processes and manage their time efficiently.
Disadvantages of Being Self-Employed in Portugal
While the self-employed worker regime provides flexibility, it also presents certain challenges:
- Unstable Income: Income is dependent on the number of clients and projects secured, leading to potential fluctuations and periods without income.
- Responsibility for Taxes, Social Security, and Administration: Self-employed workers are responsible for managing their own taxes, paying social security contributions, and handling administrative tasks.
- Lack of Benefits: Self-employed workers do not receive benefits such as paid holidays, sick leave, or employer-sponsored healthcare plans.
Steps to Become a Self-Employed Worker in Portugal
Becoming a self-employed worker in Portugal requires a few key steps:
- Opening an Activity with Finance: The first step involves registering your activity with the Portuguese tax and customs authority (Finanças). This can be done online through the Finance Portal or in person at a branch. You will need to identify the type of activity you will carry out and provide an estimated annual income forecast.
- Issuing Green Receipts: Once your activity is approved by the Tax and Customs Authority, you can start issuing green receipts (recibos verdes) for payments received.
- Social Security Registration: When registering your activity, you will also be automatically notified to Social Security to be included in their civil protection regime. Spouses or de facto partners of self-employed workers must register separately in the month they begin working.
Rights and Responsibilities with Social Security
As a self-employed worker, you are entitled to various benefits and support from Social Security upon payment of contributions. These benefits cover a range of eventualities:
- Parenting: Support for parents.
- Unemployment: Support during periods of unemployment.
- Old Age: Pension benefits.
- Disability: Support for individuals with disabilities.
- Illness: Support for medical expenses and loss of income due to illness.
- Professional Diseases: Support for illnesses related to professional activities.
- Deficiency: Support for individuals with deficiencies.
- Dependency: Support for individuals caring for dependents.
- Death: Benefits for dependents in the event of death.
Social Security Contributions
Self-employed workers are required to pay monthly social security contributions between the 10th and 20th of the month following the one to which the contributions relate. The amount payable depends on the earned income, with a minimum contribution of €20. Failure to pay contributions can lead to suspension of benefits. If contributions remain unpaid for three months after suspension, the right to benefits is permanently lost.
Tax Responsibilities of Self-Employed Workers
In addition to social security contributions, self-employed workers have several tax responsibilities:
- Quarterly Income Declaration: Self-employed workers must declare their income quarterly by the last day of April, July, October, and January.
- Annual Activity Declaration: An annual activity declaration must be filed by completing Annex SS of the Model 3 Personal Income Tax declaration.
- Issuing Green Receipts: All payments received must be documented with green receipts, which are issued through the Finance Portal.
- Withholding Tax: Self-employed workers are subject to withholding tax on their income. A certain percentage is deducted from payments received and paid to the government. Individuals who earned less than €10,000 in the previous year are exempt from withholding tax.
- Expense Declarations: Expenses incurred in carrying out professional activities, such as material and equipment purchases, must be declared to the IRS. These expenses must be proven through invoices.
- Value Added Tax (VAT): Self-employed workers who earned more than €10,000 in the previous year are subject to VAT.
Bottom Line
Becoming a self-employed worker in Portugal offers a unique opportunity to pursue personal and professional goals with greater control and flexibility. However, it requires careful planning and a commitment to fulfilling tax and social security obligations.
By understanding the legal framework, advantages, disadvantages, and essential steps involved, you can navigate the self-employed worker regime successfully and build a thriving independent career in Portugal.
