Why Freelancing Beats NHR 2.0 for Most in Portugal

INLIS Consulting
Sep 16
3 min read

Discover why Portugal’s little-known Freelancer Regime can offer greater tax efficiency than the new NHR (IFICI) regime in 2025, and what it means for expats and professionals.

Many expats moving to Portugal ask us about the NHR 2.0 (IFICI) regime (we’ll simply call it NHR 2.0 from here). It’s widely marketed, heavily discussed, and often seen as the ultimate tax solution for newcomers.

But the reality is that, for most people, registering as a freelancer in Portugal is actually more tax-efficient, at least during the first two years.

In this article, INLIS Consulting breaks down the trade-offs between freelancing in Portugal and NHR 2.0, so you can make an informed decision about your best tax setup. We’ll clear up common misconceptions and simplify how Portugal’s tax system works for expats.

TL;DR

If you earn under €100,000 per year, freelancing is usually more tax-efficient in the first two years.
Between €100,000 and €130,000, things get tricky—professional tax advice is essential.
If you earn well above €100,000, NHR 2.0 quickly becomes more favorable—especially in the long term.
NHR 2.0 also offers major benefits on foreign-sourced income such as dividends, interest, and capital gains.

The Freelancer Regime in Portugal

The freelancer regime is simple:

No need to set up a company.
Register as self-employed with the tax office.
You’ll need a NIF (tax number) and a Portuguese bank account.
Responsible for annual IRS returns, VAT filings, and social security.

At INLIS Consulting, we guide expats through the entire setup and manage compliance so you can focus on your work.

Freelancer Tax Examples

Below are simplified calculations (assuming 15% deductible expenses).

If You’re Under 35 (IRS Jovem benefit)

Annual Income	Year 1	Year 2	Year 3
€50,000	€0 tax (0%)	€1,500 + €5,625 SS (14.25%)	€2,422 + €5,625 SS (16.13%)
€75,000	€0 tax (0%)	€3,652 + €8,437 SS (16.12%)	€9,742 + €8,437 SS (24.24%)
€100,000	€2,264 tax (2.26%)	€9,739 + €11,250 SS (20.99%)	€16,737 + €11,250 SS (27.99%)

If You’re 35 or Older

Annual Income	Year 1	Year 2	Year 3
€50,000	€3,220 tax (6.44%)	€5,971 + €5,625 SS (23.19%)	€9,289 + €5,625 SS (29.82%)
€75,000	€5,971 tax (7.96%)	€10,998 + €8,437 SS (25.91%)	€17,284 + €8,437 SS (34.3%)
€100,000	€9,289 tax (9.29%)	€17,284 + €11,250 SS (28.53%)	€25,722 + €11,250 SS (36.97%)

NHR 2.0 (IFICI) Regime

The NHR 2.0 regime is built around skilled professionals who register a Portuguese company and employ themselves.

Key Features:

Must qualify under the list of skilled professions.
Flat 20% income tax on company profits.
Social security contributions apply to salary (~€2,000/year).
Benefits last 10 years with no tapering.

Example: €100,000 Income Under NHR 2.0

Gross Income	Expenses (15%)	Taxable Base	Profit After Salary	Tax (20%)	Social Security	Effective Rate
€100,000	€15,000	€85,000	€83,000	€16,600	~€2,000	~19%

Freelancer vs. NHR 2.0

Here’s how they stack up at €100,000 annual income:

Scenario	Year 1	Year 2	Year 3	Long-Term (10 years)
Freelancer (Under 35)	2%	21%	28%	Increasing each year
Freelancer (35+)	9%	29%	37%	Increasing each year
NHR 2.0	~19%	~19%	~19%	Stable 19% for 10 years

The “Big Benefits” of NHR 2.0

NHR 2.0’s real power is not just on work income—it’s on foreign-sourced income, which can be tax-free for 10 years.

This includes:

Dividends from overseas companies.
Interest from bank accounts or investments.
Profits from selling businesses.
Capital gains from shares, equities, or crypto.

For expats with international income streams, these exemptions can save far more than the difference in income tax rates.

Which Option Should You Choose?

Freelancer regime: Ideal if you’re starting out, earn under €100,000, or want the simplest setup.
NHR 2.0: Better if you earn significantly more, want tax stability for 10 years, or have substantial overseas income.
Income between €100,000 and €130,000 falls into a “murky zone” where the best option depends on your exact situation—professional advice is essential.