Tips for becoming a freelancer in Portugal

Portugal is quickly becoming a haven for digital nomads, and many of these newcomers are self-employed. It takes a while to get used to the legal requirements, especially if you don’t speak Portuguese. Hiring an accountant to help you set up at first can prevent troubles down the road. Once you familiarize yourself with the logistics, it’s quite easy to run things on your own.

If you are looking to start a business or go freelance in Portugal, this guide has all the tools you need to help you get started. It includes the following topics:

Starting a business vs becoming a freelancer in Portugal

When setting up your business in Portugal, you can choose to start an individual company or sign up as a freelancer. Usually, if you are working for yourself, it is not worth creating a company. A freelancer or independent worker (trabalhador independente) does not have a fixed tie with one entity. Instead, they work with several clients.

There are a few advantages of signing up as a freelancer instead of a company. These include lower social security fees and tax exemptions for incomes under €12,500 and certain professions like artists and doctors. However, if you want to sell products, you must set up a company.

If you have a business, you may have to hire a permanent accountant to manage logistics, which can be expensive. If you opt for this route, you will be considered an Empresário em Nome Individual or ENI, a worker who is the single owner of a company which may provide services and sell products. 

In 2021, there were 704,200 freelancers in Portugal, the majority of which have gone through higher education. Additionally, the Portuguese social security registered a 25.3% increase in self-employed workers in the same year.

Being self-employed has its pros and cons. One advantage is the option to work anywhere and choose your clients. You also have flexible schedules, which means you can decide what time of the day works for you. However, there are drawbacks, like not having a fixed income, paid holiday, or hustling to find clients. You also have deadlines to pay your social security and IRS taxes – when you are an employee, your company usually covers these for you.

Who can become a freelancer in Portugal?

To become a freelancer in Portugal, you must have a NIF (tax identification number) and a personal bank account. Although it’s possible to use the IBAN from a SEPA country, it is far easier to pay taxes from a Portuguese account.

Unless you are an EU citizen, you will need to obtain proof of legal entry from the Agency for Integration, Migrations, and Asylum (Agência para a Integração, Migrações e Asilo – AIMA), and a visa before registering with the tax authority to work in Portugal. 

How to become a freelancer in Portugal as an expat

Having a NIF is essential to become self-employed in Portugal. When applying, you will need to choose the best legal structure for your business. Non-EU citizens must also consider visa requirements before setting up as a freelancer. We cover all of this below.

How to obtain a Portuguese freelance work visa

Anyone can become a freelancer in Portugal. EU citizens can register directly at the tax office (finanças). Other nationalities, however, will need to have a visa before they start working. Essentially, there are three types of work visas available: the D2 visa, the startUP visa, and the self-employed visa. Each of them has specific requirements, but in general, you will need to present the following documents:

• Passport
• Evidence of regular entry into Portuguese territory
• Proof of means of subsistence
• Proof of accommodation
• Criminal record from your country of origin
• Extract from the criminal record from the country of residence for more than one year (if not Portugal) or permission for AIMA to check your Portuguese criminal record
• Evidence of registration with the tax authority (NIF) and social security

You will also need to have a tax representative. It can be someone that you know who is legally living in Portugal. Alternatively, you can hire a company that offers this service like GETNIF or Bordr.

Legal structures for Portuguese freelancers

Below are the two types of legal structures that you can choose as a freelancer in Portugal, along with information about the registration process, start-up costs, and so on:

• Independent worker (trabalhador independente)
• Individual entrepreneur (Empresário em Nome Individual or ENI)

Registering as a freelancer in Portugal

Once you’ve obtained your NIF, you will need a password to log into the tax authority website. If you already have a Portuguese address in the system, you can register as a freelancer online at Portal das Finanças. Otherwise, you have to head to the tax office in person to change this first. It is often easier to go there anyway, especially if you’re unsure how to fill out the forms yourself. To sign up as self-employed, you will need to provide the following information:

• Starting date of your activity
• The service you offer represented by an activity code (código de atividade). Most of the trades are part of Article 151 of the CIRS.
• Estimated income until the end of the year (this will affect your placement in the tax system and determine if you have to pay VAT)
• Your bank account details (IBAN)

The next step is to choose your accounting regime: simplified (regime simplificado) or organized (contabilidade organizada). The simplified option is the most common and does not require you to have an accountant. As a downside, you won’t have an allowance for activity costs. If you earn more than €200,000 a year, you must use the organized regime and hire an accountant to deal with your finances.

