Tax Number (NIF) in Portugal
The NIF number (tax ID number in Portugal) is fundamental for administrative processes such as opening a bank account, signing a mobile phone contract, etc. Anyone who lives in Portugal, whether residents, citizens, or foreign non-residents, need a NIF number.
How to Register for a Tax Number (NIF) in Portugal
To register for a Tax Number in Portugal, you need to visit a local government tax office (Finanças in Portuguese).
The Documents Required for a Tax Number Registration in Portugal
Here are the documents you need in order to register for a Tax Number (NIF):
- Valid ID card (if you are a citizen of EU, EEA or Switzerland)
- If you are not from the EU, EEA or Switzerland, you need to provide a passport.
- Proof of residency.
- If you are a non-Portuguese citizen, a bank statement containing your home country address should be enough.
Tax Rates in Portugal for Sole Traders
In Portugal, income tax rates are progressive and vary depending on the annual taxable income.
- less than €7,112- 14,5% tax rate
- €7,113– €10,732- 23% tax rate
- €10,733– €20,322- 28,5% tax rate
- €20,323– €25,075- 35% tax rate
- €25,076- €39,967- 37% tax rate
- €39,968- €80,882- 45% tax rate
- more than €80,883- 48% tax rate
Value Added Tax (VAT) in Portugal
If you are wondering if VAT will be applicable to your business, the answer depends on whether you anticipate your income more than €10,000 per year for your services or not. In Portugal, VAT must be paid by businesses with an annual turnover exceeding €10,000 on taxable goods and services.
Annual Income Exceeding €10,000
If you earn more than €10,000 in a year, you need to declare it to the state until January of the following year. If your earnings are more than €10,000 per year, you will have to charge VAT on top of your usual fee. You will then declare the value of the received VAT from your clients to the state quarterly.
VAT Rates in Portugal
There are three different rates of Value Added Tax (VAT) in Portugal:
- The general rate of 23% on taxable goods and services
- The intermediate rate of 13% on food and drinks
- The reduced rate of 6% applicable to the supply of foodstuffs, water supplies, pharmaceutical and agricultural products, passenger transport, etc.
Accounting Requirements for Sole Traders in Portugal
There are two types of accounting regiment in Portugal: the simplified regiment, and the organized regiment.
The Simplified Accounting Regiment
The simplified accounting regiment is applicable for any company whose annual turnover doesn't exceed €200,000. It is also the default regiment assigned by the tax authorities upon registration.
The biggest benefits of a simplified regiment are its simplicity and low cost.
The Organized Accounting Regiment
When your gross annual income exceeds €200,000, organized accounting becomes compulsory for sole proprietorships. You will need to hire an accountant who will handle the "Finanças" and Social Security matters on your behalf. With an organized regiment, you have to keep yearly tax files.
There you have it, a step-by-step guide on how to set up as a sole trader in Portugal.
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