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Starting activity as an independent worker: what the tax office asks and what your obligations are

If you are going to work for yourself in Portugal, for example as a freelancer or service provider, the first tax step is to register your activity with the Tax and Customs Authority (AT). It is a declaration filed online, but it helps to know beforehand what you will be asked and which obligations start from then on.

This article is based on the AT's information leaflet on starting activity and the practical guide of the Social Security Institute. It explains the essentials and does not replace checking the law in force or advice from a certified accountant.

What the start-of-activity declaration is

According to the AT, an individual who intends to carry on a business or professional activity must file the start-of-activity declaration before starting to work for themselves. It is filed on the Portal das Finanças, with your tax number and password, or with the Cartão de Cidadão or the Chave Móvel Digital.

The AT also states that, for VAT purposes, someone carrying out an isolated act is exempt from this declaration. If this is your case, check the conditions on the official source before deciding.

What you need before filling it in

Before filing, the AT asks you to identify three things:

Activity and turnover

You must state the activity code or codes you will carry out, based on the Classification of Economic Activities (CAE), and the turnover you estimate until the end of the year. The turnover to consider is the one expected for the remainder of that year.

IBAN

You need an IBAN, with its BIC/SWIFT, of a bank account in your name, to link to your activity.

When a certified accountant is needed

If you are required to keep organised accounting, or choose to, the start-of-activity declaration must be filed by a certified accountant (contabilista certificado).

Income tax: simplified regime or organised accounting

Based on the estimated annual category B income, the AT places you in one of two regimes for determining income: the simplified regime or organised accounting. In the simplified regime, taxable income is, as a rule, calculated by applying coefficients to income; under organised accounting, it is based on the accounts.

According to the leaflet, organised accounting is mandatory above 200,000 € of annual category B income and optional below it. The option is made in the declaration of changes, which takes effect in the same year if filed by the end of March. Check the limits in force on the official source.

VAT: which regime applies

Depending on the start-of-activity declaration, you fall under a VAT regime. The AT leaflet mentions the normal regime, the article 9 exemption of the VAT Code, the special exemption regime of article 53 and the special regime for small retailers.

For many small businesses the question is the article 53 exemption, which depends on turnover. We explain that regime in a separate article on the VAT exemption for small businesses.

Obligations during the year

After starting activity, the AT leaflet mentions, among others, these income tax obligations:

Invoices and receipts

You must issue an invoice, receipt or invoice-receipt for every amount received from clients, through the Portal das Finanças invoicing system or the ATGO app. Those who use that system are exempt from monthly reporting of invoice data.

Withholding tax and tax return

In some cases income is subject to withholding tax, and the rates vary by activity. You must also validate activity expenses on e-Fatura and file the income tax return with Annex B, between 1 April and 30 June.

Payments on account

You may have to make income tax payments on account, calculated from the assessment of the year before last, in three instalments: by 20 July, 20 September and 20 December.

Changing or ending activity

If you stop the activity, you must file a cessation declaration within 30 days of stopping. If you merely switch to a different activity, the declaration to file is the declaration of changes, not cessation.

Social Security

According to the Social Security Institute's guide, the AT notifies Social Security of the start of activity on its own initiative, and Social Security handles your registration and enrolment in the independent workers' regime and notifies you. For a first-time independent worker, the guide states that enrolment only takes effect on the first day of the 12th month after the start of activity.

There are also quarterly reporting obligations, contribution calculation rules and exemptions. Amounts and conditions change over time, so we refer you to the guide and to Segurança Social Direta.

Key takeaways

  • The start-of-activity declaration is filed on the Portal das Finanças before you start working for yourself.
  • Prepare the activity code (CAE), the year's turnover estimate and an IBAN in your name.
  • Your income tax and VAT regime depends on what you declare and can be changed.
  • The AT notifies Social Security of the start of activity, but effects and amounts should be checked on the official source.

Frequently asked questions

Official sources

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