Self-Employed VS Limited Company in Portugal

[MishaBear]

Hello!

I am self-employed, born in Italy but working as a registered self-employed in Iceland for the past 3 years (here the tax system is super easy and mostly handled online: it took 5 minutes to register myself at the tax office).

I am thinking seriously about relocating to Portugal, but I have a few questions that maybe self-employed can answer for me based on your experience.

The type of job I do is software development; I already have my clients, and about 90% of them are based in the United States or Canada. I will keep my clients even after the move to Portugal, so I do not need to find additional clients or tap on the local market.

- Question 1: Is it possible to have a rough estimate of how much would be left in my pocket if let's say I make 50,000 EUR per year? I have read about social contribution payments for self employed, but I do not understand if they include also the pension fund or if that is paid separately.
- Question 2: Which are the rates of an accountant these days in Portugal?
- Question 3: I think the main disadvantage of choosing a private limited company with a minimum capital over a self-employed status is that as a limited company I will need to pay more taxes, overall. Is this correct? The reason why I might need to go this route though is that Iw ill be selling also pre-made software (for example for mobile phones) and from what I read this will require a limited company in Portugal.

I know my questions are very specific, but even just two cents about your experience/opinion would be invaluable to me. I know that I will need to hire an accountant once in Portugal.

Thanks!

[canoeman]

You really must contact a Portuguese Accountant it is a complex rather than easy thing here and requires careful planning.

On a simple level a self employed person pays between 25-32% per month, you get a honeymoon for 1st year where earnings are then used for calculation of %, then any +/- is adjusted with IRS tax return.

Pension you can opt for 2 levels basics or enhanced incl in % paid.

On line that's not a problem here S/S & Tax are both online and increasingly the preferred method.

How much depends on where you live and complexity of work another reason for contacting an accountant.
You can opt for 2 systems of tax 1. simplified where you get a set % to claim as expenses for business or 2. an account based system who are then responsible for accounts, returns etc.

Companies easy to set up and quick these days but important to get the correct type for you, also IVA

Contact an accountant and get off on the right foot

[MishaBear]

Thanks for your reply!

I absolutely have no intention of not using an accountant for this, I just want to have an idea of the costs I will be facing to start and on a monthly basis. I have little cache money, so it is important for me to have just a rough estimate.

So, if I understood, I pay that percentage of social security contributions. Do you know if the income tax is then calculated on the gross income before the security contributions or after?

Thanks!

[canoeman]

Too much depends on how you set yourself up to how Social security, tax etc is paid.

If your self employed and operate simplified Tax system then I believe you deduct 20% flat rate business expenses from earnings then Social Security is paid as % on balance, tax then calculated on balance less allowable personal expenses.
Social Security I also believe that once "honeymoon" period is over you pay a min. flat rate 12 months of year regardless.
IVA on turnover +10000€ @ 23% paid quarterly less input IVA, no IVA on goods, services? supplied outside of Portugal.

Sorry but even for a rough estimate you need to consult an accountant here, if it was the UK you could work it out very accurately, but Portugal's tax and Social Security is anything but simple