In short — as of August 2026: A sole trader (freelancer on recibos verdes) pays IRS on 75% of income under the simplified regime plus 21.4% Social Security on 70% of income (first 12 months exempt), needs no accountant, and carries unlimited personal liability. A Unipessoal Lda pays corporate tax (IRC) at 19%, reduced to 15% on the first €50,000 of taxable profit, must have a certified accountant by law, and limits liability to the company's assets — but a further 28% flat tax applies if you later pay yourself dividends. Below roughly €40,000–€50,000 of income, freelancing usually wins on simplicity and net take-home; above that, and once liability, hiring or the D2 visa are in play, a company usually wins. There is no universal answer — only the right answer for your income and plans.
Portugal gives you two honest ways to work for yourself: register as a freelancer and invoice on recibos verdes, or incorporate a Unipessoal Lda, Portugal's single-shareholder limited company. Both are legitimate, both are common, and the internet's advice tends to default to one or the other without asking what actually applies to you. This guide compares them properly — cost, tax, liability, credibility, and the visa angle — with two worked scenarios so the numbers, not vibes, do the deciding. If you've already registered and want the operational playbook rather than the decision itself, see operating as a freelancer in Portugal.
The two structures, side by side
| Sole trader (freelancer) | Unipessoal Lda (company) | |
|---|---|---|
| Setup cost | Free — início de atividade at Finanças | ~€220–€360 state fee (or full setup service) |
| Setup time | Same day, online | Same day to a few business days |
| Mandatory accountant | No | Yes, by law from day one |
| Ongoing running cost | Minimal — optional bookkeeping only | Accountant (~€60–€250+/month), possible registered address |
| Tax on profit | IRS, 75% of income taxed on the progressive scale | IRC: 19% general, 15% on first €50,000 |
| Extracting profit personally | No extra step — it's already your income | +28% flat withholding if you pay yourself dividends |
| Social contributions | 21.4% on 70% of income (first 12 months exempt) | 11% employee / 23.75% employer, only on a salary you choose to draw |
| IVA | 23% above €15,000 turnover — same for both | 23% above €15,000 turnover — same for both |
| Liability | Unlimited — personal assets exposed | Limited to company assets, normal caveats apply |
| Annual filings | Quarterly Social Security declaration, annual IRS | Modelo 22 (IRC), annual IES, ongoing accounting |
| Credibility for larger contracts/hiring | Fine for direct and remote clients | Stronger for tenders, formal staff, enterprise clients |
| Visa fit | Suits the D8 digital nomad visa | The usual vehicle for the D2 visa |
Scenario 1: a solo consultant at ~€40,000
Case study — Sofia, a Lisbon-based marketing consultant, €40,000/year. Sofia works with a mix of Portuguese and foreign agencies, past her first-year Social Security exemption.
As a freelancer: taxable IRS base = 75% × €40,000 = €30,000, run through the normal progressive scale. Social Security = 21.4% × (70% × €40,000) = €5,992/year (~€499/month). Combining IRS and Social Security, a mid-income freelancer typically keeps roughly two-thirds of gross once past the first-year exemption — for Sofia, that's a working estimate of around €26,000–€27,000 net, with no accountant fee and no incorporation cost eating into it.
As a Unipessoal Lda: she'd still need to draw a salary or dividends to actually spend the money, triggering the same IRS-and-Social-Security mechanics on whatever she pays herself, plus a mandatory certified accountant at roughly €1,800–€3,000/year, plus IES filing, plus — if she distributes any retained profit as dividends — a further 28% on top of the 15% IRC already paid on it. At this income, the company adds real running cost and an extra tax layer without a matching benefit, since her liability exposure as a solo consultant is genuinely low.
Verdict: at roughly €40,000, freelancing wins on both simplicity and net income, unless a specific client, a hiring plan, or an approaching D2 application makes a company worth the overhead now rather than later.
Scenario 2: a growing business at ~€100,000
Case study — Bruno, running a small web-development studio, ~€100,000 revenue. Bruno subcontracts two developers and has real costs — subcontractor fees, software, a shared workspace — bringing taxable profit to roughly €60,000.
