When you begin an activity as a sole trader, you must be registered with the Social Security if you have not already done so previously.
Since 2007, self-employed persons are no longer required to inform the Social Security office directly at the start, suspension or termination of their professional or business activity; this information will be automatically communicated to the Social Security Institute (Instituto da Segurança Social, I.P.) by the Portuguese Tax Authorities (“AT”).
The following outlines the procedure that is followed for registration with the Social Security administration.
Even though implementation may be deferred, registration takes place immediately following the “Início de Actividade” of the business activity.
The local Social Security Office in the area of residence of the sole trader.
Completion of the Identification Form and, in the case of foreign workers, a Supplementary Identification Form (standard forms), along with the Work Visa or the authorisation to reside or stay for non-EU citizens.
Because Social Security is mandatory in Portugal and in the EU.
▪ Identity Card (or Birth Certificate or Passport);
▪ Declaration of commencement of activity for tax purposes (Início de Actividade);
▪ Social Security Beneficiary Card, if already registered;
▪ Tax identity card in the case of sole traders carrying on a commercial business activity.
Payments to Social Security are calculated on 29.6% of self-employment income declared in the previous year.
Those currently contributing to Social Security regimes (including UK “National Insurance”) in another country or receiving Social Security benefits, such as “old age” or “state” pensions, are eligible for full exemption.
When an individual’s annual taxable self-employment income falls below the minimum (six times the monthly minimum wage: €419.22 X 6 = €2,515.32 p.a.), the independent worker is also eligible for exemption.
In the case of Local Lodging, since only 15% of the income is taxable, this 15% is the part subject to Social Security contributions. With this in mind, the gross threshold for exemption threshold rises to €16,768.80 when practising Local Lodging. Above this amount, you may still be eligible for partial exemption.
By Dennis Swing Greene
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Dennis Swing Greene is Chairman and International Tax Consultant for euroFINESCO s.a.