The freelancer simplified regime is the most widely used taxation method for independent professionals in Portugal. It reduces administrative complexity while ensuring predictable IRS assessments. Still, in certain cases, freelancers must substantiate deductible expenses to remain compliant.
How the Freelancer Simplified Regime Operates
The freelancer simplified regime applies to individuals with business or professional income (Category B) not exceeding €200,000 annually. It was designed for small-scale activities or self-employed professionals seeking straightforward taxation.
Under this model, taxable income is determined by applying a fixed coefficient to gross income. The portion not covered by the coefficient is automatically treated as professional expenses, removing the need for detailed accounting in many situations.
For instance, if a freelancer earns €10,000 and falls under a 0.75 coefficient, only €7,500 is taxable. The remaining €2,500 is presumed to represent necessary business costs.
When Expense Presumption Requires Evidence
The presumption of expenses within the freelancer simplified regime is not universal. In specific cases, proof of expenditure must be presented.This requirement mainly applies to Category B income subject to coefficients of 0.75 or 0.35.
- Coefficient 0.75: Applies to professional services listed in Article 151 of the IRS Code, including lawyers, doctors, architects, and accountants.
- Coefficient 0.35: Covers other service providers not listed in Article 151, except catering, hospitality, or similar activities. It also includes local accommodation in apartments or houses.
Minimum Threshold of Deductible Expenses
Professionals under the freelancer simplified regime must justify deductible expenses corresponding to at least 15% of their gross annual income.If the required amount is not fully documented, the shortfall is added to taxable income, resulting in a higher IRS liability.
Types of Deductible Expenses
The freelancer simplified regime recognizes a range of deductible expenses, provided they are demonstrably linked to professional activity:
- A fixed deduction of €4,462.15 or mandatory social security contributions, if higher.
- Staff-related costs, including salaries or remuneration.
- Imports or intra-community acquisitions related to the activity.
- Rents on properties exclusively used for professional purposes.
- 1.5% of the tax value (VPT) of business-related properties, or 4% when used for hospitality or local accommodation.
- Operational costs such as utilities, telecommunications, vehicle rentals, insurance, professional subscriptions, and business travel.
- Goods and services acquired within the EU or through imports, provided they support the professional activity.
Requirements for Expense Justification
In the freelancer simplified regime, expenses must be supported by invoices containing the freelancer’s tax identification number.
Additionally, they must be properly allocated to professional activity within the Tax Authority’s system (e-Fatura); otherwise, they may not be accepted as deductible.
Key Takeaways
The freelancer simplified regime offers independent professionals an efficient and predictable taxation model. It reduces administrative obligations by presuming a portion of income as expenses.
Nevertheless, when expense justification is required, accurate documentation is essential to prevent unnecessary tax increases.
The information provided in this article about the freelancer simplified regime and deductible expenses is for general guidance only. It does not replace professional tax, accounting, or legal advice. Tax rules may change, and individual circumstances can significantly affect obligations and entitlements. Readers should always confirm details with a qualified professional before making financial or tax-related decisions.
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