Freelancer Tax in Portugal: Category B Explained

Category B covers all self-employment and freelance income in Portugal (recibos verdes). Unlike employment income (Category A), there's no employer withholding your tax automatically — you're responsible for declaring and paying. The taxable amount is not your gross income but a portion of it, determined by a coefficient that depends on your activity type.

Simplified regime (regime simplificado) applies automatically if your gross income is under €200,000/year. Tax is calculated on a percentage of gross income using fixed coefficients — no need to track actual expenses. Organized accounting (contabilidade organizada) is mandatory above €200,000 and optional below. It taxes actual profit (revenue minus real expenses) and requires a certified accountant (TOC).

The most common coefficient for services (IT, consulting, design, etc.) is 0.75 — meaning 75% of your gross income is taxable. This taxable amount is then added to other income and taxed at the normal progressive rates (13–48%). Example: €50,000 gross × 0.75 = €37,500 taxable base from Category B.

Freelancers in Portugal pay social security contributions (SS) at 21.4% of their declared income base. The base is calculated quarterly based on 1/3 of the last 3 months' invoiced income × a coefficient. New freelancers are exempt from SS for the first 12 months. SS contributions are deductible from your IRS taxable base.

Under the simplified regime, you cannot deduct actual business expenses — the coefficient already accounts for a notional expense allowance. However, you can still deduct: social security contributions paid; general personal deductions (health, education, rent); and if your activity qualifies under NHR/IFICI, different tax treatment applies.

If your clients are Portuguese companies, they withhold 25% of your invoice as advance IRS payment (retenção na fonte). This is credited against your final tax bill when you file. If most clients are foreign, you may need to make voluntary advance payments (pagamentos por conta) to avoid a large bill at filing time.