Starting out as a freelance translator in Portugal- IVA and taxes
Thread poster: Benjamin Thornton Barclay

Benjamin Thornton Barclay  Identity Verified
Portugal
Local time: 01:27
Italian to English
+ ...
May 29, 2013

Hello everyone!

I am moving to Lisbon in a few days and have been scouring the web for information on how to set up as a freelancer in Portugal. Previous posts on Proz really helped me out: I know this topic has been covered on here many times before and I would like to thank everyone for their replies to the other posts! You have made my life a bit easier with all your suggestions!icon_smile.gif

However, I seem to be experiencing somewhat of an information overload here! So I was wondering whether you could just confirm a few things I had jotted down (my personal check list, let's say!) and correct/add any other relevant points.

1)The first thing I would have to do is go and apply for a NIF; after that, I should register as a "trabalhador independente" and as a "tradutor".

2) Next come the recibos verdes: from what I've understood, I just need to be sure to ask for them at the Finanças when they set up my online account and then start filling them in every month?

3) Next stop social security for my Social S. number; then I'd have to go back to Finanças to make sure I do not pay it for the first year and then back to the social security office again?

4) IRS: I will be sent three initial assessments, which I will have to pay by a certain date (I know they change slightly every year). Is this the same year after year, or will I only have to pay once a year after those initial assessments?

5) IVA: there are four VAT periods in the tax-year , so I have to pay VAT four times. The VAT rate is 21.5 %, correct?

Each payment will be assessed on the number of recibos verdes that I hand in, is that so?

Once I pass the 10,000 € threshold (I think I will try to steer clear of IVA as long as I can, or do you think I should apply for it straight away?) do I have to pay VAT on all income declared on my recibos, even those I have invoiced to EU companies? (not in Portugal).

I'm feeling a bit confused: I will not be charging VAT to these companies, but am I the one who will have to pay VAT on that income to the Portuguese Tax Authorities (I apologise if this sounds confusing, but it merely reflects my own puzzlement)

Would you say that this is everything when first starting out? Or is there anything essential I have forgotten?

Thanks

Ben


 

Francesca Bernardis  Identity Verified
Italy
Local time: 02:27
Member (2010)
Portuguese to Italian
+ ...
Some answers May 29, 2013

Hello Ben and welcome to Portugal.

I arrived in Portugal a couple of years ago and I understand perfectly how you feel about it all. For me it was mostly trial-and-error, but I'll try and answer where I can.

Benjamin Barclay wrote:
1)The first thing I would have to do is go and apply for a NIF; after that, I should register as a "trabalhador independente" and as a "tradutor".


They may ask you for a proof of residence in order for you to apply for a NIF. For me, it meant going to the Camara Municipal and declaring that I was living at that address.


2) Next come the recibos verdes: from what I've understood, I just need to be sure to ask for them at the Finanças when they set up my online account and then start filling them in every month?


As far as I know, as a trabalhador independente your online account will allow you to issue recibos verdes eletronicos, there's nothing you need to activate. Well, you need to activate your online account, and I think that once you have the NIF you have to sign up for the service online. A few days later you'll receive your password in the mail, and with that you are ready to go.


3) Next stop social security for my Social S. number; then I'd have to go back to Finanças to make sure I do not pay it for the first year and then back to the social security office again?

Next stop social security, yes. The two things are separated, and Social Security will give you the initial one-year exemption. I don't remember having to go back to Finanças for that (but I may be wrong). They usually are nice enough to tell you what you have to do. After the 1st year there is a way to keep the exemption, but I can't remember how it works exactly.


4) IRS: I will be sent three initial assessments, which I will have to pay by a certain date (I know they change slightly every year). Is this the same year after year, or will I only have to pay once a year after those initial assessments?


I'm at loss here. Where did you get that information? I do my IRS declaration in May of each year and never had to do anything else, but it is true that my declaration is done jointly with my husband so maybe that changes things a bit.


5) IVA: there are four VAT periods in the tax-year , so I have to pay VAT four times. The VAT rate is 21.5 %, correct?
Each payment will be assessed on the number of recibos verdes that I hand in, is that so?
Once I pass the 10,000 € threshold (I think I will try to steer clear of IVA as long as I can, or do you think I should apply for it straight away?) do I have to pay VAT on all income declared on my recibos, even those I have invoiced to EU companies? (not in Portugal).


VAT is 23% now.
When you register as independente, they will tell you what's your threshold for this year (not 10,000 because you didn't start on January 1st). As long as you don't pass that threshold (or the 10,000 in following years), you have nothing to do with IVA. There is an option to check on every recibo verde you issue, but you won't be charging VAT to anyone, nor repaying it.
When you go over the threshold... well, I hired an accountant to be on the safe side. It's doable, mind you, but I chose not to do it myself. I do understand the main points of how it works, but maybe somebody else can give you a better idea of what it entails.

Hope this helps.

[Edited at 2013-05-29 18:17 GMT]


 

Benjamin Thornton Barclay  Identity Verified
Portugal
Local time: 01:27
Italian to English
+ ...
TOPIC STARTER
Thanks! May 30, 2013

Hello Francesca and thanks for your reply!

It was certainly helpful!

re. IRS, I think that the first three assessments are only done if you can't present any previous tax returns? I found that information in a post here on the forum!

And regarding IVA... so, from what i've understood, If I don't pass the threshold for this year, I won't have to pay any IVA for 2013 nor for 2014, correct?

