Self-employed individuals in Portugal (trabalhadores independentes / "recibos verdes") are taxed on their business and professional income under IRS Categoria B. Most newcomers use the regime simplificado, where only a percentage of gross income (set by activity-type coefficients) is taxed, rather than actual profit. Self-employment also triggers separate obligations to Segurança Social (social security) and, above a turnover threshold, to register for and charge IVA (VAT).
Anyone relocating to Portugal and invoicing clients as a freelancer, consultant, or sole trader — rather than through a company — falls under this regime. Understanding the simplified-regime coefficients, the VAT exemption threshold, and mandatory social security contributions is essential to price services correctly, budget for quarterly obligations, and avoid penalties for late registration or non-payment.
Key Facts
Self-employment income is taxed as IRS Categoria B (rendimentos empresariais e profissionais); this is separate from corporate/company tax (IRC), which applies only if you operate through a registered company.
The regime simplificado applies automatically to taxpayers with gross annual Categoria B income up to €200,000 who have not opted for organized accounting (contabilidade organizada).
Under the regime simplificado, taxable income is calculated by applying a coefficient to gross income, not by deducting actual expenses in full:
0.75 for income from professional services listed in Article 151 of the IRS Code (e.g., consultants, IT professionals, engineers, trainers, many liberal professions).
0.15 for sales of goods and certain hospitality/restaurant income.
0.35 for other services not on the Article 151 list.
For the 0.75 and 0.35 coefficients, part of the presumed deduction is conditional on the taxpayer having actually incurred and documented deductible business expenses (invoices with tax number) equal to at least 15% of gross income; a minimum automatic deduction equivalent to the Categoria A specific deduction also applies.
VAT (IVA) registration: self-employed people whose annual turnover does not exceed €15,000 can benefit from the small-taxpayer exemption under Article 53 of the CIVA and do not charge IVA on invoices. Exceeding the threshold — or exceeding it by more than 25% (i.e., above €18,750) during the year — triggers immediate mandatory transition to the normal VAT regime.
A Decree-Law (35/2025) reformed the Article 53 exemption regime effective 1 July 2025, including changes affecting EU-established taxpayers, who as of that date can no longer use Portugal's domestic exemption and must instead rely on the EU-wide small business scheme (max €100,000 turnover across the EU, with prior notification and an "EX" identification number).
Segurança Social: self-employed workers (trabalhadores independentes) must register and contribute under the "novo regime dos trabalhadores independentes." The standard contribution rate is 21.4%, applied to the "rendimento relevante" — defined as 70% of service income (or a lower percentage for sales of goods) received in the reference quarter, averaged monthly.
The monthly relevant income base is capped at 12 times the Indexante dos Apoios Sociais (IAS); contributions above this ceiling are not required.
Social security contributions are declared quarterly and paid monthly, due between the 10th and 20th of the month following the reference month.
New self-employed workers are exempt from Segurança Social contributions during the first 12 months of activity.
IRS Categoria B taxpayers must make three "pagamentos por conta" (advance payments toward next year's IRS) by 20 July, 20 September, and 20 December, generally equal to 65% of a formula based on the prior year's tax liability; new activities are exempt from pagamentos por conta in the year of start-up and the following year, and payments below €50 are waived.
Failure to pay at least 80% of a required advance payment triggers compensatory interest calculated daily from the missed deadline.
Steps
Register activity (Início de Atividade) — Before invoicing any client, register as self-employed via the "Início de Atividade" declaration on the Portal das Finanças (or in person at a Finanças office). You must estimate annual turnover, which determines your initial VAT regime (exemption vs. normal).
Confirm your simplified-regime coefficient — Identify which Article 151 activity code applies to your work; this determines whether the 0.75, 0.35, or 0.15 coefficient applies to your gross income when calculating taxable Categoria B income.
Register with Segurança Social — Registration as a trabalhador independente with Segurança Social is triggered automatically from your Início de Atividade declaration; confirm your registration via Segurança Social Direta and monitor the quarterly declaration you must file to calculate contributions.
Issue invoices/green receipts and track the VAT threshold — Issue electronic invoices (recibos verdes / faturas-recibo) through the Portal das Finanças for every payment received. Track cumulative annual turnover against the €15,000 IVA exemption threshold; if you cross it (or exceed €18,750 mid-year), you must start charging IVA and notify the Autoridade Tributária within the legal deadline.
File annual IRS return — Report Categoria B income on Anexo B of the annual IRS return (Modelo 3), filed the year after the income was earned, within the standard IRS filing window.
Timelines
VAT-exemption threshold breach notification: within 15 business days after the end of the year, or within 15 days of exceeding the 25%-over-threshold trigger (€18,750)
Social security contribution payment window: 10th–20th of the month following the reference month
Pagamentos por conta (IRS advance payments): 20 July, 20 September, 20 December
New self-employed exemption from Segurança Social contributions: first 12 months of activity
New self-employed exemption from IRS pagamentos por conta: year of start-up plus the following year
Required Documents
Citizen/NIF (tax number) registration
Início de Atividade declaration (Portal das Finanças)
Segurança Social registration as trabalhador independente
Invoices/expense receipts with your NIF, for justifying deductible expenses under the 0.75/0.35 coefficients
Common Mistakes
Assuming all business expenses are automatically deducted under the regime simplificado — for the 0.75 and 0.35 coefficients, a portion of the deduction requires actual documented expenses.
Failing to track cumulative turnover and continuing to invoice without IVA after crossing the €15,000 (or €18,750) threshold.
Not registering with Segurança Social promptly, or missing the quarterly declaration that determines the contribution amount.
Confusing IRS Categoria B (individual self-employment tax) with IRC (corporate tax), which applies only to registered companies.
Overlooking pagamentos por conta obligations after the first two years of activity.