If you are self-employed in Portugal, it is important to understand how you can deduct your expenses with the IRS to reduce the tax base and, consequently, the tax payable. The rules for deductions vary depending on the tax regime you choose: simplified regime or organized accounting regime. In this article, we will detail the deductions allowed under each regime.
1. Simplified Regime
Under the simplified regime, expenses are deducted automatically, without the need to present proof. Instead of deducting specific expenses, a fixed percentage is applied to gross income to determine net taxable income.
Automatic Deduction: Typically, 75% of gross income is considered an expense, and only 25% of income is taxable.
Exceptions: Some activities, such as health professionals and educators, have a different percentage, with 35% of gross income being taxed.
In the simplified regime, simplicity is the biggest advantage, as it is not necessary to justify most expenses. However, you should bear in mind that for some specific expenses, such as mandatory contributions to social protection schemes, it is necessary to keep receipts.
2. Organized Accounting Regime
Under the organized accounting regime, self-employed workers can deduct real expenses, as long as they are necessary and directly related to their professional activity. This regime allows for more detailed management of finances and potentially greater tax savings, especially if you have a lot of expenses.
Deductible Expenses:
Personnel Expenses: Include salaries, Social Security contributions and other expenses related to workers.
Expenses for Acquisition of Goods and Services: Materials, contracted services, rentals, among other goods and services necessary to carry out the activity.
Travel and Lodging Expenses: Work-related transportation, food and lodging costs.
Amortization and Depreciation: Expenses related to the devaluation of assets such as equipment, vehicles and properties.
Rents: Payment of rent for properties used in professional activity.
Contributions to Social Protection Schemes: Mandatory contributions to Social Security and insurance required by law.
Communication Expenses: Costs with telecommunications, internet and postal services related to the activity.
Percentages and Limits:
General Expenses: In the organized accounting regime, you can deduct all expenses necessary to carry out the activity, as long as they are duly proven.
Amortizations: Amortization rates vary according to the type of asset. For example, computers have a 25% amortization rate, while real estate has a 10% rate.
Which Regime to Choose?
The choice between the simplified regime and organized accounting must be made based on the nature of your activity and the volume of expenses you have. The simplified regime is ideal for those who have few expenses and seek simplicity. The organized accounting regime can be more advantageous for those who have many deductible expenses, allowing greater tax savings.
Conclusion
Understanding the expenses you can deduct as a self-employed person is essential to optimizing your tax situation. If you opt for the simplified regime, you will benefit from an automatic deduction, but if you have many expenses, the organized accounting regime may be more advantageous. In any case, it is crucial to keep all receipts and ensure that expenses are properly documented to be accepted by the tax authorities.
For more information about which regime is most appropriate for your case, consider consulting an accountant or accessing the Finance Portal.
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