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Establish a Sole Trader in Portugal

Updated on Wednesday 22nd February 2023

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A small business in Portugal may commence under the rules of a sole proprietorship, the easiest business structure available. This a preferred business for many reasons, among which small taxes, complete liability for the owner and simple accounting requirements. Our company formation specialists in Portugal are here to provide complete support for entrepreneurs interested in setting up a sole trader in Portugal.
 
 
 Quick Facts  
Who can register a sole proprietorship in Portugal? Residents and non-residents interested in starting a business in Portugal

Documents required for a sole trader in Portugal

- personal ID or passport,

- proof of tax registration,

- professional certifications,

- other qualifications for accountants, medical practitioners, lawyers

Authority in charge of company registration in Portugal

Trade Register in Portugal
What is NIF? NIF stands for Numero de Identificacao Fiscal which is solicited at the time the sole proprietorship is registered in Portugal.
Bank account for sole proprietorship in Portugal

Entrepeneurs should open a bank account exclusively for their sole proprietorship.

EORI for sole traders in Portugal For intra-EU company activities. Our local agents can manage the formalities for obtaining the EORI number.
VAT registration Applicable for annual turnover above EUR 10,000 on taxable goods and services
Time frame for sole proprietorship registration in Portugal

A few days

Can he/she sign contracts? (YES/NO)

Yes

Possibility of hiring staff (YES/NO)

Yes

Taxation of sole traders in Portugal

- 14,5% income tax rate for incomes less than EUR 7,112,

- 48% income tax rate for incomes over EUR 80,883 

Deductions for sole proprietorship

 Expenses related to office supply, internet, transportation, etc.

Support for company registration in Portugal

Our company formation agents can manage the formalities for registration of sole traders in Portugal.

Advantages of sole proprietorships in Portugal

- great taxation system,

- simple business structure,

- recognition of qualifications

Why choose our local agents for sole trader registration in Portugal?

- professionalism,

- experience,

- transparency,

- affordable prices

How do I become self-employed in Portugal?

 
The Portuguese Trade Register is the institution in charge of company incorporation in this country, including sole proprietorships. Just like in the case of any kind of company, the first thing to do is to verify and reserve the business name before preparing the company’s documents. Here are the main steps for setting up a sole proprietorship:
 
  1. The registration for tax purposes, such as VAT and social security.
  2. Professional certifications and qualifications recognized in Portugal are needed. 
  3. Portuguese qualifications are necessary for accountants, lawyers, etc.
  4. The authorities will request copies of the personal identification documents.

 

Do I need a NIF in order to have sole proprietorship in Portugal?

 
Even if you become self-employed, you still need to register for NIF. Número de Identificação Fiscal (NIF) is the unique identifier assigned to individuals and companies for tax purposes in Portugal. Every Portuguese citizen, resident, non-resident, individuals and companies with taxable activities in Portugal, is required to have a NIF. You can apply for a NIF through our accountants from Portugal to make the process easier.
 
Obtaining the NIF is important because it proves you obtain income. The NIF is also required while registering with the Portuguese Social Security and Commercial Register. The social security number (NISS) gives you access to benefits such as pension, health insurance, and unemployment benefits. 
 
Additionally, to become a sole trader in Portugal, you will also need to open a bank account and obtain the necessary licenses and permits, depending on your business profile
 
These requirements vary based on circumstances and business activities, so it’s advised to consult a legal professional for guidance. 
 

What are the taxes for sole traders in Portugal?

 
The tax regime is quite appealing for foreign traders in Portugal, and this means that there is no corporate income tax involved. The sole proprietorship enters the Simplified Category B Regime, meaning that taxes are applied for EUR 200,000 annual turnover.
 
It is good to know that sole traders in Portugal are subject to social contributions and must pay a variable rate, depending on your individual circumstances. On average, the social contribution taxes rate at about 21.4%. We mention that sole proprietorships are considered single entities and therefore, the taxation is made through the personal tax regime established for individuals in Portugal. All the aspects and steps involved in the registration of a sole proprietorship in Portugal can be explained by our company incorporation agents in Portugal.
 
Our team of advisors can help foreign entrepreneurs register a company in Portugal at any time, regardless of the selected business structure.
 