Finally, you will need to acquire your social security number. Usually, freelancers are exempt from paying social security for the first 12 months. Register early so you’re ready to submit your income details when the time comes.

Portuguese administration for freelancing

If you’re running a business in Portugal, you should keep track of your records for at least a year. You may need to present this in your tax returns, especially if you want to redeem work expenses.

When issuing an invoice, you must include the following information:

• Your name, address, and NIF
• The client’s name or company, address, and tax identification number
• Invoice number
• Issue date
• Service description
• Fee
• Tax details (VAT and IRS charge or exemption rules)

Using time management platforms such as Toggl is a great way to keep track of your working hours. Before starting a project, you should draw up a contract with basic reminders and send it to your clients to sign.

How to issue an invoice in Portugal

The Portuguese tax authority provides a free online invoice system. You can issue a receipt at Portal das Finanças by searching the website for recibos verdes. After filling in the form, you can download a PDF to send to your client. Sadly, this does not include your banking details, so you must send a separate document with this in your email. Once your client has paid you, you must issue an invoice (fatura) associated with the receipt. Alternatively, you can deliver a fatura-recibo, which acts as a receipt and invoice. However, you should only do this if you’re certain you will receive the money, as it’s hard to cancel it afterward.

There is also plenty of paid accounting software, such as InvoiceXpress. These already include your bank account details. Plus, they often have the option of translating invoices into English, which can be good if you’re dealing with international clients. Make sure that the software is connected to your Portuguese tax authority account.

Banking and insurance for Portuguese freelancers

As a freelancer in Portugal, you don’t have to create a separate business account. However, it is helpful to have one, as it allows you to have a clear record of your income and expenses. While it’s possible to have an EU account, you should open a Portuguese bank account for the annual tax payments and returns.

Work insurance (seguro de acidentes de trabalho) is mandatory for the self-employed. Even if you’re working for a company and freelancing on the side, you’re still required to have it. Portugal also offers free healthcare for residents through social security contributions. That said, some people choose to complement this with private health insurance.

Taxation for freelancers in Portugal

Anyone with a business in Portugal must keep up-to-date with the local tax system. Those who earn less than €12,500 a year are exempt from charging VAT.

If you’re dealing with EU clients outside of Portugal, you need to complete the declaração recapitulativa do IVA. Even if you’re not subject to VAT, you should deliver this once a month before the 20^th of the following month. For example, if you issue an invoice to a French client in January, you should hand in the VAT form with their details by the 20^th of February.

Once you go over the €12,500 limit, you must inform the tax authority by altering your self-employed registration (alteração de atividade). After that, you will have to start filling out an additional VAT form known as the declaração periódica do IVA. This needs to be delivered quarterly.

Between April and June, you must file your annual tax return. Depending on your earnings and expenses, you will either pay or receive money back from the government.

You should also request an invoice with a NIF (fatura com contribuinte) for every service or product you buy throughout the year. Then every month, you can sort these as personal or business expenses online at e-fatura. Usually, you can only claim business expenses after going over the €12,500 cap, but it helps to get used to the system. For more information, you can read our guide to self-employed tax in Portugal.

Social security, health insurance, and pensions for freelancers

Your contributions to social security provide access to healthcare in Portugal and pensions in the future. 

When you register as self-employed in Portugal, you are exempt from paying social security for the first 12 months. After that, you will have to declare your profits every three months by filling out a quarterly report (declaração trimestral) online at Segurança Social Direta. You should complete this report before the last day of the following months:

• April – refers to income from January to March.
• July – refers to income from April to June.
• October – refers to income from July to September.
• January – refers to income from October to December. You will also need to review and approve the annual report (declaração anual) related to the previous year at this time.

