Categoria B
Category B: Business and Professional Income
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The IRS income category for self-employment income in Portugal. Covers freelancers, sole traders, and independent professionals. Declared in Anexo B of the Modelo 3 IRS return.
In Portugal's IRS system, your income is sorted into categories depending on how you earned it. If you're a freelancer, independent contractor, or solo entrepreneur issuing Recibos Verdes, your income is Categoria B.
This is the category for business and professional activities, everything from consulting and design to translating, programming, or selling goods as a sole trader.
What falls under Categoria B
- Professional services (consulting, freelance work, creative services)
- Sole trader business activities (goods sales, artisan production, dropshipping)
- Rental from commercial properties (residential rental is Categoria F)
- Royalties and intellectual property income (in some cases)
- Agricultural, forestry, and fishing activities
Most expat freelancers in Portugal are dealing with professional services, their Categoria B income is service income declared in Anexo B, under the simplified regime.
Categoria A vs Categoria B: the key difference
Categoria A is employment income. You have an employer, a contract, a monthly payslip. The employer withholds your income tax and Social Security contributions. At tax time, your Categoria A income is largely pre-filled by the employer's declarations.
Categoria B is different. You're responsible for your own invoicing, VAT, Social Security contributions, and tax declarations. The simplified regime handles most of the calculation automatically, but the administrative responsibility is yours.
How Categoria B is taxed on the simplified regime
Under the simplified regime, a deduction coefficient is applied to your gross income before tax rates kick in. For professional services (the type most freelancers provide), 75% of gross income is the taxable base, meaning 25% is automatically considered costs.
If you earned €50,000 in services in 2025, your taxable income is €37,500 (75% × €50,000). Progressive IRS rates then apply to that €37,500.
For goods sales, the coefficient is different (the taxable base is a higher percentage of gross turnover). For most expat freelancers providing services, it's the 75% rule.
Where it shows up in your IRS return
Categoria B income is declared in Anexo B of the Modelo 3 IRS return. The Portal das Finanças pre-fills the amounts from your AT-registered invoices. Your job is to review the pre-filled values, add any foreign-source income that wasn't captured automatically, and check that your Social Security contributions and withholding tax are correctly entered.
If you have both employment income and self-employment income in the same year, you file both Anexo A (Categoria A) and Anexo B (Categoria B) in the same Modelo 3.
Frequently asked questions
What is Categoria B income?
Categoria B is the Portuguese IRS income category for self-employment income, freelancers, independent contractors, sole traders, and other business activities. If you issue Recibos Verdes or run your own activity, your income is Category B. It's declared in Anexo B of the Modelo 3 IRS return.
What's the difference between Categoria A and Categoria B?
Categoria A is employment income from a job with an employer. Categoria B is self-employment income from running your own activity. An employee with a contract is Categoria A. A freelancer issuing Recibos Verdes is Categoria B. Some people have both. They declare each in the relevant annex of Modelo 3.
How is Categoria B income taxed under the simplified regime?
Under the simplified regime, 75% of gross professional service income is treated as taxable (a 25% deemed costs deduction). So if you earned €40,000, €30,000 is your taxable income. This taxable amount is then subject to standard progressive IRS rates (unless you have NHR or IRS Jovem status).
Can I have Categoria A and Categoria B income in the same year?
Yes. Many freelancers also have part-time employment. Both are declared in the same Modelo 3, employment income in Anexo A, self-employment income in Anexo B. The combined income determines your total IRS liability.
Related terms
Portugal's personal income tax: the annual tax that solo entrepreneurs pay on their individual income, declared each spring for the previous year's earnings.
Anexo BAnnex B: Self-Employment Income (Simplified Regime)The IRS annex where solo entrepreneurs on the simplified regime declare their self-employment income (Category B). Contains your gross revenue, withholding tax, and activity codes.
Regime SimplificadoRegime Simplificado de Tributação · Simplified Tax RegimePortugal's simplified tax regime for solo entrepreneurs and small businesses, where taxable income is calculated using fixed coefficients applied to gross revenue.
Recibo VerdeGreen ReceiptA combined invoice-receipt (fatura-recibo) issued by solo entrepreneurs in Portugal through the Portal das Finanças when they receive payment for services.
Trabalhador IndependenteSelf-Employed WorkerThe Portuguese term for an independent worker or sole entrepreneur, the equivalent of a freelancer or sole trader in other countries.