Freelancing in Portugal: Tax Mistakes, Activity Regimes & NHR

Planning to work as a freelancer in Portugal? Discover the biggest freelancing mistakes, tax paradoxes, how to choose the right activity regime, and why expert guidance from INLIS Consulting is essential to avoid penalties and save thousands in taxes.

Why Freelancing in Portugal Is Booming (and Risky)

Portugal has become one of Europe’s top destinations for digital nomads, consultants, designers, IT professionals, and creatives. With attractive tax benefits such as the Non-Habitual Resident (NHR) regime and flexible remote work culture, freelancing seems like the perfect option.

However, most freelancers make critical mistakes in their first year, which can lead to unexpected tax bills, fines, or even legal issues. The Portuguese tax system is full of paradoxes; what appears simple on the surface becomes complex once you start issuing “recibos verdes” (green receipts) and declaring income.

This blog will give you a real, in-depth understanding of:

• The most common mistakes freelancers make

• The paradoxes that affect your tax rate and income

• How to choose the correct activity regime (CAE/IRS Code + Tax Regime)

• How INLIS Consulting can help you avoid financial losses and stay compliant

Part 1: The Most Common Freelancing Mistakes in Portugal

Mistake 1: Registering with the Wrong Activity Code

Many freelancers choose a generic CAE code without understanding that each code has its own taxation percentage.

Type of Activity	Taxable Percentage (Simplified Regime)
Professional/Intellectual Services (e.g. Designers, IT, Consultants)	75% of income is taxable
Commercial Activities (e.g. Selling Products)	100% taxable
Agricultural Activities	15% taxable

Why this matters: Choosing the wrong code can instantly increase your taxable income—even if your earnings stay the same.

Mistake 2: Picking the Wrong Tax Regime

Portugal offers two main regimes:

Regime	Income Level	Tax Method	Best For
Simplified Regime	Under €200,000/year	Taxes based on a fixed percentage of revenue	Freelancers with low expenses
Organized Accounting	Mandatory if above €200,000 or voluntary	Taxes calculated on actual profits (after deducting expenses)	High-income earners or those with large deductible costs

👉 Choosing the wrong regime could mean paying thousands more in taxes every year.

Mistake 3: Misunderstanding Social Security (Segurança Social)

New freelancers receive a 12-month exemption, which many misinterpret as “free year.” However, you are still required to register and will automatically begin contributions in year two.

• Standard social security rate: 21.4% of income

• Failure to register → penalties

Mistake 4: Believing the NHR Regime Exempts Everything

The NHR regime does not automatically exempt all foreign income. Depending on your double taxation treaty and activity classification, you may still owe tax in Portugal.

Mistake 5: Not Keeping Proper Invoices and Expense Records

Freelancers often underestimate the importance of documentation in Portugal. The tax authorities frequently audit independent workers.

Part 2: The Surprising Paradoxes of Freelancing in Portugal

Paradox	Explanation
Tax Incentives vs. Complex Bureaucracy	Portugal promotes tax-friendly regimes but imposes strict compliance, audits, and deadlines.
Freelancer Freedom vs. Financial Responsibility	You control your work hours, but you're responsible for tax filings, VAT, and social security.
Global Income vs. Local Compliance	You can earn from anywhere, but every euro must be declared to Portuguese authorities under your chosen regime.
Simplified Regime vs. Long-Term Tax Optimization	Initially attractive but not beneficial if your expenses are high or if you plan to scale.

Part 3: Understanding Freelancer Activity Regimes in Portugal

When registering as a freelancer, you must make two key decisions:

1. Choose Your Activity Classification (CAE / IRS Code)

Examples of common freelancer codes:

• CAE 74100 – Design & Creative Services

• CAE 62090 – Web Development & IT Consulting

• CAE 70220 – Marketing & Business Consulting

• Liberal Professions Code (IRS Code 1519) – Technical or Scientific Professionals

2. Select Your Tax Regime

• Simplified Regime (Regime Simplificado) – Easy setup, limited deductions

• Organized Accounting (Contabilidade Organizada) – Requires a certified accountant but offers tax deductions

Why Choosing the Right Regime Is Crucial

• Impacts how much of your income is taxed

• Determines your eligibility for NHR benefits

• Influences future EU compliance if you apply for visas, grants, or residency renewals

• Improper registration can lead to heavy fines and audits

INLIS Consulting specializes in helping freelancers choose the correct regime specific to their income type, nationality, and tax strategy.

Real Example: Tax Impact Based on Activity Choice

Income	Regime	Taxable Income	Estimated Tax
€40,000	Simplified (Professional Activity)	€30,000 (75%)	~€6,000
€40,000	Organized Accounting	€18,000 (after deductions)	~€3,000

Savings: Over €3,000 per year simply by choosing the right regime and activity code!

How INLIS Consulting Helps Freelancers Succeed in Portugal

Services Specifically for Freelancers:

Registering your freelancer activity correctly

Choosing the optimal tax regime (Simplified vs Organized)

Applying and managing NHR status

Issuing Recibos Verdes and invoicing correctly

Tax returns, VAT, and social security management

International income tax planning (EU, UK, US clients)

INLIS Consulting is the only firm in Portugal specializing in helping expat freelancers go from confusion to compliance while maximizing tax benefits.

Book a Consultation with INLIS Consulting

Learn how we help freelancers register and save taxes

Don’t Risk Your Freelance Career in Portugal

Most freelancers don’t realize they made a mistake until they get a letter from Finanças demanding payment or an audit. Don’t wait for that moment.

• Get professionally registered

• Avoid penalties and over-taxation

• Optimize your financial future in Portugal

Speak to a tax consultant at INLIS Consulting today. Email: geral@inlis.pt | 📞 WhatsApp: +351 968 464 906🌐 Visit: www.inlis.pt

Freelancing in Portugal can be one of the best lifestyle and career decisions you ever make, but only if you set things up correctly from the start. Choosing the right activity regime and tax structure is not just a formality; it directly impacts your income, legal compliance, and long-term financial success.

With the right guidance from INLIS Consulting, you can avoid mistakes, reduce your taxes, and enjoy the true benefits of being a freelancer in Portugal.