Setting Up a Sole Trader in Portugal

Setting Up a Sole Trader in Portugal

Updated on Monday 03rd June 2019

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Setting-Up-a-Sole-Trader-in-Portugal.jpgMany entrepreneurs consider setting up a sole trader in Portugal when they first decide to open a business or provide services in a self-employment manner. The sole trader in Portugal is the business form that enjoys the lowest level of taxation, accounting and reporting requirements but also one that has greater liability for its founder. One of our lawyers in Portugal can help you if you want to work as a sole trader in the country. Seeking professional advice is a good first step for all those investors who want to understand the rights and liabilities when they are their own employers. 

The characteristics of the sole trader in Portugal

The sole trader is the simplest business form and also the one with the lowest level of protection for the founder. The entrepreneur is liable for the debts and obligations of the sole proprietorship in Portugal and the liability extends to the private assets. Sole traders are registered for tax purposes with the Portuguese authorities. Entrepreneurs who wish to work as self-employed individuals should have the proper qualifications and certificates for their business. Moreover, for foreign sole traders, these must be recognized in Portugal.

Taxes for sole traders in Portugal

The taxation regime for sole traders is referred to as the Simplified category B Regime (Self Employment) and it is an alternative to the traditional profit/loss assessment. Small businesses in Portugal can thus simplify the record keeping practices and reduce taxes. The low tax regime applies for those entrepreneurs who record an annual turnover below 200,000. One of our attorneys in Portugal can help you with information on the eligibility criteria for the simplified taxation regime. 
Sole traders that have a successful business venture and wish to expand can do so by converting the sole trader into a private limited liability company, following a set of rules and criteria for company incorporation. One of the experts at our law firm in Portugal can help you if you want to take this step.

Is there a corporate tax for sole traders in Portugal?

No, the corporate tax is not applicable to sole proprietorships in Portugal, as these are single entities taxed through the personal tax structure. Sole traders can activate as single-member limited company, mentioning that the business assets are detached from the personal incomes. All the legal requirements of sole proprietorships in Portugal can be explained by our team of lawyers in Portugal.

What are the social contributions for sole traders in Portugal?

Sole traders generating profits of more than EUR 2,573 per year will have to register for social contributions and pay a rate of 29.6% to the Portuguese Social Security. This means that self-employed persons in Portugal benefit from sickness allowance, pension, unemployment benefits and many more. The legal requirements for social contributions can be explained by our Portuguese attorneys at any time.

Who can be self-employed in Portugal?

Temporary workers in Portugal, lawyers, farmers, accountants, brokers, insurance agents, real estate agents can be registered as sole traders in Portugal. Most of the professional activities can be established under the rules of sole proprietorship in Portugal. Among the responsibilities of sole traders in Portugal, we mention the payment of contributions which must be declared each year for the previous year of business. In the case the sole proprietorship is closed, the tax administration in Portugal needs to be announced in this matter.

5 steps for opening a sole proprietorship in Portugal

There are no complex conditions involved in setting up a sole trader in Portugal, however, recommendations in this directions can be made. The following five steps are probably the most important ones when deciding for business in Portugal:
1. Establishing a sole trader means having a clear picture about the business conditions involved and respect the applicable legislation for foreigners in Portugal
2. A complete business plan is required for sole traders wanting to establish the business presence in Portugal and thrive in the chosen business sector. Such a plan normally develops around a good business idea.
3. The next step is to choose a business name, and prepare the documents for business registration. A name verification is normally made at the time the company incorporation procedure begins.
4. Once the sole proprietorship is incorporated in Portugal, the next thing to pay attention to is the tax registration. Self-employed persons are subject to lower taxes in Portugal compared to other business structures available.
5. Looking for an experienced accountant in Portugal is the next thing to consider for your business in this country. Such an expert will provide specific services and oversee the financial operations in the firm.
Besides these major steps contouring the simplest business form in Portugal, sole proprietorship, owners should consider the importance of marketing strategies that can help the business thrive in the chosen category. The services of marketing specialists might be ideal solutions for small and medium entrepreneurs who want to set up sole proprietorships in Portugal. As a piece of advice in matters of sole trader registration, it is suggested to have the support of our law firm in Portugal and align with the legal requirements imposed by the legislation.

Why open a sole proprietorship in Portugal?

Business scenarios can turn into reality in a competitive and appreciated market where Portugal makes no exception. International entrepreneurs with a fixed budget can direct the attention to sole proprietorships, the simplest business form available. Among the advantages of this business structure, the tax regime is the most appreciated one because of the low fees imposed. In addition to the advantages of sole traders in Portugal, the recognition of professional certificate and qualifications is extremely important, particularly for entrepreneurs from overseas. However, some fields might require extra qualifications or the equivalent of the studies abroad. Such a business structure can be established in most of the business fields in Portugal, and if it is the case, such structure can be changed into a limited liability company. It is good to know that changing the company structure is subject to particular conditions, especially in terms of documents and taxes. The entire procedure can be overseen by our experienced team of lawyers in Portugal, from a legal point of view, taking in consideration that the legislation on foreign investments can be explained at any time.
Please feel free to contact our lawyers in Portugal and ask for the legal aspects of opening a sole proprietorship or another form of business.