Recibos Verdes Explained: How Freelance Tax Works in Portugal

• Tax and Social Security are calculated completely separately, on different schedules — annual IRS vs quarterly SS.
• Regime Simplificado taxes a coefficient (0.15-0.95) of your revenue, not the raw total.
• For services, Social Security normally applies 21.4% to 70% of quarterly income; its first-year deferral is based on when you opened activity, not on a €5,030 income test.
• Mandatory switch to Contabilidade Organizada after more than €200,000 in two consecutive years or more than €250,000 in one year.

If you invoice clients as a freelancer or sole trader in Portugal, you're taxed under Categoria B of the IRS — colloquially, issuing "recibos verdes" (green receipts, from the paper receipt books this used to run on; it's all electronic now, via e-Fatura). Two separate systems take a cut: the Autoridade Tributária (income tax) and Segurança Social (social contributions) — and they're calculated completely differently. Some freelancers hand the filing to an app; a comparison of one such app with Finkavo is inFinkavo vs FIZ.

How the tax side works: Regime Simplificado

Most freelancers start in Regime Simplificado when their annual Category B income is no more than €200,000 and they have not opted into organised accounting. The regime ends after income exceeds €200,000 in two consecutive years or exceeds €250,000 once. Instead of taxing real profit, it applies a fixed coefficient to gross revenue: The activity you declare when you open atividade feeds these coefficients, as ourCAE codes guide explains.

For the 0.75 and 0.35 coefficients, the law checks whether 15% of gross service income is covered by the 2026 specific-deduction amount of €4,587.09 (8.54× IAS), or higher compulsory Social Security contributions, plus qualifying activity expenses. Any positive shortfall is added to taxable income. Staff costs, business-related rent and other categories listed in article 31 can count, but each item must be correctly classified and documented.

Worked example: a consultant (0.75 coefficient) billing €40,000 starts with €30,000 of coefficient-based income. The 15% check is €6,000. The 2026 automatic amount covers €4,587.09, leaving €1,412.91 to cover with any higher compulsory contributions and qualifying documented expenses. If nothing else qualifies, that shortfall is added to the taxable amount.

When you move to organised accounting

The switch to Contabilidade Organizada becomes mandatory for the following tax year after gross Category B income exceeds €200,000 in two consecutive years, or exceeds €250,000 in a single year.

How the Social Security side works

This side runs on its own calendar: you report the quarter just ended in the quarterly Segurança Social declaration, while the tax above is settled once a year in your Modelo 3 IRS return. How the monthly figure is worked out, and when it differs, is in our guide tohow contributions are calculated.

This is calculated completely separately from your tax bill, on a quarterly cycle rather than annually. In the ordinary services case, your contribution is 21.4% of your "relevant income" — which is normally 70% of the service income received in the quarter, not the full amount.

• The quarterly declaration is due by the last day of January, April, July and October and covers the previous three months. Monthly contributions are then paid separately between the 10th and 20th of the following month.
• When there is no relevant income, or the calculated monthly contribution is below it, the minimum contribution is €20.
• Maximum contribution base: 12× IAS per month.
• On a first start of self-employed activity, compulsory coverage normally begins on the first day of the 12th month after activity begins. This timing is not conditional on annual income staying under €5,030, and you may opt to start contributing earlier.

How the contribution is actually calculated

For ordinary service income, the 21.4%-of-70% shorthand is right, but the mechanics matter once income is very low or very high because the floor and ceiling are monthly. Each quarter you declare the income received in the previous three months; 70% is relevant income for services, while 20% applies to production and sale of goods and to hotel or similar, restaurant and beverage services declared as such. One third of the quarterly relevant income becomes the monthly contribution base, and the applicable rate is charged on that base.

Worked through: €12,000 invoiced in a quarter gives €8,400 of relevant income, a monthly base of €2,800, and €599.20 a month — €1,797.60 for the quarter. That is the same answer as 21.4% × 70% × €12,000, which is why the shorthand works.

• Monthly base ceiling: 12× IAS, €6,445.56 in 2026 — so the contribution tops out around €1,379 a month no matter how much you bill.
• When submitting the quarterly declaration, eligible workers may opt to adjust the resulting relevant income up or down in 5% steps, to a maximum of ±25% (art. 164.º CRC), subject to the statutory limits.
• Review the amounts, submit the declaration in Segurança Social Direta and retain the submission receipt. Since June 2026, that receipt can be downloaded from the declaration-history area.

The rate isn't always 21.4%

The standard worker rate is 21.4%. A 25.2% rate applies to individual entrepreneurs and holders of individual limited-liability establishments covered by that category. Concentrating invoices in one client does not raise the worker's rate to 28.3%.

Economic dependence can instead create a separate contribution for the contracting entity: 7% when it accounts for more than 50% and up to 80% of the worker's activity, and 10% when it accounts for more than 80%. That client-side contribution does not replace the worker's own contribution.

The initial coverage deferral has trade-offs

On a first start, compulsory coverage normally begins on the first day of the 12th month after the activity begins. Because contributions are not due under this regime before coverage takes effect, do not assume that period builds a contribution record for benefits or pension purposes. Eligibility for each benefit has its own qualifying-period rules.

You may request earlier coverage during a quarterly declaration window; it takes effect on the first day of the following month. Consider the cash-flow and social-protection consequences for your own circumstances before choosing it.

If you also have a job

Employment and self-employment contributions are cumulative by default, on separate bases. A simultaneous-employment exemption may apply only when the statutory conditions are met together: the employment coverage must include the required protections, the employer and freelance clients must be independent of one another, average employment pay must be at least 1× IAS (€537.13 in 2026), and average monthly relevant self-employed income must stay below 4× IAS (€2,148.52 in 2026). Check the status shown in Segurança Social Direta rather than assuming salary alone creates the exemption.

What your clients withhold, and when they stop

Separate from all of the above, a Portuguese client that has or must have organised accounts generally withholds IRS when article 101 requires it: 23% for professional activities on the article 151 table, 11.5% for specified other Category B income, and 16.5% for the income listed in article 3(1)(c), including intellectual-property income in the circumstances covered there. Article 101-B offers an optional exemption for eligible Category B income when expected annual income is below €15,000, but not for contract-intermediation commissions. The option is unavailable if the prior year's income reached the limit and ceases in the month after the limit is reached. If your client is abroad, IVA works differently, and theforeign clients and VAT guidecovers when a recibo carries no IVA.

What the contributions actually buy

Unlike IRS, Social Security contributions fund social-protection entitlements, including sickness, parental and old-age protection, each subject to its own legal conditions and contribution record. A cessation-of-activity benefit also exists for economically dependent self-employed workers after involuntary termination of a service contract, but eligibility has separate statutory tests; check the current Segurança Social guide for your facts rather than inferring entitlement from client concentration alone.

Putting the two together

A useful way to think about the ordinary services case: the AT starts from a statutory coefficient, while Segurança Social generally applies 21.4% to a monthly base derived from 70% of quarterly service income. The two systems run on different calendars — annual for IRS and quarterly for Social Security — and each obligation must be met separately.