If you’re considering becoming an independent worker in Portugal, it’s important to understand the rights, responsibilities, and challenges that come with this career path.
In this article, we’ll explore everything you need to know about becoming an independent worker in Portugal, including the definition of an independent worker, who is covered by this regime, who is excluded, the advantages and disadvantages of being self-employed, and the steps and obligations involved in the process.
What is an independent worker?
An independent worker, or “trabalhador independente” in Portuguese, refers to individuals who engage in professional activities without being bound by an employment contract or being required to provide the results of their work to others. Essentially, independent workers are self-employed individuals who generate income based on the work they produce. The Portuguese Social Security includes various professionals under the independent worker regime:
- Workers involved in commercial, industrial, or service provision activities (including scientific, literary, artistic, or technical services)
- Individual entrepreneurs with income from commercial or industrial activities who own limited liability establishments
- Agricultural producers working on their own land or similar holdings
- Individuals with management rights over agricultural or similar holdings
- Partners or members of professional partnerships or agricultural cooperatives
- Members of production cooperatives who have chosen this regime according to their statutes
Spouses or civil partners who actively participate in professional activities alongside the independent workers are also covered by this regime.
It’s important to note that certain professionals are not covered by the self-employed workers regime, including agricultural farm owners primarily producing for personal consumption, lawyers, holders of category B income from specific sources, owners of fishing vessels, collectors of marine species, farmers receiving less than €1,755.24 in support from the Common Agricultural Policy, and temporary self-employed workers covered by social protection abroad for old age, disability, and death.
📝 Read more: Starting a Sole Proprietorship in Portugal (Empresário em Nome Individual, or ENI): A Comprehensive Guide
Advantages and Disadvantages of Being a Self-Employed Worker
Before deciding to become self-employed, it’s crucial to weigh the advantages and disadvantages associated with this career choice.
Advantages of Self-Employed Workers
One of the significant advantages of being your own boss is the freedom to choose your working hours and location. Independent workers have the flexibility to create their own schedule and work from anywhere, whether it’s the comfort of their own homes or any other suitable workspace. They also have the freedom to select their clients, enabling them to align their work with their professional preferences.
Disadvantages of Self-Employed Workers
The lack of a fixed schedule means that independent workers must always be available to meet the needs of their clients, which can be a challenge for many professionals. Additionally, independent workers face the uncertainty of a variable income. If there is no demand for their services, they will not receive payment. Furthermore, independent workers do not receive the benefits that come with traditional employment, such as holiday or Christmas bonuses or food allowances.
How to Become a Self-Employed Worker in Portugal
If you’re planning to become an independent worker in Portugal, you must follow certain steps to establish yourself in this role.
Opening an Activity and Registering with Social Security
The first step is to open an activity with the Finance Department. This can be done online through the Finance Portal or in person at a branch. During this process, you will need to specify the type of activity you plan to undertake and provide an estimated annual income. This information is essential for obtaining approval from the Tax and Customs Authority. After approval, you can start issuing “green receipts (recibos verdes)” for your services.
When opening your activity for the first time, you must also register with Social Security. Spouses or de facto partners of self-employed workers should register in the same month they start working.
Rights and Obligations with Social Security
Once registered with Social Security as an independent worker, you are entitled to various support benefits, provided you fulfill your contribution obligations. These benefits include:
- Parental leave
- Unemployment benefits
- Old-age pensionsdisability benefits
- Sickness benefits
- Death benefits.
Contributions must be paid monthly between the 10th and 20th of the following month, with a minimum payment of €20. Failure to fulfill contribution obligations will result in the suspension of benefit payments, which can be resumed upon regularization of your situation within three months. Failure to regularize the contribution situation within three months will result in the loss of benefit entitlement.
In addition to contributions, you must declare your total income associated with the provision of services, the production and sale of goods, and relevant income on a quarterly basis. This declaration must be made by the last day of April, July, October, and January. You are also required to submit an annual activity declaration by filling out Annex SS of the Model 3 Personal Income Tax Declaration. Changes in your activity status, such as starting, suspending, or ceasing operations, must be reported to the Finance Department, which will automatically transmit this information to Social Security.
Tax Obligations for Self-Employed Workers
On the tax front, self-employed workers in Portugal must comply with certain rules to ensure tax compliance.
In addition to the mandatory quarterly declaration mentioned earlier, you have additional duties to fulfill with the Finance Department. It is crucial to issue green receipts (recibos verdes) through the Finance Portal to prove payment for the services you provide. These receipts must be sent to your clients, and it’s also important to retain copies for yourself.
You are also responsible for paying taxes on your income through withholding taxes, similar to employed workers. Withholding tax should be deducted from the due fees after issuing green receipts (recibos verdes).
If you use your own resources, such as purchasing materials and equipment, you must declare the associated expenses for your professional activity to the IRS. Expenses must be proven with invoices.
Additionally, if your annual income exceeds €10,000, you may be required to pay value-added tax (VAT).
Bottom line
Becoming an independent worker in Portugal offers the advantages of flexibility and autonomy in your professional life. However, it also comes with responsibilities and challenges.
By following the necessary steps, registering with Social Security, fulfilling your contribution obligations, and complying with tax requirements, you can establish yourself as a self-employed professional in Portugal. Remember to stay informed about your rights and duties to ensure a successful independent work journey.
Footnotes
- Outeiro, R. (2023, November 7). Como ser um trabalhador independente? Simulador líder de Crédito e Telecomunicações | ComparaJá.pt.
- ePortugal.gov.pt. (n.d.). Trabalhador Independente.