VAT in Portugal for sole proprietorship 

 
As a sole trader in Portugal you will be required to charge VAT on the goods and services you sell. The VAT you collect must be remitted to the Portuguese tax authorities.
 
The standard VAT rate in Portugal is currently 23%. However, there are reduced rates for specific types of goods and services. Drinks and certain foods have a VAT rate of 13%. Essential necessities such as basic food products (meat, vegetables, fruits, etc.), medical equipment, or books have a reduced rate of 6%.
Depending on your business profile, you will be required to pay a different amount of VAT. Another variable is the location where you wish to set up a company inside Portugal. Madeira and Azores, for example, have different VAT rates from the rest of the country. 
 
Discussing more details about VAT, taxes, and choosing the best type of business can be done by contacting our team of consultants. 
 

Who can work as a sole trader in Portugal?

 
Brokers, accountants, temporary workers, real estate agents, lawyers, alternative medicine practitioners or farmers can be self-employed in Portugal and register their activities as sole traders. Such activities are based on specific rules, and self-employed persons will have to comply with the tax payment regulations and report the profits for the previous business year. 
 
A correct and realistic business plan, a logo, a name, a long-term strategy and details about the business start-up costs should be the first steps in opening a sole proprietorship in Portugal, whether as a national or as a foreign entrepreneur. Even if the registration procedure is simple, it is best to talk to our company formation representatives in Portugal and solicit assistance and complete guidance.
 
Portugal has been a popular destination for self-employed people and freelancers in the last few years. The Portuguese government has established a non-resident tax regime, known as the "NHR" (Non-Habitual Residency). It allows freelancers and digital nomads to benefit from a reduced tax rate for a period of 10 years. If you wish to relocate to Portugal and work as a sole trader, here are some details you should keep in mind. 
 
In order to apply for NHR, you have to be a citizen of a European Union (EU)/ European Economic Area (EAA) country. You can also apply for NHR through the Golden Visa program. It is also important that you have not been a Portuguese resident in the last five years. If you meet these criteria, then you must follow some procedures for a sole proprietorship in Portugal
 
This includes submitting your application and residence documents, obtaining the NIF, providing bank statements among others. You also need proof of income in order to demonstrate you are self-employed.
 
Overall, there are many opportunities for people outside the country that wish to have a sole proprietorship in Portugal. If you are a foreigner, you can discuss your option to relocate as a freelancer, or even to open a business in Portugal, with one of our consultants. 
 

 Reasons to be self-employed in Portugal

 
The business opportunities in Portugal are huge and let foreign investors choose what they want in terms of business forms, suitable for their needs. A sole proprietorship is the ideal choice for the type of entrepreneurs wanting to start a business with a fixed budget. This means that they can easily develop without having to pay attention to taxes to pay if the annual turnover is not exceeded. The tax regime is advantageous for sole traders in Portugal, and it is among the reasons why such business form is recommended and chosen. Likewise, being self-employed in Portugal means having fewer worries from a business point of view, especially for attorneys, accountants, real estate agents, translators, web developers, graphic designers who want to activate in this fields. A successful self-employed contractor will have to be aware of the business responsibilities, make a concrete plan, understand the direction of business, including on the internet, and have everything necessary for offering complete services.
 
A sole proprietorship in Portugal is the proper structure for the type of entrepreneurs who would rather work for themselves, pay fewer taxes and generate profits for their own good. It is though recommended to change the business structure if the sole proprietorship no longer addresses to your needs, and in this case, an LDA represents the next business step in Portugal.
 
Company incorporation in Portugal is a straightforward process for both residents and non-residents, provided they meet certain requirements. Here are some facts about business in Portugal:
 
  • • approximately USD 254 billion is the estimated GDP for 2021;
  • • EUR 1200 is the average monthly salary for employees in Portugal;
  • • the economy is sustained by the tourism sector that registers around 20 million visitors each year;
  • • USD 105.3 billion represents the export profits for Portugal in 2021;
  • • Portugal is a member of the EU, EAA, and Schengen, having access to a large market and plenty of funding and grants for both company incorporations and sole proprietorships.
We kindly invite you to contact our company formation specialists in Portugal and find out complete information about how you can open a sole proprietorship in Portugal, and about the taxation for such structures. If you want to open a company in Portugal, feel free to address to our team.
 
 
 

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