The taxes of a Self-Employed Worker

Do you know that there are more and more Portuguese who decide to have a professional activity as Self-Employed Workers?

In fact, 18.8% of Portuguese workers are self-employed workers (data collected at www.pordata.pt), either as a way to obtain an extra income, in relation to other income, by necessity, or simply by their own option.

So if you are thinking about working on your own, or if you are already a Self-Employed Worker, it is important to know the details of this tax framework.

Having said that, let's look more closely at the taxes of a Self-Employed Worker.

If you have any questions, feel free to contact us.

General rule, the Self-Employed Worker is a person who exercises a professional activity without being subject to a work contract or legally equivalent contract.

The following are considered to be covered by the Self-Employed Workers’ scheme:

Persons with professional services’ provision (including scientific, literary, artistic or technical activities);
Partner or member of a society of free professionals;
Partner of group farming society;
Rights holder on agricultural undertakings or equivalent, even if only exercising management acts, provided they are exercised directly, repeatedly and permanently;
Agricultural producer that carries out an effective professional activity in the agricultural holding or equivalent;
Individual entrepreneur with income derived from commercial and industrial activity and holder of an individual establishment of limited liability;
Member of a cooperative of production and services that, in its statutes, opts for this regime.

Income Taxation

Simplified Regime

The Self-Employed Worker is automatically covered by the Simplified Scheme when he/she holds annual earnings below € 200,000.

Consequently, the Self-Employed Worker can be requalified in the organised accounting system if:

exceed 200,000 euros in earnings in the two consecutive years; or
exceed € 250,000 of earnings in a year.

As a general rule, in the Simplified Regime, the Taxable Income is calculated by:

15% of the turnover regarding the sales of products and services’ provision in hotel activities;
75% of the turnover regarding the services related to the activities provided for in the Article 151 of the IRS Code;
35% of the remaining services provision;
95% of income from royalties, capital, property and/or capital gains;
30% of the amount regarding subsidies or subventions not intended for operational activities;
10% of subsidies for operational activities.

Note: Regardless of being included in the Simplified Regime, the Self-Employed Worker can opt for the Organised Accounting regime framework. To do so, he/she must indicate his/her choice by the end of March of each year.

Organised Accounting

The Self-Employed Worker is covered by the Organised Accounting regime by free choice or in case he/she holds annual earnings of more than € 200,000.

In the Organised Accounting regime, the Taxable Profit is calculated through rules established in the IRC Code (Company Income Tax Code).

VAT

Subjection

As a general rule, the Self-Employed Worker is included in the normal taxation regime, ie he/she has to collect VAT on the work he/she does.

However, there are activities that may be subject to special regimes. We have, for example, agricultural producers, who are covered by a special scheme called: Flat-Rate Scheme.

Exemption

In effect, the VAT Code provides for some situations in which Self-Employed Workers may be exempt from tax payment. This exemption is applied according to the following conditions:

Exercise an activity that is exempt from VAT collection. For example:
- Physician
- Dentist
- Obstetrician
- Nurse or other paramedical activity
- Provision of services related to education and vocational training;
- Etc... (see here the complete list).
Do not carry out import/export operations or related activities;
Do not carry out the transmission of goods or services provided for in the Annex E of the VAT Code;
Do not have an annual turnover exceeding 10 thousand euros.

We finish with some notes that you should take into account:

The calculation of the payable VAT is made by the difference of the invoiced VAT to customers, and the VAT borne by the expenses (if, in a given quarter, the amount of VAT borne is higher than the invoiced VAT, the difference will be credited in favour of the Self-Employed Worker and will be included in his/her favour in the following quarter);
The Self-Employed Worker must deliver the VAT return quarterly (or monthly, if he so chooses);
The deadline for payment of VAT is 1 month and 15 days after the end of each quarter (for example, for the first quarter, the deadline is 15 May).

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