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. And while the exemption lasts, you don’t file the quarterly declaration either - the duty to declare goes hand in hand with the duty to contribute, and your first declaration only comes when contributions begin, once the 12 months are up.
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 the professional activities in the art. 151.º table (most freelancers — other services use 0.35), 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.
Starter bonus (art. 31.º n.º 10-11 of the CIRS): anyone opening a new activity gets the coefficient reduced by 50% in the first tax period and 25% in the second — Ana, if eligible, would pay IRS on 37.5% (€7,500) in year one instead of €15,000. The conditions are cumulative: no employment or pension income (categories A/H) in those years, and no activity closed in the previous 5 years. If you don’t qualify, the normal 0.75 applies.
VAT: The Magic €15,000 Threshold
If your turnover in Portuguese territory stays up to €15,000 (inclusive), you’re exempt from VAT. In year one there is no “previous year” — what counts is the forecast you state when opening your activity (art. 53.º n.º 5): forecast up to €15,000 for the remainder of the calendar year and you’re exempt — no conversion to an annual figure, that annualisation ended in 2025; forecast more and you start in the standard regime right away. The exemption 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 move to the standard regime - as a rule from the following 1 January, or immediately if you pass €18,750 - and start charging VAT (usually 23%) and filing the quarterly declarations.
The 3 Real Scenarios
Note: the IRS figures in the table use the normal 0.75 coefficient and assume the 15% justification is covered. With the starter bonus you pay on roughly half. Mind the €36,000 scenario: 15% is €5,400 and the standard deduction covers ~€4,587, so without around €800 of expenses registered in e-Fatura the base rises a little — with or without the bonus.
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 (37.5% in year one, if you qualify for the starter bonus). Of the presumed 25% expenses, 15% must be justified — for incomes up to around €30,000/year, the standard deduction or your SS contributions cover that on their own.
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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.
