Madeira and mainland Portugal have become one of Europe’s most attractive destinations for freelancers, consultants, and remote professionals. Whether you are relocating permanently or providing services from abroad, understanding how to open an activity in Portugal is key to ensuring tax compliance and business success.
1. Obtain a Portuguese Tax Identification Number (NIF)
Your first step is to obtain a NIF, the Portuguese tax identification number. This number is mandatory for all fiscal activities, including opening a bank account, signing a rental contract, or registering a business.
If you are not yet a Portuguese resident, you may need to appoint a tax representative to obtain the NIF on your behalf, depending on the activity you intend to carry out. This representative will handle tax correspondence until you establish a local address in Portugal.
2. Choose Your Professional Activity and Classification
Freelancers in Portugal must specify the nature of their work by selecting the appropriate CAE code (Classificação das Atividades Económicas Rev. 4) or Liberal Professions Code. This code identifies your economic sector and determines your fiscal obligations.
For example, creative professionals may use a code under “artistic services,” while IT consultants will register under “technical services.” The chosen CAE must accurately reflect your real activity to ensure correct taxation and compliance.
3. Register Your Activity with the Tax Authority (AT)
After obtaining your NIF, register your self-employed activity with the Autoridade Tributária e Aduaneira (AT). You can do this online via the Portal das Finanças or in person at any local tax office. When registering, select Category B (self-employed income) under the Personal Income Tax Code (IRS). You must also declare the start date of your activity and indicate whether you will operate under the Simplified Regime or the Organised Accounting Regime.
4. Select Your Tax Regime
There are three main tax regimes for freelancers in Portugal:
- Simplified Regime: Designed for lower-income professionals, this system presumes a fixed portion of income as expenses, simplifying tax calculations.
- Organised Accounting Regime: Requires a certified accountant but allows you to deduct all professional expenses in detail.
- VAT Regime: If your annual turnover exceeds €15,000, you are required to charge and remit VAT (IVA). Below that threshold, you may qualify for VAT exemption.
Choosing the proper regime depends on your expected income and the complexity of your activity. Engaging a tax advisor is crucial to ensure you benefit from the full extent of the law in accordance with each regime.
5. Register with Portuguese Social Security
Once registered with the Tax Authority, you must also register with the Social Security Authority. As a freelancer, you contribute 21.4% of your taxable base to Social Security, calculated on one-third of your quarterly income. New freelancers are exempt from contributions during the first 12 months of activity. Registration is done online through Segurança Social Direta, Portugal’s social security portal.
6. Check Licensing and Regulatory Requirements
Certain activities, such as healthcare, education, tourism, or food services, require specific licenses or professional permits. Before starting operations, verify your obligations with your local City Hall (Câmara Municipal) or professional regulatory body. Operating without the necessary authorisation can lead to fines or suspension of activity.
7. Issue Invoices Electronically
Freelancers must issue invoices (faturas) for all services rendered. Invoices can be created directly on the Portal das Finanças or using certified invoicing software such as Faturama or InvoiceXpress.Some Portuguese banks, like Millennium or Novo Banco, integrate invoice tools with business accounts, simplifying management.
8. Understand Your Tax Obligations
Every freelancer in Portugal must comply with periodic tax reporting requirements:
- IRS Declaration (Modelo 3): Submitted annually between April and June for income from the previous year.
- VAT Returns: Submitted quarterly or monthly, depending on turnover.
- Social Security Declarations: Filed quarterly to report income for contribution purposes.
Maintaining accurate records and meeting deadlines is crucial to avoid penalties and fines.
9. Required Documentation
To open an activity as a freelancer, you typically need:
- Passport or residence permit; Proof of address (or tax representative, if non-resident);
- Portuguese NIF;
- Dedicated Portuguese bank account for freelancing activity.
These documents are required for both tax registration and invoicing clients.
10. Estimated Timeline
If your activity does not require special licensing, registration with the Tax Authority and Social Security can be completed within one to two business days. Activities requiring permits may take two to four weeks, depending on the authority involved.
Advantages and Challenges of Self-Employment
Pros:
- Flexibility and autonomy;
- Lower startup costs;
- Simplified tax regime;
- Access to Social Security and public healthcare.
Cons:
- Irregular income;
- Administrative and tax responsibilities;
- No paid leave or labour benefits;
- Mandatory social contributions even with low income.
Tax Benefits for Self-Employed Workers
Freelancers in Portugal can optimise their tax position through several incentives:
- Simplified Regime: Allows presumed expense deductions up to 25% of income.
- Organised Accounting: Enables deduction of professional and operational costs.
- VAT Exemption: Applies to freelancers with an annual turnover below €15,000.
- Social Security Flexibility: Reduced contributions possible for low-income professionals.
- Training Deductions: Tax relief on professional education and innovation investments.
To maximise these benefits, consider professional accounting or tax advisory support.
Transferring an Existing Activity to Portugal
If you are already self-employed abroad, you can transfer your business to Portugal by:
- Obtaining a Portuguese NIF;
- Registering your activity with the Tax Authori ty;
- Updating your tax residency status;
- Closing or suspending your activity in your country of origin;
- Enrolling with Portuguese Social Security;
- Adjusting VAT and invoicing compliance to Portuguese rules.
For EU nationals, previous Social Security contributions may count toward Portuguese entitlements under EU coordination law.
Final Considerations
Understanding how to open an activity in Portugal ensures you start on the right foot, legally, fiscally, and operationally. Portugal offers a transparent, digitalised tax environment, ideal for freelancers and expats seeking a European base.
Partnering with a licensed accounting and tax advisory firm, such as Madeira Corporate Services (MCS), helps guarantee compliance, efficient tax planning, and peace of mind as you grow your business in Portugal.
This article is for informational purposes only and does not constitute legal or tax advice. Professional guidance is strongly recommended before taking any action.
The founding of Madeira Corporate Services dates back to 1996. MCS started as a corporate service provider in the Madeira International Business Center and rapidly became a leading management company… Read more
