Here’s how Portugal’s little known Freelancer Regime can be more tax efficient than the new NHR (IFICI) Regime, in 2025.

Many Touchdown customers come to us with a specific ask on the NHR 2.0 (IFICI) regime (we’ll refer to it as the NHR from now on). It’s well known, marketed and explained - and seems to be the talk of the town. However, registering as a Freelancer in Portugal is more tax efficient for most: at least in the first two years.

In this blog, we break down the trade-offs between registering as a freelancer in Portugal and the NHR, and how you can choose the best tax setup for you. We clear up misconceptions and make it incredibly simple to understand how Portugal’s tax system works for expats, and how you can choose the winning setup for you.

What is the Portugal Freelancer Regime - and how does it work?

The freelancer regime is very simple. It’s optimised around income tax, and rewards you opening a freelancer activity in Portugal. Here are the simple requirements:

• You are a Portuguese Tax Resident (Either more than 183 days out of 365 or your primary residence is in Portugal).

• You can work as a freelancer or contractor.

• You generate income on a regular or semi-regular basis.

• You can issue invoices to your clients: they can be individuals or companies.

• Your clients are in Portugal or overseas, it doesn’t matter.

Also, note that:

• You don’t need to open or register a company.

• You register as self-employed with the tax authorities (very easy and fast).

• You need a Portuguese Fiscal Number (NIF) and a bank account.

• You have to file an annual tax return, regular VAT returns and social security contributions (Touchdown has a fully managed service for this).

Most importantly, if you’ve just moved from another country to Portugal (like the UK), and continue to pay your home country income tax, setting up as a Freelancer in Portugal is much more tax efficient. If you’re living in Portugal and plan on staying, you should switch your tax residency to Portugal. Oftentimes, if you’ve been living in Portugal for some months, you can even claim back taxes paid in your home country during this period.

Freelancer Regime: How much tax do I pay?

Well, it depends on your income, and how long you’ve been a freelancer. Here are some simple calculations to help understand the Freelancer Regime. Note, that if you’re under 35, because of a special exemption called IRS Jovem, the tax rates are reduced even further.

You’re under 35 years old:

If you earn €50,000 per year:

• 1st Year: €0.00 taxes (effective tax rate: 0%).

• 2nd Year: €1,500.46 tax + €5,625 in social security (effective tax rate: 14.25%).

• 3rd Year: €2,422.03 + €5,625 in social security (effective tax rate: 16,13%).

If you earn €75,000 per year:

• 1st Year: €0.00 taxes (effective tax rate: 0%).

• 2nd Year: €3,652.21 + €8,437.5  in social security (effective tax rate: 16.12%).

• 3rd Year: €9,741.63  + €8,437.5  in social security (effective tax rate: 24.24%).

If you earn €100,000 per year:

• 1st Year: €2,263,79 (effective tax rate: 2.26%).

• 2nd Year: €9,739.43 + €11,250  in social security (effective tax rate: 20.99%).

• 3rd Year: €16,736.93  + €11,250  in social security (effective tax rate: 27.99%).

You’re 35 or older:

If you earn €50,000 per year:

• 1st Year: €3,219.59 taxes (effective tax rate: 6.44%).

• 2nd Year: €5,970.62 + €5,625 in social security  (effective tax rate: 23.19%).

• 3rd Year: €9,289.36 + €5,625 in social security  (effective tax rate: 29.82 %).

If you earn €75,000 per year:

• 1st Year: €5.970,62 taxes (effective tax rate: 7.96%).

• 2nd Year: €10.997,80 + €8,437.5  in social security (effective tax rate: 25.91%).

• 3rd Year: €17,284.12 + €8,437.5  in social security (effective tax rate: 34.3 %).

If you earn €100,000 per year:

• 1st Year: €9,289.36 (effective tax rate: 9.29%).

• 2nd Year: €17,284.12 + €11,250  in social security (effective tax rate: 28.53 %).

