The Recibos Verdes (Green Receipts) regime has had some changes that you’ll need to wrap your head around. This is for all the self-employed English-speakers battling their way through the Portuguese bureaucracy.
Some of the major changes
There will now be a minimum monthly social security contribution for self-employed workers of 20€. This means that the first year is no longer “free” and those registering on the system will be required to start paying from day one.
Furthermore, the discount rate for Social Security drops from 29.4% to 21.4% and will be applied to 70% of your average income for the previous thee months. Another big change is that self-employed individuals who derive income exclusively from alojamento local will no longer get any tax discounts.
Additionally, changes to the way in which income is calculated may affect some people’s tax exemptions. This will only apply to those with work they get paid for in addition to word paid on green receipts with income that is four times the IAS (Index of Social Support) or more. With current figures, this means those earning 2,451€ per quarter will lose the current self-employment tax exemption.
There will also be some changes to the companies that employ those on Recibos Verdes. Firstly, if 50% of an individual’s income comes from a single company, the company will have to make social security contributions of 7%. This increases to 10% if more than 80% of a person’s income is from a single source.
Finally, under the new system, self-employed individuals are required to declare their income, which we will now look at in a little more detail.
What you need to do in the paraphrased words of a veteran Portuguese accountant
If you are registered on Recibos Verdes, you will need to declare your income to Segurança Social (Social Security) every three months. They will then work out how much you owe them based on the previous three months.
You can declare your income online, but first you’ll need your senha (password). To get this, go into your finanças page and find where it says “pedir senha online.” Now, follow the on-screen steps to get your password!
It will allow you to access your page in Segurança Social, where you can check your contributions, make payments, and all the other boring but necessary things that come with self-employment.
The first declaration under this new three-month system has to be made by Jan. 31, so try to get your senha sooner rather than later, to avoid the chaos of every self-employed worker in the country scrambling to do the same. The Jan. 31 declaration will be for your earnings in October, November, and December 2018. It will then continue on a three-month cycle, with the next declarations due by the end of April, July, October, and so on.
Through this, you will be enrolled in the public health system, eligible for unemployment benefits, and your contributions will count towards your pension, which can often be transferred to your home country if you choose to go back.
The pain that is IVA (that’s like VAT) remains. If you go above the 10,000€ yearly threshold — Jan. 1 to Dec. 31 — you, and the people you work for, will have to pay IVA and deduct for IRS. Be careful with this, it can bite you in the ass.
Oh, and I’m not an accountant or lawyer or anything. So don’t hold me responsible if some of this is wrong. They change it depending on the day/office/worker/mood anyway.
It does not cost much to have an accountant look at your taxes, and in the long run could be very beneficial!