Portugal

Introduction

Portugal is a southern European country located on the Atlantic Ocean and bordering Spain. It is one of the oldest nation states in Europe, with evidence of settlements and invasions dating back to prehistoric times. It has an incredibly rich history, all of which had a significant cultural, architectural and linguistic impact on the country.

Portugal is a developed country with an advanced economy and high standards of living. It is ranked second in the world for moral freedom, third in the world for peacefulness and seventh of democracy. It is also a member of the United Nations and the European Union, and is one of the founding members of NATO, the Eurozone, the OECD and the Community of Portuguese Language Countries.

While the official language is Portuguese, there is a great deal of English spoken. As such, there are many professions open to expats and English speakers, including jobs in IT, software, engineering, online gaming, agriculture, commerce and web development.

The last few years have witnessed a rise in entrepreneurial start-ups, and the government has actively encouraged this through the introduction of new visas. In particular, Lisbon has become a major start-up hub in recent years, which has created great demand for international contractors and freelancers. There are also many opportunities for bilingual or even trilingual speakers, with many of the world’s biggest corporations, including Amazon, Google and Uber, having offices in Portugal.

There is also a talent shortage across many sectors in Portugal, and many Portuguese businesses have struggled to find enough skilled professionals. As such, there are many opportunities for international freelancers, contractors and self-employed professionals in the country.

Here at Chesterfield we possess in-depth experience with all aspects of Portuguese payroll and Portuguese Contracting. If you are seeking a comprehensive Portuguese employed solution or would like to learn more about our contractor management solutions in Portugal, Chesterfield is more than happy to assist.

Registry/Registration

As a member of the European Union, EU citizens are free to work in Portugal without a work permit or visa. However, they must apply for a residence card within six months of arriving in Portugal for employment.

Non-EU citizens must obtain a visa from their country of origin before arriving in Portugal. Due to bilateral agreements, there are a number of exemptions for citizens of Australia, Canada, Israel, Japan, New Zealand and the USA. Citizens of these countries can apply within 90 days of arriving in Portugal.

There are three types of residency visas. These are:

  • Permanent residency visa
  • Resettlement visa for relatives of Portuguese citizens
  • Resettlement visa for relatives of permanent, non-citizen residents of Portugal.

There are also a number of work visas available for non-EU nationals, including:

  • Short-term work visa (for Portuguese contracts of six months or less)
  • Long-term work visa (for individuals who intend to work in Portugal for six months or longer)
  • Permits for highly skilled migrants and researchers
  • EU Blue Card for highly qualified workers
  • Self-employed workers in Portugal
  • Golden residence for business investors

Once you have obtained your relevant visa, you can then travel to Portugal to live and work. You will have four months to convert your visa into a residence permit and work visa.

You must submit a number of documents to obtain these, including:

  • A valid passport
  • Proof of health insurance and accident insurance
  • Biometric data including fingerprints and digital photos
  • Documented flight reservations
  • A valid Portuguese residence visa
  • Proof of accommodation in Portugal
  • Relevant tax documents
  • Proof of registration with social security
  • Background checks for criminal records

Income Tax

Income tax rates for contractors in Portugal are generally subject to VAT. In some cases, VAT exemptions apply. In certain industries, such as agriculture, commerce and industry, small and medium-sized businesses benefit from tax reliefs from the Portuguese government. These typically add up to 25% of due tax, and are reinvested in eligible assets within two years of earning the income.

Income tax rates as of 2020 are:

  • Up to €7,711: 14.5%
  • €7,712 – €10,732: 23%
  • €10,732 – €20,322: 28.5%
  • €20,322 – €25,075: 35%
  • €25,075 – €36,967: 37%
  • €36,967 – €80,822: 45%
  • €80,822+: 48%

Freelancers typically work under a taxation regime called recibos verdes (green receipts). Non-habitual residents employed or self-employed in Portugal in certain professions considered ‘high added value’ can benefit from a flat 20% income tax rate. 

Social Security

If you are self-employed, you will need to apply for a social security number in Portugal. Documents required include:

  • An RV1000-DGSS form
  • ID from your country of origin
  • Portuguese tax number
  • Passport
  • Residence permit (for non-EU citizens)

Employees and independent contractors are subject to social security contributions, although there are separate rules and systems for employees versus independent contractors. Contributions are calculated on the basis of the gross amount or the salary/fees received. For independent contractors and self-employed workers, social security contributions are calculated at 29.6%, although there are some exemptions subject to varying contribution rates. These include:

  • Where activities are separately provided to different entities that do not belong to the same company group
  • Where employment activity is subject to a social security contributory system that includes all the social protection covered by the social security system applicable to independent contractors
  • Have in the past year paid contributions over an annual income amount that does not exceed 2.527,92

Please check with one of our specialists to determine your social security status in Portugal.

Employment Rules

There are a number of ways to be self-employed in Portugal. These include companies that contain one individual only (pessoa singular) and those who employ more than one person (pessoa colectiva). If you are going to work as a freelancer or contractor in Portugal, you need to register with Financas before doing any type of trade.

Independent contractors who are self-employed in Portugal do not benefit from the same legal protection as employees, particularly when it comes to termination. Both parties are free to agree upon the termination conditions of the contract.

All employment contracts are subject to the provisions laid out in the Portuguese Labour Code. The Portuguese Civil Code contains provisions on service agreements. These specifically apply to independent contracting but are not restrictive or mandatory.

Self-employed workers in Portugal are legally required to declare their turnover. A typical working week is 40 hours, and typical working hours are 9am – 6:30pm.

Banks

You must have a local bank account in order to carry out self-employed contracting in Portugal. You can do this either online or at a physical branch.

The Portuguese banking system is very sophisticated and there are plenty of options when it comes to local and international banks. Portugal’s five largest national banks are Santander, Novo Banko, CGD, Millennium BCP and Banco CTT. They offer online banking and many banks offer online banking in English.

If opening your account at a physical branch, you will need to take all the relevant paperwork, which tends to vary from bank to bank. Bear in mind that banks tend to close at 3pm or 3:30pm weekdays. If a branch opens on a Saturday, it is unlikely that it will open after 3pm.

Paperwork needed typically includes:

  • Proof of ID
  • Tax number and card
  • Residency card
  • Proof of address

Further, an initial deposit of around 250 is needed. Please check the rates for bank charges, such as ATM withdrawals and international money transfers. 

Corporate Structures

At Chesterfield, we will carry out your Portuguese payroll (Portuguese employer of record) and if you want to be self-employed in Portugal we can assist via our local Portuguese accountant.

We also assist with all registration and criteria requirements. Our services include local accounting, tax liabilities, corporate structures, invoice structuring, contract management solutions and much more.

Chesterfield & Contracting in Portugal

With a diverse and liberalised economy, favourable tax regime and relatively low cost of living, Portugal remains an attractive destination for international contractors.

The rules for working in Portugal vary dependent on whether you are employed or self-employed in Portugal. In order to ensure that you are fully compliant with local legislation, we recommend partnering with a specialist international contracting company, such as Chesterfield.

Our Portuguese freelancer and self-employed services are tailored to the individual needs of the client. We remain on hand to support you with all of your needs, ensuring a customised approach that helps you to reach your personal financial goals.