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Establish a Sole Trader in Portugal

Establish a Sole Trader in Portugal

A small business in Portugal may commence under the rules of a sole proprietorship, the simplest business structure available. This a preferred business form for many reasons, among which are low taxes, complete liability for the owner, and simple accounting requirements. Our company formation specialists in Portugal are here to provide complete support for entrepreneurs interested in setting up a sole trader in Portugal.

 Quick Facts  
Who can register a sole proprietorship in Portugal? Residents and non-residents interested in starting a business in Portugal

Documents required for a sole trader in Portugal

– personal ID or passport,

– proof of tax registration,

– professional certifications,

– other qualifications for accountants, medical practitioners, lawyers

Authority in charge of company registration in Portugal

Trade Register in Portugal
What is NIF? NIF stands for Numero de Identificacao Fiscal which is solicited at the time the sole proprietorship is registered in Portugal.
Bank account for sole proprietorship in Portugal

Entrepeneurs should open a bank account exclusively for their sole proprietorship.

EORI for sole traders in Portugal For intra-EU company activities. Our local agents can manage the formalities for obtaining the EORI number.
VAT registration Applicable for annual turnover above EUR 10,000 on taxable goods and services
Time frame for sole proprietorship registration in Portugal

A few days

Can he/she sign contracts? (YES/NO)

Yes

Possibility of hiring staff (YES/NO)

Yes

Taxation of sole traders in Portugal

– 14,5% income tax rate for incomes less than EUR 7,112,

– 48% income tax rate for incomes over EUR 80,883 

Deductions for sole proprietorship

 Expenses related to office supply, internet, transportation, etc.

Support for company registration in Portugal

Our company formation agents can manage the formalities for registration of sole traders in Portugal.

Advantages of sole proprietorships in Portugal

– great taxation system,

– simple business structure,

– recognition of qualifications

Why choose our local agents for sole trader registration in Portugal?

– professionalism,

– experience,

– transparency,

– affordable prices

Short steps for sole trader registration in Portugal

The following guide can help you in establishing a sole proprietorship in Portugal. This way, you can understand what are the most important steps in the process. In addition, you have the support of our local agents at your fingertips because they can take care of the formalities involved:

  • The name of a sole trader must be verified and reserved with the National Registry. An approval will be issued.
  • Registration of a sole trader in Portugal begins with the preparation of documents, and the Memorandum of Association is submitted to the Portuguese Trade Register.
  • The next step is the NIF application. This is the tax ID of the future sole trader in Portugal.
  • Proceed to registration for social security and contributions.
  • You can choose a bank to collaborate with and open an account linked to the sole proprietorship in Portugal.
  • A business license is also needed depending on the activities you are going to carry out in Portugal.
  • The application for opening a sole trader in Portugal must reach the Directorate General for Economic Activities in Portugal.
  • The documents for the establishment of a sole proprietorship in Portugal must be translated into Portuguese before the presentation to the relevant authorities.

We remind you that you can opt for our services in Portugal. Our agents have experience in company incorporation in Portugal and can prepare the necessary documents as well as communicate with the relevant authorities for registration.

Applying for NIF to open a sole proprietorship in Portugal

Even if you become self-employed, you still need to register for NIF. Número de Identificação Fiscal (NIF) is the unique identifier assigned to individuals and companies for tax purposes in Portugal. Every Portuguese citizen, resident, non-resident, individual, and company with taxable activities in Portugal, is required to have an NIF. You can apply for an NIF through our accountants in Portugal to make the process easier.

Obtaining the NIF is important because it proves you obtain income. The NIF is also required while registering with the Portuguese Social Security and Commercial Register. The Social Security Number (NISS) gives you access to benefits such as pension, health insurance, and unemployment benefits. 

Additionally, to become a sole trader in Portugal, you will also need to open a bank account and obtain the necessary licenses and permits, depending on your business profile

What are the taxes for sole traders in Portugal?

The tax regime is quite appealing for foreign traders in Portugal, and this means that there is no corporate income tax involved. The sole proprietorship in Portugal qualifies for the simplified tax regime when reaching an annual turnover of up to EUR 200,000. Here is extra information:

  • Sole proprietorships in Portugal can qualify for a tax-free deduction of EUR 4,104. Others can be subject to a simplified tax regime in Portugal, under certain conditions.
  • Income tax is paid for 75% of the total income, at standard rates. The remaining 25% should be provided with expense bills.
  • Incomes of a sole trader in Portugal are seen as personal earnings for which there is no corporate tax imposed.

