Rights of a sole trader

Insights into what is involved in buying, selling & living in Portugal

Currently there are approximately 800,000 independent workers registered in Portugal. Being your own boss has its advantages. However, you need to pay careful attention since the contributions and tax payments are made by you, rather than by a company.

In recent years, the self-employed have gained more and more rights. Nowadays, as occurs with salaried employees, these workers have achieved entitlement to protection in many situations, such as parenting, illness or unemployment. But to be eligible for these social benefits, you need to keep your Social Security contributions up-to-date. Note that if you have contributions in arrears, a grant will be suspended. The beneficiary regains the right to the support once the contributory situation has been rectified.

  • Maternity / Paternity Leave

    Freelancers are entitled to a parental leave when they have children. This is an amount paid in cash to the parent at the time they are on leave for child birth and is intended to replace lost employment income. It may be granted either for 120 or 150 days, depending on parent’s choice.

    For example, if the mother decides to stay home with the baby for 120 days, she will receive 100% of the reference pay. If she chooses 150 days, she will receive 80%.

  • Allowance for clinical risk during pregnancy If a pregnancy is at risk, the Freelancer is also entitled to a subsidy during pregnancy - support in situations where there is the existence of clinical risk, for mother or for the baby. To be eligible, a medical declaration is required, indicating the time considered necessary to avoid the risk. In these cases, the worker receives 100% of the reference wage.

  • Other support in parenting Self-employed workers are also entitled to other forms of parental support from Social Security, such as the allowance for termination of pregnancy, an extended parental allowance, allowance for adoption and allowance for care or chronic illness. However, they do not qualify for a subsidy for child and grandchild assistance.

  • Right to sick pay Self-employed workers are also entitled to illness benefits. There are some peculiarities. The initial payment of sick pay is subject to a waiting period of 30 days. The maximum period is one year. Note also that in the first month of illness, freelancers have to pay the respective contributions. When they return, they are also required to pay the contributions due on the number of days worked in the month.

  • Right to unemployment benefits The right to unemployment benefits is one of the greatest achievements for independent workers in recent years. However, you can only access this provision, known as Activity Cessation Allowance, if you are considered economically dependent on a company, that is, if 80% of the total amount of annual income comes from a single business entity. Apart from this condition you must be registered in the Employment Centre. There must be an involuntary termination of the contract with the company and that you have been working for via green receipts over 720 days (two years) in the four years before termination.

  • Exemption from contributions The self-employed are required to pay contributions for Social Security from the moment when they become part of the body of an organisation. However, in certain situations, they may be exempt from paying this levy. You may be entitled to exemption when accumulating independent activity to dependent work, when working for others puts the Freelancer into another social protection system, or if annual income is less than €5,146.80 [12 times IAS (€428.90)]. Beginning in 2019, a Sole Trader whose only income results from a Local Lodging activity will be exempt from Social Security contributions.

  • Right to an old-age pension Those working on green receipts may also have access to a retirement pension. To be eligible for an old age pension, you must be aged 66 years and 4 months and have discounted for at least 15 years for Social Security. The amount you will receive depends on several factors, including your career earnings and how old you are when applying for retirement. Independent workers who retire early may continue to perform any activity without restrictions.

  • Right to a disability pension In the event of permanent incapacity for work, the self-employed are also entitled to protection from disability (relative or absolute). To receive this grant, you must have contributed to Social Security for at least 5 years in the case of “relative” disability, and at least 3 years in the event of “absolute” disability.

  • Right to family protection in case of death On the death of the Freelancer, the family may be entitled to benefits, such as funeral allowance, reimbursement of funeral expenses, orphan’s pension, widows, survival or death grant. To be eligible for death benefits, there is no minimum contribution period.

by Dennis Swing Greene is Chairman and International Fiscal Consultant for euroFINESCO s.a. www.eurofinesco.com

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