IRS
Imposto sobre o Rendimento das Pessoas Singulares · Personal Income Tax
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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.
IRS is the acronym you'll see on every tax document, portal screen, and accounting conversation in Portugal. It stands for Imposto sobre o Rendimento das Pessoas Singulares, the tax on individual income. If you earn money as a person (not a company), IRS is the tax that applies.
How it works for solo entrepreneurs
As a trabalhador independente, your freelance income falls under Category B of the IRS code. When you file your annual return, you report all the income you received during the previous calendar year.
If you're on the simplified regime (and most solo entrepreneurs are) you don't deduct individual expenses. Instead, the tax authority applies a coefficient to your gross income:
- 75% of services income is considered taxable
- 15% of goods sales income is considered taxable
The remaining percentage is assumed to cover your business costs. This is a simplification that eliminates the need for organized bookkeeping, though it means you can't deduct more than the coefficient allows.
Progressive brackets
IRS is a progressive tax. The rates start at 14.5% for the lowest income band and climb to 48% for the highest. Each band only applies to the income within its range, crossing into a higher bracket doesn't increase the rate on your lower earnings.
Cash-basis timing
On the simplified regime, income is recognized when you receive payment, not when you invoice. This is cash-basis accounting. A Recibo Verde issued in December for a payment received in December belongs to that year's IRS. An invoice sent in December but paid in January belongs to next year's.
Withholding tax: paying IRS in advance
If your clients are Portuguese businesses, they typically withhold a percentage of each payment as retencao na fonte (withholding tax). This is an advance payment of your IRS, not an extra tax. When you file your annual return, all withholdings are credited against your total IRS liability. If the withholdings exceed what you owe, you get a refund.
The annual cycle
The IRS year runs January to December. You file your return between April and June of the following year through the Portal das Financas. The tax authority pre-fills much of it based on the invoices and receipts already in the system. Review, confirm, and submit.
Frequently asked questions
What is IRS?
IRS stands for Imposto sobre o Rendimento das Pessoas Singulares, Portugal's personal income tax. It applies to all individual income, including employment wages, freelance earnings, rental income, and capital gains. Solo entrepreneurs declare their business income as Category B on the annual IRS return.
When do I file my IRS return?
You file between April and June each year for the previous calendar year's income. For example, income earned in 2025 is declared in spring 2026. The tax authority (Autoridade Tributaria) pre-fills parts of the return, but you must review and confirm the details.
How is taxable income calculated on the simplified regime?
On the simplified regime (regime simplificado), the tax authority applies a coefficient to your gross income. For services, only 75% of your revenue counts as taxable income. For goods sales, it's just 15%. This coefficient replaces the need to track and deduct individual business expenses for IRS purposes.
What are the IRS tax brackets?
IRS uses progressive brackets ranging from 14.5% on the lowest band to 48% on income above the highest threshold. Only the income within each band is taxed at that band's rate, earning more doesn't retroactively increase the tax on your lower income.
Does IRS use cash-basis or accrual accounting for freelancers?
On the simplified regime, IRS is cash-basis. Income counts in the year you receive payment, not when you issue the invoice. If you invoice a client in December but receive payment in January, that income belongs to the following tax year.
Related terms
The English name for IRS (Imposto sobre o Rendimento das Pessoas Singulares): the annual tax on individual income in Portugal, including freelance and self-employment earnings.
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.
Retenção na FonteWithholding TaxIncome tax withheld at the source by Portuguese businesses when they pay a solo entrepreneur for services, the client keeps a percentage (23% standard since 2025) and sends it directly to the tax authority.
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.