Instead, when/if I pass the 10,000 € threshold during 2014, I will only have to apply and start charging and paying IVA from January 2015, is that so?

If it's "fairly" straightforward, I'd rather avoid an accountant, especially during the first years... but then, I have no idea about how things will develop, so I will have to wait and see.

I am sure that I will receive more information from Finanças (hopefully) but this already helps somewhat!


 

Francesca Bernardis  Identity Verified
Italy
Local time: 02:27
Member (2010)
Portuguese to Italian
+ ...
Well May 30, 2013



re. IRS, I think that the first three assessments are only done if you can't present any previous tax returns? I found that information in a post here on the forum!


Now I'm curious. Could you please point me towards that post? As far as I know, each year in the tax return you declare your income of the previous year and pay taxes on that. So, if you were to pay IRS this year, it would be for the income you had in 2012... when you were not in Portugal! It does not make much sense. But of course I can be wrong.


And regarding IVA... so, from what i've understood, If I don't pass the threshold for this year, I won't have to pay any IVA for 2013 nor for 2014, correct?

Instead, when/if I pass the 10,000 € threshold during 2014, I will only have to apply and start charging and paying IVA from January 2015, is that so?


Until you remain below the threshold, your NIF is just a NIF. You can work just as well, but you won't charge VAT to your customers and therefore you won't pay that VAT back to the State. (I had no problem working for EU customers, but I know that some countries do not accept this kind of cooperation, Spanish agencies being a case in point. No idea how it works with extra-EU or private customers.)
When you pass the threshold, things remain the same until the end of the year. Then in January of the following year you go to Finanças and tell them, and they register your NIF as a VAT number (a EU-recognized VAT number, which can be checked on VIES). From there on, you charge VAT to some customers (privates, and Portuguese companies). Then, every 3 months you have to fill in a VAT declaration, where you mention how much you were paid, how much VAT you received from your customers, and also how much VAT you paid in work-related expenses: and then you pay back to the State the VAT balance (what you were paid-what you already paid in expenses).

I hope this is clear. It's harder to explain than to do (the Finanças website is quite a good one, easy to use and clear).


 

Benjamin Thornton Barclay  Identity Verified
Portugal
Local time: 01:27
Italian to English
+ ...
TOPIC STARTER
Got it! May 31, 2013

Once again many thanks!

You have made things a lot clearer and less daunting than they were! As soon as I've got a bit of extra time (and I will have to find it sooner rather than later) I'll have a closer look at Finanças and try not to run away in despair, this time!icon_wink.gif

As I said, I think those assessments only relate to people who are not able to provide tax returns and, as I was a student last year, I was not earning anything. I shall sort it out once I go and apply for my NIF.

Here's the link to the post I mentioned:
http://www.proz.com/forum/getting_established/142883-income_tax_and_vat_in_portugal.html

it's the second reply and yes, it is a bit "old" (2009) so maybe things have changed since then?

Ben


 

Francesca Bernardis  Identity Verified
Italy
Local time: 02:27
Member (2010)
Portuguese to Italian
+ ...
I don't think many things have changed... May 31, 2013

... but you may be misunderstanding her point. Lawyer-Linguist (who is much more knowledgeable than me on these subjects and who I hope will intervene on this topic) wrote:
Once you are on the system, Finanças will send you three assessments per year for provisional tax, these are normally payable on or around 21 July, 21 September and 21 December (the dates differ a bit each year). This will be based in the beginning on what you tell them your expected income will be. After that, it will be adjusted to your actual assessments for each year.


What I understand here is that, whatever you have to pay, you'll pay in 3 installments in July, September and December. Meaning: you fill in your tax return in May of a given year, about the income of the previous year; they confirm that your declaration is right and tell you how much to pay; you pay in the following July, September and December.
It is true that at the beginning they will ask you to state how much you expect to earn per month, but I don't think they'll use that information for IRS purposes. (Actually, you'll find out that they -- Finanças, but also Seg. Social, banks, insurance companies etc. -- will expect you to have a regular income: this is probably because most people working with recibos verdes are actually "falsos recibos verdes" who do have a regular income.)

You may want to have a look at this document on the Finanças website:
info.portaldasfinancas.gov.pt/NR/rdonlyres/5088FCC0-FFDA-4CDC-AA1F-FB95D02C0ADC/0/Pagar_Imp_vf.pdf
Here's what it says:
Nos termos do art.º 97.º do Código do IRS, o IRS deve ser pago no ano seguinte àquele a que respeitam os rendimentos

and
A titularidade de rendimentos da categoria B determina, para os respetivos sujeitos passivos, a obrigatoriedade de efetuarem três pagamentos por conta do imposto devido a final, até ao dia 20 de cada um dos meses de julho, setembro e dezembro, nos termos do art.º 102.º do Código do IRS.


Let me mention that I have no first-hand knowledge of these IRS payments so that's my understanding but I may be wrong (what my husband pays during the year has been enough for both of us until now, I'm afraid things are about to change this year).

Two more things, you probably know already but just for the sake of completeness:
-you'll need a Portuguese bank account in your name, which will be linked to your position with Finanças. Then again you need a NIF to open a bank account... So you'll probably end up going back and forth a couple of times.
-one thing that has changed since 2009 is the receipt book: you won't be using one, all of your receipt are to be issued in electronic form through the Portal das Finanças


 


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