Do freelancers pay taxes in Portugal? This is a question we get asked a lot.
As a freelancer in Portugal and Madeira Island, understanding tax compliance is essential to avoid penalties or legal issues. In this article, I will guide you through the basics of tax compliance for freelancers in Portugal, including tax obligations, registering, VAT, filing taxes, deductible expenses, penalties for non-compliance, and resources to help you stay compliant.
Introduction to tax compliance for freelancers in Portugal
Tax compliance is crucial for any freelancer in Portugal. As a freelancer, you are considered self-employed and must comply with the tax obligations set by the government. Tax compliance involves registering with the tax authorities, filing taxes, and paying any taxes due on time. Failure to comply with these obligations can result in penalties and legal issues.
Do freelancers pay taxes in Portugal?
Yes, freelancers in Portugal are required to pay taxes. The amount of tax you pay depends on your income and the tax regime you choose. As a freelancer, you are considered self-employed and must register with the tax authorities and pay taxes on your income. If you are relocating to Portugal for the first time in the last five previous calendar years, you may be eligible for NHR status.
Tax obligations for freelancers in Portugal
As a freelancer in Portugal, you have several tax obligations. First, you must register with the tax authorities before starting your freelance activity. You must also keep accurate records of your income and expenses, including invoices and receipts. As a freelancer, you must issue invoices to your clients through Portuguese-certified invoicing software or through the Portuguese Tax and Customs Authority web portal (recibos verdes).
You must file your tax return annually by June 31st, the latest, of the following year. Additionally, you must pay any taxes due by the same date.
Penalties for non-compliance
Failure to comply with tax obligations as a freelancer in Portugal can result in penalties and legal issues. Penalties can include fines, interest charges, and even criminal charges in severe cases. It is essential to stay compliant with tax obligations to avoid any penalties and legal issues.
Registering as a freelancer in Portugal
To register as a freelancer in Portugal, you must obtain a taxpayer number (NIF) and a social security number (NISS). You can obtain these numbers by visiting a tax office or a service provider such as MCS. Once you have your NIF and NISS, you must register with the tax authorities using the online portal or by visiting a tax office. During the registration process, you will be asked to choose a tax regime based on your expected income.
Understanding VAT for freelancers
As a freelancer in Portugal, you may also be required to charge Value Added Tax (VAT) on your services. If your annual income exceeds €10,000, you must register for VAT and charge it on your services. The current VAT rate in Portugal is 23%. In Madeira Island, the VAT rate is 22%. You must also file a VAT return every month or quarter, depending on your turnover.
VAT exemption may be available through the reverse-charge mechanism, provided certain conditions are met.
Deductible expenses for freelancers in Portugal
As a freelancer in Portugal, you can deduct certain expenses from your income to reduce your taxable income. These expenses include office expenses and professional fees. However, you must keep accurate records of these expenses and only deduct expenses that are directly related to your freelance activity.
Miguel Pinto-Correia holds a Master Degree in International Economics and European Studies from ISEG – Lisbon School of Economics & Management and a Bachelor Degree in Economics from Nova School of Business and Economics. He is a permanent member of the Order of the Economists (Ordem dos Economistas)… Read more