As a freelancer: the simplified regime still applies under €200,000 turnover, but taxable IRS base = 75% × €100,000 = €75,000, pushing a meaningful slice of income into Portugal's higher marginal IRS brackets (reaching toward 45–48% at the top). Social Security, uncapped in this simplified math, would be 21.4% × (70% × €100,000) = €14,980/year (~€1,248/month) before any contribution ceiling is applied — worth checking with an accountant at this level. He is also taxed on the full amount in the year he earns it, with no way to retain profit at a lower rate, and his personal assets carry the liability for two subcontracted developers' work.
As a Unipessoal Lda: on roughly €60,000 of taxable profit, IRC = 15% × €50,000 + 19% × €10,000 = €7,500 + €1,900 = €9,400 (before any municipal derrama, up to 1.5% where it applies). That is a markedly lower rate than his freelancer marginal IRS band. He can also retain profit in the company rather than distributing it immediately, deferring the 28% dividend tax until he actually wants to take money out personally. The mandatory accountant (~€2,000–€3,000/year) is a rounding error against the tax difference, and limited liability meaningfully protects him now that he's subcontracting other people's work.
Verdict: at roughly €100,000, the company wins clearly — a lower headline rate on retained profit, the flexibility to defer the second tax layer, and real liability protection for a business with subcontractors and bigger clients.
Liability: the difference people underweight
A freelancer's liability is genuinely unlimited — if a client dispute, an unpaid supplier or a mistake results in a claim, your personal assets are on the table. A Unipessoal Lda limits exposure to the company's own assets in ordinary trading (normal caveats apply around personal guarantees, mismanagement or mixing personal and company funds). This matters more as contract values, subcontracting and client risk grow — a €2,000 freelance design job and a €40,000 web-build with subcontractors carry very different downside.
The visa angle: D2 vs D8
If immigration is part of your decision, the structure question partly answers itself. The D2 visa is built around running a business or working self-employed inside Portugal, and most D2 applicants incorporate a Unipessoal Lda to evidence a real, funded venture — see our company setup guide and the D2 founder journey for how that sequencing works in practice. The D8 digital nomad visa, by contrast, is an income test for people already earning from foreign clients or a foreign employer, and it suits a straightforward freelancer registration — no company required. Choosing the wrong structure for your visa route wastes months, so settle the visa question before you settle the tax question if the two are linked.
Things to watch
- Assuming a company always saves tax. Below roughly €40,000–€50,000, the mandatory accountant and the extra dividend layer often make freelancing the better net-income outcome.
- Ignoring your real liability exposure. A freelancer's personal assets are genuinely on the line — fine for low-risk solo services, riskier once you subcontract or take on bigger contracts.
- Incorporating purely for a visa, with no intent to operate. Consulates and AIMA increasingly check for genuine activity, not a paper company.
- Forgetting the 28% dividend layer. A company's low IRC rate looks great until you actually try to spend the money personally — plan for that second tax bite.
- Underestimating company admin. IES, RCBE updates and ongoing certified accounting are real, recurring obligations a freelancer simply doesn't have.
- Waiting too long to switch. If you're already turning away larger contracts or hiring informally because you're "just a freelancer," that's usually the signal to incorporate.
Frequently asked questions
Yes — recibos verdes (green receipts) is simply the invoicing mechanism freelancers use once registered as self-employed at Finanças; it isn't a separate legal status.
Yes, the €15,000 threshold and 23% rate apply identically to freelancers and companies once you cross it — structure doesn't change your IVA position.
Not directly in the usual sense — hiring staff formally is far more natural, and often only really works, through a company.
Run both scenarios with your real numbers and your accountant — the crossover point depends heavily on your actual costs, whether you plan to retain profit, and how much liability risk you're carrying.
Neither structure is universally "better" — the right one depends on where your income sits today, where it's heading, and how much liability and credibility you actually need. Run your own numbers before committing, and revisit the decision as the business grows rather than treating it as permanent.
Not sure which structure fits your numbers? Talk to our company setup team about comparing freelancer registration against a Unipessoal Lda for your specific income and plans — or see the full cost of starting a business in Portugal.