It is good to know that sole traders in Portugal are subject to social contributions and must pay a variable rate, depending on your individual circumstances. On average, the social contribution tax rate is about 21.4%. We mention that sole proprietorships are considered single entities and therefore, the taxation is made through the personal tax regime established for individuals in Portugal. All the aspects and steps involved in the registration of a sole proprietorship in Portugal can be explained by our company incorporation agents in Portugal.

Our team of advisors can help foreign entrepreneurs register a company in Portugal at any time, regardless of the selected business structure.

VAT in Portugal for sole proprietorship 

As a sole trader in Portugal, you will be required to charge VAT on the goods and services you sell. The VAT you collect must be remitted to the Portuguese tax authorities.

The standard VAT rate in Portugal is currently 23%. However, there are reduced rates for specific types of goods and services. Drinks and certain foods have a VAT rate of 13%. Essential necessities such as basic food products (meat, vegetables, fruits, etc.), medical equipment, or books have a reduced rate of 6%.

Depending on your business profile, you will be required to pay a different amount of VAT. Another variable is the location where you wish to set up a company in Portugal. Madeira and Azores, for example, have different VAT rates from the rest of the country. 

Who can work as a sole trader in Portugal?

Brokers, accountants, temporary workers, real estate agents, lawyers, alternative medicine practitioners, or farmers can be self-employed in Portugal and register their activities as sole traders. Such activities are based on specific rules, and self-employed persons will have to comply with the tax payment regulations and report the profits for the previous business year. 

A correct and realistic business plan, a logo, a name, a long-term strategy, and details about the business start-up costs should be the first steps in opening a sole proprietorship in Portugal, whether as a national or as a foreign entrepreneur. Even if the registration procedure is simple, it is recommended to talk to our company formation representatives in Portugal and solicit assistance.

Portugal has been a popular destination for self-employed people and freelancers in the last few years. The Portuguese government has established a non-resident tax regime, known as the “NHR” (Non-Habitual Residency). It allows freelancers and digital nomads to benefit from a reduced tax rate for a period of 10 years. If you wish to relocate to Portugal and work as a sole trader, here are some details you should keep in mind. 

In order to apply for NHR, you have to be a citizen of a European Union (EU)/ European Economic Area (EAA) country. You can also apply for NHR through the Golden Visa program. It is also important that you have not been a Portuguese resident in the last five years. If you meet these criteria, then you must follow some procedures for a sole proprietorship in Portugal

This includes submitting your application and residence documents, obtaining the NIF, and providing bank statements among others. You also need proof of income in order to demonstrate you are self-employed.

Overall, there are many opportunities for people outside the country who wish to have a sole proprietorship in Portugal. If you are a foreigner, you can discuss your option to relocate as a freelancer, or even to open a business in Portugal, with one of our consultants. 

Is it possible to register as sole trader online in Portugal?

Yes, in Portugal you can register a company online, with the help of dedicated platforms. The procedures are straightforward, but it is very important to have specialized support at hand to start the online registration process. The problems often faced by those who want to open a company in Portugal are those related to documents and formalities. That is why there are cases in which applications for opening a sole trader in Portugal can be rejected. Starting from here, we recommend that you get in touch with our specialists, regardless of the method of setting up a company, whether you choose to do the procedures online or the traditional way.

Are there any risks linked to sole traders in Portugal?

Personal and business assets are the same, which means that the sole trader is directly responsible for the company’s losses. If the debts are greater than the company assets, these can be extinguished with personal assets, including the common ones from the marriage.

 Reasons to be self-employed in Portugal

The business opportunities in Portugal are huge and let foreign investors choose what they want in terms of business forms, suitable for their needs. A sole proprietorship is the ideal choice for the type of entrepreneur wanting to start a business with a fixed budget. This means that they can easily develop without having to pay attention to taxes if the annual turnover is not exceeded. The tax regime is advantageous for sole traders in Portugal, and it is among the reasons why such a business form is recommended and chosen. Likewise, being self-employed in Portugal means having fewer worries from a business point of view, especially for attorneys, accountants, real estate agents, translators, web developers, and graphic designers who want to activate in these fields. We invite you to find out more about company formation in Portugal and the formalities for establishing a sole trader in this country.

Some facts about Portugal’s economy

Company incorporation in Portugal is a straightforward process for both residents and non-residents, provided they meet certain requirements. Here are some facts about business in Portugal:

  • An economic growth of around 6% has been registered in Q4 of 2023.
  • The inflation fell to 1.4% at the end of December 2023.
  • The budget execution to November noted a surplus of around 2.7% of GDP due to an important rise in profits.

We kindly invite you to contact our company formation specialists in Portugal and find out complete information about how you can open a sole proprietorship in Portugal, and about the taxation for such structures. If you want to open a company in Portugal, feel free to address to our team.