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Freelance workers to discount social security

SOCIAL security for freelance workers is to be targeted next in the widespread government’s restructuring of the tax and social security system.

The government wants to tighten up loopholes whereby those working with green receipts and under contract, in other words working for themselves and for an employer, have to pay discounts via their contracted place of work and discount a percentage of social security according to what they earn on green receipts.

The ‘discount as you earn’ issue remained outside the recent social security reform bill, but is to be discussed by both the government and trade unions at the beginning of 2007.

The General Workers’ Union (UGT) wants to separate the regime of those working with so-called green receipts from those working on contract for an employer.

Contrary to what happens with those employed by employers, where social security discounts are divided between bosses and employees, in the case of those paying with green receipts the entire cost of social security is borne by the freelance worker.

João Proença, the secretary of the UGT said that discussions would begin, taking into account that there was a lot of fraudulent behaviour in this area, whereby many people, in the last years of their working life, were building a pension and discounting more than in previous years, prejudicing those who did not do this, but had paid the correct amount all along.

“This issue has to be thought about. It’s not fair that employees working on contract to others should finance the social security regimes of freelancers,” said Proença, adding that the discounts needed to be “levelled out.”

The government claims that freelance workers using green receipts declare incomes to social security that are actually lower than those they in fact receive.

Proposed changes at a glance

• Freelance workers will have to deduct a percentage for social security on each factura and green receipt they send out.

• The exact amount has not been decided but could be between 1.5 and five per cent.

• New green receipt books will be issued with a box for social security deductions.

• Contributors can continue paying through the Multibanco system every month, but will have to fill in the green receipt all the same.

• The tax department will check the amount written in the green receipts with the Multibanco monthly payments and make a refund or demand more money at the end of the tax year.