The idea of being your own boss may sound amazing. Imagine combining that with the opportunity to live and work in Portugal, and you may be ready to start working on your new business today. However, you cannot simply relocate to Portugal and start working on day one. There are a few important steps that you need to take to register as a freelancer in Portugal and to get your business up and running. What should you know as you set up a freelance business in Portugal?
Who Is Eligible to Work as a Freelancer in Portugal?
Are you wondering if you have what it takes to be a freelancer in this beautiful European country? Some countries in the EU have extensive requirements for freelancing activities, but this is not the case in Portugal. In fact, as long as you are in the country legally on a valid visa or permit, you are free to register as a freelancer. However, when you register as a freelancer in Portugal, you will need to provide specific documents to various government agencies. Once you satisfy all of the requirements and have your ducks in a row, you are free to become a freelancer in Portugal.
Benefits When Working as a Freelancer in Portugal
You can set up freelance business in Portugal relatively easily, but it may take some time to walk through the steps. If you are willing to put forth the time and effort, you can enjoy a number of life-changing benefits. For example, in addition to being able to live in a truly beautiful environment with an amazing culture and great people, you can be your own boss.
This offers several benefits in itself. For example, you can pick and choose your clients. There is no need to spend time trying to serve difficult clients because you have the freedom to work exclusively for those who are most rewarding. This can dramatically reduce your stress level in your chosen field. You also have the ability to manage all aspects of your business. For example, if you just thought of an amazing marketing method, you can act on that idea without having to get approval from anyone else.
Income may also be more lucrative. Generally, self-employed individuals earn a higher wage than employees doing the same activities. Plus, you can establish your own rates and change them as desired. You also can decide how much time you are willing to spend working for your paycheck. Whether you want to work 30 hours or 50 hours per week, you can easily enjoy a better work-life balance through the flexibility to set your own schedule.
Required Documents to Register as a Freelancer in Portugal
In order to register as a freelancer in Portugal, you will need to pull together the required documents for necessary permits and identification numbers. These include:
Numero de Identificacao Fiscal (NIF): This is a tax identification number that is given to you by the tax authority. There is no cost to apply for this number. However, you will need to bring your passport to the tax authority office. In addition, you must show proof that you have a tax representative if you are a foreign national.
IBAN: The IBAN, or International Bank Account Number, will be for your new business bank account number. The account must be with a Portuguese Bank. Each bank may have slightly different requirements for opening a new account. Required documentation for a new account in Portugal may include a passport and proof of residency.
Certificate of Residency: This certificate gives you the right to live and work in Portugal. It is available through the Junta de Freguesia. At this office, you must provide your NIF or a rental contract and your passport.
NISS: This is a social security number for your activities in Portugal. To obtain this number, you must make an appointment in advance with the social security office close to you. You will need to provide your Certificate of Residency, your passport and your NIF. It may take several months for the paperwork to be processed and for you to receive your NISS. As a freelancer, you may not need to use your NISS for the first 12 months of your activities. However, because this process takes time, it is important to get a jump on it as soon as possible.
Once you have these documents ready, you are officially ready to start your new business as a freelancer. However, to get your Portugal business up and running, there are a few additional steps that you may need to take. For example, you may want to create a business plan, prepare a marketing plan and line up your accounting system.
Income Tax for Freelancers in Portugal
When you earn income in Portugal, you are required to file a personal tax return and pay taxes on that income. Portugal has a progressive tax rate structure. Those who are in the lowest income bracket will pay 14.5% of their income in taxes. At the top of the spectrum, the highest earners will pay 48%. If you earn greater than 80,000 euros in a year, you are also responsible for paying a solidarity tax. This tax ranges between 2.5% and 5%.
VAT Rate for Freelancers in Portugal
A freelancer who offers goods or services for sale in Portugal must register to pay VAT, or value-added tax. The standard rate for many business activities is 23%. However, some business activities qualify for a reduced rate. These rates are 6% and 13%, depending on the activity.
You must register to pay VAT if your business income or sales are greater than 12,500 euros. If you are operating your business as a self-employed individual, however, this threshold is 25,000 euros. Even if you do not meet the threshold limit, you must create a single invoice stating your annual income so that you can prove your exemption from paying VAT that year. For non-residents and expats, there is no minimum threshold. All of these freelancers must pay VAT.
Check Xolo’s guide on how to pay VAT as a freelancer in Portugal.
How to Create Invoices as a Freelancer in Portugal
Creating invoices for all of your sales as a freelancer is important. While you may not need to provide individual invoices if your income is below the minimum threshold, it is important to still produce them. This is because you may not know earlier in the tax year if you will pass the threshold or not. The last thing that you want is to discover that your income is above the threshold when you have not been preparing invoices as required.
While some freelancers will create their own invoices, others will use a template. Regardless of how you choose to invoice, your documents must have a few important details in them in order to comply with VAT requirements. These details include the name and address of the buyer and seller, your tax identification number, a description of the goods or services, the total cost of the purchase, the transaction date and more.
How to Manage Your Income and Expenses While Freelancing in Portugal
Before you start producing income while freelancing in Portugal, it is important to have a great financial management system in place. Your ability to quickly and accurately track income and expenses will help you to simplify tax filing efforts at the end of the year. In addition, because you will know where you stand financially when you stay on top of your income and expenses, you can make better business decisions throughout the year.
At Xolo, we want to help you start and manage your freelance business with compliance in Portugal. Through our platform, you can conveniently automate invoice generation to save time and energy. You can also set up a business bank account, take advantage of a real-time dashboard and enjoy other great perks. By using Xolo Go, you can free up your valuable time so that you can focus more fully on serving your customers.
5 steps to register and open your business as a freelancer in Portugal
You can set up a freelance business in five easy steps. Are you wondering what you should do to get started?
- Apply for a Certificate of Residency.
- Request an NIF.
- Set up a business bank account in Portugal
- Register to pay VAT
- Request an NISS.
Once these steps are completed, you are ready to focus on launching your new business. Many people find it helpful to start the process by preparing a business plan. With a business plan, you can make decisions about marketing, pricing, services or goods you will offer and more. If you plan to launch your business in Portugal from any location across the globe, also consider using Xolo Leap. This e-Residency business setup solution includes convenient tools to help you start and operate your business from anywhere in the world. We’ll set up your Estonian business which help you gain access to the EU market and provide you with legal as well accounting support so you can run it without any compliance worries.
Become and Work as a Freelancer in Portugal
You could continue dreaming about what life may be like as a freelancer in Portugal, or you could take the first important steps to turn your dream into your reality. You can see that the process for becoming a freelancer in Portugal is relatively straightforward. It is even easier to do when you take advantage of our great resources at Xolo. In fact, with Xolo Leap, you can eliminate all of the hassles that come with managing your business as a self-employed professional. This can enhance your business activities and give you more time to enjoy all that life in Portugal has to offer.