• 3rd Year: €25,721.62 + €11,250  in social security (effective tax rate: 36.97 %).

Note: These numbers assume that you expense 15% of your revenue. If you have lower expenses, the taxes to pay will be slightly higher. For anything above 15%, the result is the same. We also assume that you’ll start the activity at the start of the next tax year in Portugal (January 2026), however you can start whenever you want.

And now let’s run some numbers under the NHR

We’ve documented the NHR 2.0 (IFICI) regime extensively. We won’t bore you with the details, so here are the key points:

• You have to qualify under the skilled professions list (available here).

• You set up a Qualifying Portuguese Company and employ yourself with a minimal fixed salary.

• You pay a flat 20% tax rate on any profit you move through a Portuguese Company.

• You get NHR status for 10 years, which means that these benefits don’t taper off like the Freelancer Regime.

What this means in practice

If you earn €100,000 per year in gross income, under the NHR:

• We assume the same expense percentage as the Freelancer Regime (15%): that is you expense 15% of your gross income.

• You have to make social security contributions on the salary you pay yourself from the Portuguese company, approximately €2,000.

• That leaves you with €83,000 in declared profit.

• You pay 20% in tax, which is €16,600.

• Total effective tax rate, including social security contributions: 18,6%.

• But, this doesn’t taper like the Freelancer Regime does- it stays fixed for 10 years.

Also - if you have the ability to pay dividends from an overseas entity (for example a US LLC), you can bypass this structure entirely and enjoy them tax free. More on this further down.

How this compares to the Freelancer Regime

Taking the worked example from the Freelancer Regime calculations, we get the following:

Comparison table:

• €100,000 earned by an under 35 year old qualifying for Jovem (year 1): 2.26%

• €100,000 earned by an under 35 year old qualifying for Jovem (year 2): 20.99%

• €100,000 earned by an under 35 year old qualifying for Jovem (year 3): 27.99%

• €100,000 earned under the NHR 2.0 (IFICI) Regime (fixed, 10 years): 19%

Summarising the trade-offs

As you can see, when it comes to work income over the three year time horizon, with an annual income of €100,000 or less, it’s almost always better to be a freelancer in Portugal for the first two years.

If you’re planning for the longer term, because of the way the Freelancer Regime tapers the tax rates, the NHR becomes more favourable for you. After all, the tax rate is locked in at 20% on income, for 10 years.

If you’re earning above €100,000 per year, the NHR starts to become more tax efficient, very quickly. There is a so-called “murky zone” between €100,000 and €130,000 where professional evaluation and computation by a tax advisor is required. We’ll probably build a tax calculator for this very soon.

The NHR’s big daddy benefits

We’ve just looked at this from an income lens. Without a doubt, if you have any of the following, you need to seriously consider the new NHR regime:

• You have overseas entities that generate dividends

• You earn interest from assets

• You own businesses that you want to sell 

• You have equities, stocks shares or crypto that you hold

This is because, for 10 years, the NHR exempts you from taxes on these things: that’s right - zero. It’s probably the best tax regime in the developed world. And for many, taking a hit on income and paying more on income tax is far outweighed by tax savings on these above income sources. 

However, you need to check if you qualify for the NHR before it comes into the picture.

(you can use our Eligibility Checker to get a free evaluation in minutes).

How Touchdown Helps

Portugal’s tax regimes are world class: but only if you know how to make them work for you. That’s where Touchdown comes in. 

We specialise in relocation, tax strategy, and business setup for entrepreneurs, business owners, retirees and expats landing in Portugal.

Join a growing, connected international community that is thriving in some of the fastest growing corners of the world. Portugal - now; Spain - soon; the rest of the world - to come.

If you know you need help and want to get on top of this, we recommend you book a tax consultation directly with our bar-certified tax lawyer, Manuel. He’s excellent, and will walk you through your specific circumstances. The one hour video consultation has a full money back guarantee (in case you’re not happy) and you get written legal advice after the call.