According to the Portuguese 2021 census, there were 704, 200 self-employed individuals and freelancers in Portugal—and the majority of them have undertaken higher education. This accounts for 16.9% of the entire population of Portugal, which is higher than the EU average of 15.2%.
If you’re looking to hire global freelancers, Portugal offers a great opportunity to source educated and talented professionals. But it’s critical for your business to understand the distinctions between employees and independent contractors when you’re looking to compliantly engage independent workers in Portugal.
Portuguese law makes a clear distinction between employees and freelancers, and it’s easy for companies to overlook this specific regulation when they hire contractors in this country.
In Portugal, an employee is defined as undertaking work in exchange for a salary, whereas an independent contractor is hired and paid for achieving a specific end result as stipulated in their contract.
Independent contractors are responsible for paying their own income tax and social security contributions in Portugal. Income tax rates are progressive here, which means they pay more taxes the more they earn.
If contractors operate as a business and earn over €10,000, they must also register to pay (VAT) (locally known as Imposto Sobre o Valor Agregado (IVA)).
Portugal requires social security contributions at 29.6% of total income, which independent contractors are required to pay themselves. However, if 80% or more of a contractor’s income is earned from a single client, your business must also pay 5% of the contractor’s annual fees as social security contributions.
There is also a “solidarity tax” of 2.5% which applies to contractors earning above €80,000 per year.
As you can see, Portugal has some very specific tax requirements that overseas companies need to be aware of when they’re hiring freelancers from this country.
Using a platform like Worksuite ensures you have an engagement framework in place that accurately classifies freelancers as independent contractors for you. Worksuite lets you know when freelance talent must be engaged as a payrolled independent contractor or employed directly, which gives you peace of mind that you’re always compliant with Portuguese employment requirements.
We work with the best legal partners in Portugal to create contract templates that are compliant with local laws. This protects both your company and your contractors from incurring fines and penalties.
Worksuite can also simplify the process of hiring full-time workers in Portugal by acting as the Employer of Record (EOR) on your behalf. We handle everything from contracts, onboarding, documentation, payroll, benefits, and workforce management. You can reduce your time-to-hire by 90% and reduce overheads, while always keeping fully compliant.
Enabling payment of and compliance with special independent contractor taxes is what Worksuite’s Global Shield is all about.
Partnering with us can prevent you making expensive legal, contractual, or tax mistakes when you’re hiring in Portugal—or anywhere else in the world.