By Dennis Swing Greene [email protected]
Dennis Swing Greene is Senior Partner and International Fiscal Consultant for euroFINESCO s.a.
If you let out furnished accommodation to tourists on a short term basis, you are mostly likely engaged in tourist related services (Category B) and should have already acquired a Local Lodging Licence (see Chapter nº 3).
This type of activity receives special treatment under the “Simplified Regime” and is handled in the same way as “Sales”. In other words, you are only taxable on 20% of your invoiced income.
Before you start
Before you start your independent business activity in Portugal, you must first register. This is done through the completion of an Início de Actividade, either by form in triplicate directly at your local Finanças office or via computer over the Internet.
You will also need to register at the local Social Security office.
Running your business
You are required to keep books to track your income and expenses. While old-fashioned ledgers still exist for this purpose, most people opt for a computer bookkeeping programme to track their business income and expenses on a regular basis. There are over 100 such programmes that Finanças has approved.
Just like any other business, you must register for VAT. If your business income exceeds €10,000, you must collect VAT from your customers. Tourist related activities currently charge the lowest rate (currently 6%). Business expenses add 23%.
The difference between the two is either paid to the State or returned to the taxpayer. Quarterly declarations must be done over the Internet and are in Portuguese only.
Non-residents need to appoint a Fiscal Representative specifically to meet VAT obligations.
In addition to the normal appointment procedures, the non-resident must issue a Power of Attorney to the Representative to answer any fiscal matters directly with Finanças.
Recibos Verdes Electrónicos (Green Receipts)
As in all business activities in Portugal, you are required to issue invoices to your clients.
Mandatory receipts (Recibos Verdes) must be issued electronically via the Internet (Sistema de Emissão de Recibos Electrónicos – SERE).
Portuguese Income Tax
An IRS declaration must be filed in April-May following the fiscal year. Most will find the simplified regime to be both simple and economical when compared to standard accounting practices. Gross income is reported on Anexo B.
Beginning in 2011, the new Contributive Tax Code changes how sole traders calculate contributions. An indexed system of payments, similar to salaried employees, replaces the choices previously available to the Self-Employed.
While the first-year exclusion from contributions remains in place, Self-Employed workers are no longer able to choose their level of contributions. Instead, you make deductions according to the amount of income actually received, based on IRS declarations in the preceding year.
Alternatively, if you already contribute to Social Security or receive an old age pension in Portugal or in another EU country, you may qualify for an exemption.
Closing your business
Finally, in order to avoid any unnecessary taxation, you must notify Finanças when you cease your business activity via the completion of a Cessação de Actividade form within 30 days. For Social Security, fill out the Boletim de Alterações de Elementos form.
Dennis Swing Greene is Chairman of the Board and International Fiscal Consultant for euroFINESCO s.a. Private consultations can be scheduled in Guia (Albufeira) 289 561 333, by e-mail at [email protected] or at www.eurofinesco.com.