Ask HN: Working remotely in Portugal for an Irish company
Hi,
the Irish company I am working for offered me to work remotely.
I have heard that in Portugal it is possible to have a very good tax rate 20% with the NHR system.
I am a software engineer (Data Scientist).
How does the system work? Would I pay 20% on my gross salary?
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Spain, Greece, Malta and few other countries have similar programs.
Then, you'll have a few options. If the remote company has no Portuguese subsidiary, you'll have to operate as an independent contractor (trabalhador independente) or as a one person company (sociedade unipessoal). It's basically the same, except as a company you must have an accountant. As an independent contractor you may have an accountant, or you may choose a simplified accounting model where you don't declare expenses, and your profit margin is estimated by the fiscal authority.
Income tax is progressive. You should be able to read the brackets here: https://economiafinancas.com/2017/escaloes-irs-2018/
You declare your income in May, and pay income tax in July/August.
Social security is a fixed rate: 29.6%. It is a mandatory retirement savings, and provides disability income should you require it. You pay social security quarterly or monthly.
Access to the national health service is not dependent on any tax or regular payment. You don't need health insurance.
As an independent contractor, you would pay VAT, but cross-border transactions are exempt, so your VAT is probably zero (check this with an accountant; EU's rules on cross border transactions are in flux).
References:
https://www.portaldocidadao.pt/
http://www.portaldasfinancas.gov.pt/
I'm in Catalonia, Spain (for a few more weeks) and do not recommend. I don't know what you are making, but I am also an Autonomo, and I'm being royally fucked on social insurance and taxes. My tax and SI bill for this year will be around 60%, and fuck that. And yes, I have tried different accountants. Essentially, the tax department decided that a lot of my expenses are not allowable, and because I have bank accounts in other EU countries as well as Spain, they decided that I am "probably hiding something" (their words). I can go and spend a lot of money on lawyers, or I can just pack up and leave.
Combined with the bullshit Catalan independence movement and accompanying social and economic instability, generally unfriendly Catalans, terrible quality of food (essentially salt, with a hint of whatever it claims to be on the package), and the "we will bill you whatever the fuck we want, good luck clawing your money back" utilities (literally opened a 400 EUR bill from the phone company 10 minutes ago), I am totally done with this place.
I have lived in many countries, and all places have challenges and ups and downs. This place, however, is the pits.
Spain does the same thing as Portugal, for company workers, where they "hide" part of the social security payment from payment receipts. Companies pay 23.6% and the worker 4.7%. Only the latter appears in the salary receipt, the other is a company expense.
Edit - it's 29.3% of the base mínima de autónomos - which is about 920 euros a month. Now, I honestly have no idea what that actually means, but it means you pay about 270 euros regardless of what you earn (it's a stupid system that benefits the well-off).
To the OP: Did you visit Portugal? Why do you want to move there?
It is not a third-world dump hole but it is a not a first world class country either.
Within the EU you can transfer social security between countries. If he doesn't he will be entitled to retirement income when reaching retirement age. In no condition would he forfeit these payments.
> It is not a third-world dump hole but it is a not a first world class country either.
One of the best health services in Europe, one of the lowest crime rates in the world, lots of english-speaking nationals, and gorgeous weather. You won't find the hubbub of very large cities such as NY, Paris, or London, but then again you might not miss the hubbub. It's definitely first-world.
I'd be interested in hearing what it is that you find in first-world countries that you don't find in Lisbon. Genuine question.
As far as I know, the 20% tax rate only applies to domestically sourced income. Income from Ireland would be exempt from taxation in Portugal if it is taxed in Ireland.
I'm not sure if and how this scheme affects your social security contributions and eligibility for health care and pensions.
If you don't speak Portuguese well enough to really dig into this yourself, I would suggest you get professional advice.
You can apply for it if you have been non-resident in Portugal for more than 5 years, and lasts for 10 years.
It does not apply to Social Security which in Portugal is very high.
It is very critical to structure everything in the right way otherwise you may end paying more tax and Social security than you would in Ireland!
Getting the right advice is critical. I got the wrong advice and it took it years to solve.
I've recently been in a similar situation with a company from Belgium.
What would be the difference?
With European tax law, when you live and work in Portugal, still for any day you work for your Irish employer in their Irish office you have to pay income tax in Ireland (double taxation agreements between the countries). If it's less than 5% of the work days per year it doesn't matter. If you have to go to Ireland for whole weeks for meetings or training you might have to pay taxes in both countries. Well file taxes in both countries for the percentage of working days. Again the double taxation agreements between the countries guarantee that you don't pay taxes twice (or if so you can claim the extra amount back).
As contractor it's easier. You live and work in Portugal and pay local taxes. Of course you need to register as sole trader or single-person company (whatever the equivalent in Portugal is). Any trip to Ireland is simply a business trip. It's both a cost and (ideally) you invoice that to your client (the Irish company). Your salary needs to rise because now as a sole trader you have additional cost (other insurances, slightly different taxes, you have to pay for a computer yourself, you no longer have sick days and no longer get paid for days not working e.g. holiday).
A third option is to find a Portuguese company (e.g. small agency) where you become employee and they send invoices for the Irish company.
The company will likely try to get you to work as a contractor because it's an easier setup. For you it's better to stay an employee, ideally get reimbursed for any trips to Ireland, but you have to deal with filing taxes in both countries.
I got tired of the high taxes charged to small companies around here. Last year alone we got royally charged over 65% of the income for no good reason in DE. With a stable customer base, it has been good (less taxes, less hassle) to work from PT.
My tip is that you also look on other cities besides Lisbon.
On our case we moved into Coimbra. It is directly on the middle way between Porto and Lisbon, between 2~3 hours away from both airports using public transportation (trains/bus have Wifi). Airplanes tickets are costing ~30 GBP for a back and forth trip between PT and Frankfurt through RyanAir.
Housing prices in Coimbra are amazing, I'm renting a full house with 5 bedrooms for ~240 GBP/month. This is an academic city similar to Edinburgh, about 2000 years old with roman buildings still around. All that to say that we get the good stuff without that metropolis pricing of a big city.
Just don't drive a car around here, I have the impression that turning blinkers are not default equipment on these cars.