The system will then calculate your contributions, which you should pay before the 20^th of each month. In Portugal, the social security rate for the self-employed is 21.4%. For individual entrepreneurs, this fee rises to 25.2%.

If you need to, there is an option to adjust your contribution to 25% more or less. However, keep in mind that this will affect your pension rate later. Some people invest in a private pension plan with an insurance company. If you didn’t receive anything in the previous trimester, you will pay the minimum contribution of €20 per month. All of these payments will be considered by the government when you retire.

Earning a secondary income from freelancing in Portugal

You don’t have to leave your regular job to start freelancing. Indeed, it is often helpful to have a steady income while setting up your business. In Portugal, this often comes with a few benefits. Employees who accumulate an independent activity are exempt from contributing to social security if they fulfill all the following conditions:

• The dependent and independent work are not provided to the same employer or entities of the same group.
• The monthly income obtained from your regular job must be equal to or greater than the value of the Social Support Index (Indexante dos Apoios Sociais or IAS).
• The relevant monthly average earnings of the last three months, obtained by freelance work, do not exceed €1,772.80 (4 times the value of the IAS in 2022). 
• The worker makes discounts for a social protection scheme that covers the social rights of self-employed workers.

Once you go over the limit, you will have a fixed social security rate of 21.4%. However, this only applies to the excess amount above €1,772.80. You will also have to start filling out the social security quarterly reports.

If you only do one freelance job that year, you can issue an ato isolado without registering as self-employed. However, this form of an invoice cannot exceed €25,000.

When you file your taxes at the end of the year, the income of your full-time job should appear automatically on Annex A. You will then need to complete Annex B with your freelance earnings. If you only had one client, these can be taxed together with Annex A, which often pays off.

Finding office space in Portugal for freelancing

While it’s possible to work from home, many freelancers in Portugal head to coworking spaces or rent an office for their business. There are coworking spaces all over the country, especially in the big cities like Lisbon and Porto. Many offer extra activities where you can interact with fellow freelancers and create a local community.

Below are a few helpful resources:

• Remote Portugal – provides information about remote work in Portugal, including a list of coworking spots around the country.
• Get Croissant – helps you reserve a spot in coworking spaces across Lisbon.

Finding work when freelancing in Portugal

Finding work in Portugal can be difficult if you don’t have a contact network yet. However, there are many websites and resources where you can look for clients. Creating a profile on places like Upwork can be a great way to find projects worldwide.

It’s also worth updating your LinkedIn and changing your location to Portugal, as many companies use it to scout new workers. Additionally, you should invest in a personal website and create a portfolio that showcases your talents.

Lisbon has one of the largest digital nomad communities in Europe with regular meetups.

Support, advice, and training for Portuguese freelancers

Financial support for freelancers

Freelancers in Portugal have the right to receive unemployment benefits as long as they have contributed to social security for a minimum of two years.

A subsidy is also available for maternity leave. The calculation takes into consideration your past social security contributions. So, the higher your contributions, the more you will earn. If you’re planning on having a baby in Portugal, it is advisable to increase your contributions at least a year before to receive higher benefits.

Getting start-up grants and advice

There are several types of financial support for start-ups in Portugal. To help entrepreneurs, the government has created a list of funding programs and initiatives. Beyond monetary resources, many of these programs also offer marketing and business promotion advice.

Useful resources

• Portal das Finanças – the Portuguese tax authority website where you can register as a freelancer, issue invoices, and file your taxes.
• Seguranca Social Directa – the social security website where you can declare your income and request benefits and pensions.
• EC Europa – the European Commission lists the visa requirements to work as a self-employed worker in Portugal.
• AIMA – information about applying for a resident permit for self-employed from the Portuguese Immigration and Borders Service.
• IAPMEI – information about applying for a startup visa in Portugal.
• OCC – a social security calculator created by the official Order of Accountants in Portugal.