The Simplified IRS Regime is a tax framework for self-employed workers in Portugal, designed to simplify the calculation of tax for professionals who carry out activities on their own account. This regime offers several advantages, including specific benefits for those who are starting to work, such as Social Security exemptions and significant discounts on IRS taxable income in the first two years.
Special Benefits in the First Years of Activity
Exemption from Social Security in the First Year In the first year of activity, self-employed workers are exempt from paying Social Security contributions. This exemption applies during the first 12 months, allowing greater financial flexibility at the beginning of the activity.
Discounts on Taxable Income for IRS Purposes During the first two years of activity, self-employed workers benefit from progressive discounts on taxable income: First year: 50% discount on taxable income.
Second year: 25% discount on taxable income.
These discounts are applied automatically and significantly reduce the tax burden in the initial years, giving more financial space to consolidate the business.
General Operation of Simples Nacional
The calculation of taxable income in Simples Nacional is based on an assumed percentage of annual gross income, adjusted with the applicable discounts for the first two years of activity. The percentages vary according to the worker’s economic activity: Presumed Percentages of Taxable Income 75% of gross income for the provision of services and liberal activities.
15% for agricultural, forestry or livestock production activities.
4% for subsidies or support related to agricultural activities.
35% for activities involving the sale of goods or products (commercial activities).
The remaining amounts are considered automatically deductible expenses, without the need for proof.
Practical Example with First Year Benefits
Annual Gross Revenue: R$ 30,000 Activity: Provision of Services (assumed percentage: 75%) First Year (50% Discount): Calculation of Presumed Income: R$ 30,000 x 75% = R$ 22,500 Application of the 50% Discount: R$ 22,500 x 50% = R$ 11,250 Final Taxable Income: The tax will be calculated on €250, instead of €22,500, generating a significant reduction in the IRS to be paid.
In the second year, the discount applied will be 25%, resulting in a taxable income of R$16,875 (75% of the original presumed income minus 25%).
Advantages of Simples Nacional Exemption
from Social Security at Start-up Financial relief in the first year of activity.
IRS Discounts in the First Years Reduction of the tax burden at crucial moments of business growth.
Simplified Management It is not necessary to justify all expenses.
Reduced Administrative Cost There is no need to hire an Official Accounting Technician (TOC).
Tax Obligations
Green Receipts and Invoices It is mandatory to issue green receipts or invoices through the Tax Portal for each service provided.
Annual Income Tax Declaration Income must be reported in Annex B of the Income Tax declaration.
VAT (if applicable) If annual income exceeds €15,000, VAT must be charged and remitted.
Conclusion
The Simplified INSS is ideal for self-employed workers looking to start their activity with fewer tax and administrative burdens. The benefits in the first two years of activity, such as exemption from Social Security and discounts on taxable income, make it particularly attractive for those just starting out.
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