.png)
In Portugal, there are 2 ways of conducting Business:
as an entrepreneur;
as a company.
Depending on the above method, different types of tax accounting are applied. For an entrepreneur, there are 2 regimes available:
simplified regime (Simplificado);
organized accounting (Contabilidade Organizada). For a company is used organized accounting.
Under Simplified regime, only a portion of income is subject to IRS tax. This portion depends on your activity:
15% of the income - sale of goods and products
75% of the income - provision of services
35% of the income - general services
On the first and second years this coefficient will benefit from extra reduction of 75% and 50% respectively, for activities under coefficient of 75% and 35%.
Then there’s VAT tax. If anticipated income is under 14.500€ per year, entrepreneurs will benefit of full exemption of VAT.
Social Security payments.
On the first 12 months after opening an activity, entrepreneurs have full exemption of social security. After this, social security will be based on the income and can be reduced from 21.4% to approximately:
11% on services
3% on goods.
But there’s a catch. Under Simplified regime all remaining revenue which is received by entrepreneur is considered taxable. This is highly unprofitable for a business with high degree of expenses and pass through costs.
A few people know that an Entrepreneur can also benefit from income minus expenses tax regime and exempt all the costs related to his business operations with no limitation of coefficient by implementing Organized accounting regime. With this option you can save a lot of money on opening a company. However this regime requires an entrepreneur to have a certified accountant. Opening a company in Portugal, as opposed to being a sole proprietor, always requires to have an Organized accounting and certified accountant.
Being a certified company, Kilobanan can support any of the above tax regimes and will help you choose the regime with lowest possible tax burden on your business, but still within Portugal legislation and 0 risks involved. Book an online consultation with 20% discount using promo code KILOBLOG with one of our specialists to discover options which are available to you.