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More on the rights of sole traders

This is the fourth in a seven-part series on the self employed in Portugal

In recent years, the self-employed have gained more and more rights. Nowadays, as occurs with salaried employees, these workers have gained entitlement to protection in many situations, such as parenting, illness or unemployment. But to be eligible for these social benefits, you need to have your social security contributions up-to-date.

▪ Right to unemployment benefits

The right to unemployment benefit is one of the greatest achievements that independent workers have achieved in recent years. However, you can only access this provision, known as Activity Cessation Allowance, if you are considered economically dependent on a company, that is, if 80% of the total amount of annual income derives from a single business entity.

Apart from this condition, you must be registered in the employment centre. There must be an involuntary termination of the contract with the company and have been working via green receipts (in the manner explained above) over 720 days (two years) in the four years before termination of collaboration with the company.

▪ Exemption from contributions

The self-employed are required to pay contributions for social security from the moment where they become part of the body of an organisation. However, in certain situations, they may be exempt from paying these taxes. You may be entitled to exemption when accumulating independent activity to dependent work, when working for others puts the sole trader into another social protection system, or if the annual income is equal to or less than €5,030.64 [12 times the IAS (€419.22)]

▪ Right to an old-age pension

Those working on green receipts may also have access to a retirement pension. To be eligible for an old age pension, you must be aged 66 and have discounted for at least 15 years for social security. The amount you will receive depends on several factors, including how old you are when asking for retirement. It should be noted that independent workers who retire early may continue to perform any activity without restrictions.

▪ Right to a disability pension

In the event of permanent incapacity for work, the self-employed are also entitled to protection from disability (relative or absolute). To receive this grant, you must have contributed to social security for at least five years in the case of “relative” disability, and at least three years in the event of “absolute” disability.

▪ Right to family protection in case of death

On the death of the sole trader, the family may be entitled to benefits, such as funeral allowance, reimbursement of funeral expenses, orphan’s pension, widows, survival or death grant. To be eligible for death benefits, there is no minimum contribution period.

By Dennis Swing Greene
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Dennis Swing Greene is Chairman and International Tax Consultant for euroFINESCO s.a.