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Social Security – Self-employed individuals contributions regime

10/01/18

In brief

It was published the Decree-Law nr. 02/2018 of 9 January, that makes several changes to the social security regime applicable to self-employed individuals (self-employees). 


In detail

These changes produce effects as from 1 January 2019, with exception to the changes regarding the contracting entities concept and corresponding contribution rates, duly identified below:

Contracting entities
  • Companies or individuals with entrepreneurial activity that, during the civil year, benefit from more than 50% of the total activity rendered by a self-employee, qualify as contracting entities. Prior to the entrance in force of the Decree-Law nr. 02/2018, companies or individuals with entrepreneurial activity only qualified as contracting entities in situations where the economic dependence of the self-employee in relation to that entities was higher than 80%. This measure produces effects as from 1 January 2018.
  • The contracting entities are subject to a contribution rate of 10% when the economic dependence of the self-employee is higher than 80% and 7% if the economic dependence varies between 50% and 80%. The sole contribution rate of 5% ceases to exist. This measure produces effects as from 1 January 2018.
Contributing rates
  • Self-employees individuals are subject to a contribution rate of 21.4% (instead of the previous contribution rate of 29.6%).
  • Self-employed entrepreneurs and holders of a permanent establishment with limited liability and their spouses are subject to a new contribution rate of 25.2% (instead of the previous rate of 34.75%).
First enrollment
  • In the first enrollment in the regime, the effects of the regime only enter into force on the first day of the twelfth month after the start of the activity.
  • Therefore, the level of income of the self-employee is no longer relevant and it ceases the possibility of the first enrollment in the regime occur on the first day of November of the year following the year in which the activity started, if the start of the activity occurred before September.
Deadline for the payment of the contributions

The contributions are paid on a monthly basis between the 10th and 20th day of the month following the month to which the income refers to.

The previous rule did not foresee a start date for the payment of the contributions, and the payment was due up the 20th day of the following month.

Reporting obligations

The new regime establishes a new quarterly reporting obligation for self-employees, where they should report their self-employment income until the last day of April, July, October and January.

Contribution basis
  • It ceases to exist a notional contribution basis (linked to IAS – Index of Social Support). The monthly contribution basis now corresponds to 1/3 of the relevant remuneration determined in each reporting period and produces effects in that month and in the following two months. The contribution basis will no longer be determined in October of each year.
  • The monthly contribution basis is limited to 12 times the IAS.
  • Should the self-employee not obtain any income or the amount of contributions are lower than EUR 20, the contribution amount corresponds to EUR 20. However, if this situation remains applicable to the self-employee, he/she will be exempt in the following years.
  • For the determination of the relevant remuneration of the self-employee, it is considered the income received in the three months previously to the reporting month. The relevant remuneration corresponds to 70% of the amount of services rendered and to 20% of the income related to the production and sales of products. 
  • At the time of the quarter reporting, the self-employee may opt for an income 25% higher or lower from the reported income, without prejudice to the limits established by law to determine the contributions basis. However, this option must be made in intervals of 5%.
  • From the start of the enrollment in the regime or from the restart of the activity up to the first quarterly report, the contribution amount corresponds to EUR 20.
Exemptions

Up to now, individuals that accumulate self-employment activity with employment activity, were exempt from contributing, provided the conditions foreseen in the law were meet.

However,  with the entrance in force of the Decree-Law nr. 02/2018, the exemption is only applicable regarding monthly average relevant remuneration (calculated on a quarterly basis) lower than 4 times the IAS. If this income is higher than 4 times the IAS , the self-employees should contribute on the remaining income.

Therefore, it is introduced a limit to the relevant remuneration for exemption purposes, in case of accumulation of activity.

Remuneration registration - Social security benefits

The contribution basis of self-employees with monthly average relevant remuneration (calculated on a quarterly basis) higher than 4 times the IAS and that accumulate self-employment activity with employment activity, are only considered for disability, old-age and death benefits purposes.




© 
2017 PwC. This communication is of an informative nature and intended for general purposes only. It does not address any particular person or entity nor does it relate to any specific situation or circumstance. PricewaterhouseCoopers & Associados – Sociedade de Revisores Oficiais de Contas, Lda. We will not accept any responsibility arising from reliance on information hereby transmitted, which is not intended to be a substitute for specific professional business advice.
 

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