Yesterday João, a graphic designer, sent me a message: “How much am I actually going to pay in taxes? I’ve read 20 articles and still have no idea.” Completely normal. Most articles about independent work in Portugal are either too technical or hide the real numbers.
Today you’ll find out exactly what you pay - and what stays in your pocket. No fluff, no complicated terms.
Year One: The Good News Most People Miss
Sofia started as a freelance copywriter in January. In her first month she invoiced €1,200. Do you know how much Social Security she paid? Zero.
During your first year of activity, you’re automatically exempt from Social Security payments - no application needed. You do still need to submit the quarterly Social Security declaration (every 3 months), but the amount to pay will be zero.
From Year Two Onwards: Social Security Kicks In
From the second year, things change. You submit the quarterly Social Security declaration and your monthly contribution is calculated based on the relevant income declared - adjusting every quarter.
IRS: The 0.75 Coefficient Explained Once and For All
Under the simplified regime for service providers, the government assumes 25% of what you invoice are expenses. In other words, you pay IRS on 75% of the total.
Example from Ana, a marketing consultant:
- She invoiced €20,000 in the year
- 75% of €20,000 = €15,000 (the amount on which she pays tax)
- The remaining €5,000? The government assumes those were business expenses
You then apply the standard IRS brackets to those €15,000. How much you pay depends on which bracket you fall into.
VAT: The Magic €15,000 Threshold
If you invoice less than €15,000 per year, you’re exempt from VAT. This means two things:
- You don’t charge VAT to clients
- You don’t need to submit the quarterly VAT declaration (every 3 months)
On the invoice, you select VAT at 0% and choose the exemption reason - usually Article 53 of CIVA. Exceeded €15,000? You must start charging VAT (usually 23%) and submit quarterly VAT declarations.
The 3 Real Scenarios
Warning: Many freelancers forget to set aside money for IRS. In your first year you don’t pay advance payments, but the following year the full bill arrives at once. Always save 20-25% of what you earn.
The Declarations You Must Submit
Tiago, a web designer invoicing €2,500/month, sums it up: “It seemed like a lot at first. Now I file everything in under 20 minutes per quarter.”
In Summary
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Golden first year - zero Social Security, VAT exempt up to €15,000/year. Use it to build up a reserve.
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Simplified regime - you pay IRS on 75% of what you invoice. The other 25% are automatically assumed as expenses by the government.
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Automate your declarations - with FIZ, quarterly VAT and Social Security declarations are submitted automatically. The Tax Shield covers fines up to €500 (Auto Pro plan). Zero stress about deadlines.
