Sooner or later, every freelancer hears the same line: “You should open a company, you’d pay less tax.” It comes from a cousin, a client, someone at the coworking space. It’s the sequel to the classic “you earn more on recibos verdes” - and, just like that one, it deserves actual numbers rather than faith.
The short answer: for most freelancers, it’s not worth it. The full answer depends on three things - how much you invoice, what you do with the money, and where you want to take the business.
Two different ways of working for yourself
As a trabalhador independente (the recibos verdes regime), you and the business are the same person. Whatever is left after taxes is yours, with no extra steps.
An Lda (a Portuguese private limited company) is a separate person from you - it has its own tax number, its own accounting and its own taxes. You can open one on your own: it’s called a sociedade unipessoal por quotas, and the minimum share capital is 1 €.
That separation is where everything else comes from: the advantages (profit can stay in the company, your personal assets are better protected) and the disadvantages (higher costs, more rules, and the money stops being automatically yours).
What changes in taxes
On recibos verdes under the simplified regime, IRS applies to 75% of what you invoice - the State assumes the other 25% as expenses (that’s the 0.75 coefficient for services). The tax follows the progressive IRS brackets: the more you earn, the higher the percentage.
In an Lda, profit pays IRC (corporate income tax): in 2026, 15% on the first 50,000 € of profit (the reduced SME rate) and 19% on the rest, plus a small municipal surcharge (the derrama, up to 1.5%).
Sounds much better than IRS, right? But there’s a step missing: that money is still in the company’s account, not yours. To take it out as dividends (your share of the profit), you pay another 28% in tax.
Almost 39% along the way, before counting the derrama. The real tax advantage of an Lda isn’t in taking the money out - it’s in leaving it inside. Profit that stays in the company to be reinvested (equipment, hiring, marketing) only pays IRC.
But there’s a special case that catches freelancers in particular: fiscal transparency (transparência fiscal, article 6 of the CIRC). If the company’s activity is on the art. 151 list of professions (programmers, consultants, designers…) and the capital belongs to those who exercise that activity - the exact portrait of a freelancer’s single-member company - the profit is taxed directly in your IRS, even if it never leaves the company. Under that classification, the advantage of “leaving profit inside” doesn’t exist - we’ve explained fiscal transparency in detail here. Check how your Lda would be classified before deciding.
What changes in Social Security
On recibos verdes, you pay 21.4% on 70% of what you invoice for services (run the numbers for your case). You declare every 3 months (the quarterly declaration) and the amount follows your income: invoice less, pay less.
In an Lda, whoever manages the company - usually you - contributes as a gerente (company director): 34.75% in total, of which 23.75% is paid by the company and 11% comes out of your salary. And there’s a minimum base: even with a token salary, contributions are calculated on at least 537.13 € (the IAS value for 2026). That’s around 187 € per month, whether you invoiced a lot or nothing at all.
There are exceptions - for instance, if you already contribute as an employee in another job. But if you live off the business alone, the rule is this: Social Security in an Lda is more expensive and more rigid.
The fixed costs nobody mentions over coffee
Here’s the part your cousin forgot. An Lda is required by law to have organised accounting with a certified accountant (article 123 of the CIRC) - it’s not optional like on recibos verdes. On the market, that typically costs 100 to 250 € per month.
Take Sofia, a designer who invoices 1,800 € per month:
That’s over 4,000 € in the first year - nearly 20% of everything Sofia invoices - before the company brings her any benefit at all. For her, the answer is clear: stay on recibos verdes. (The full running costs - active company and dormant company - are in how much an Lda costs to run.)
When an Lda starts to make sense
Miguel’s case is different. He’s an IT consultant invoicing 90,000 € per year, wants to hire a developer, and only needs part of his income to live on.
- On recibos verdes, his Social Security comes to around 13,500 € per year (21.4% on 70% of everything he invoices). In an Lda, with a director’s salary of 1,500 €/month, total contributions come to roughly 6,250 € per year.
- The profit he doesn’t need can stay in the company, taxed at 15% instead of climbing into the highest IRS brackets - as long as the Lda escapes fiscal transparency (see above); a classification to validate with the accountant before going ahead.
- If he hires a team and something goes wrong, it’s the company that’s liable - his personal assets are, in principle, protected. In principle, because the director remains personally liable for debts to the tax authority and Social Security if the company doesn’t pay them.
- You invoice less than ~3,000 €/month
- You work alone and want to keep it that way
- You need all the money to live on
- You're in your 1st year (Social Security exemption)
- High profit you want to reinvest in the business
- You're going to hire a team or take on partners
- Your activity carries real risk to your assets
- You're approaching 200,000 €/year in turnover
And there’s a threshold where the decision stops being optional: if you exceed 200,000 € of turnover two years in a row - or 250,000 € in a single year - you leave the simplified regime and need organised accounting anyway. At that point, the accountant’s fee stops being an extra cost of the Lda - you’d have it as a freelancer too.
And if after the maths the answer is “company”, the process is simpler than it looks: see how to open an Lda step by step.
Warning: the most common mistake of new Lda owners is treating the company account as a personal account. The company’s money is not yours: it comes out as salary (with contributions) or as dividends (with 28% tax). Unexplained withdrawals create serious problems with the tax authority.
In summary
-
Opening a company is not a trick to pay less tax. Between IRC and dividend tax, taking profit out of an Lda costs close to 39% - and merely existing costs ~4,000 €/year in mandatory accounting and director’s Social Security.
-
An Lda is worth it when profit stays in the company - to reinvest, hire or protect your assets (after first confirming you don’t fall under fiscal transparency) - or when you’re approaching 200,000 €/year and organised accounting becomes inevitable anyway.
-
While you stay on recibos verdes, the paperwork doesn’t need to take up your time - FIZ issues your certified invoices and submits the quarterly VAT and Social Security declarations automatically, so the decision to open a company is about strategy, not escaping admin.
