Portugal taxes your turnover, not your profit
The regime simplificado does not look at what you spent. It takes what you invoiced, multiplies it by a coefficient fixed by your activity, and sends that figure to the income tax scale. Your laptop, your rent, your accountant and your flights do not appear anywhere in the calculation, because the coefficient already decided, on your behalf, what your costs are.
That coefficient is the whole game. A listed professional activity keeps 75% of turnover in the tax base. A service that is not on the list keeps 35%. Selling goods, or running a restaurant or a hotel, keeps 15%. Services rendered to a company you control keep 100%: the base is your turnover, with no deemed cost at all.
Same invoice, wildly different tax, decided by the activity code you chose when you registered.
What survives the coefficient is then aggregated and taxed on the ordinary IRS scale, from 12.5% to 48%, exactly as if it were a salary, the same scale the Portuguese income tax calculator is built around, and the place to read how it works.
Social security uses a different coefficient on the same invoice
Segurança Social does not reuse the tax coefficient. It applies its own to the same turnover: 70% for service income of any kind, listed or not, and 20% for the production and sale of goods. The contribution rate of 21.4% lands on that base, which stops growing past an annual ceiling of €77,347.
So one invoice produces two different bases. A freelance developer is taxed on one share of revenue and pays contributions on another, and neither number is the profit they actually made.
Contributions barely dent your tax base, and for some activities not at all
Contributions are not simply deductible. They reduce the coefficient-based income only in the part that exceeds 10% of your gross income, and the law grants that only to the two service coefficients, the listed professions and the unlisted services.
Everyone else gets nothing. For goods and hospitality the contributions land well under that threshold anyway, so there is nothing above it to deduct. For services billed to your own company the threshold is beside the point: the norm does not extend the relief to that coefficient at all.
We got this wrong once. The rule sat in our engine as a single threshold applied to every activity, and the calculator quietly handed the deduction to people the law excludes, understating the tax on invoices to your own company by thousands of euros a year. Independent verification caught it before publication. It is fixed, and the fix is why the activity you select above changes more than one line of the result.
IVA and organised accounting sit outside this calculator
VAT. IVA is not modelled here. It is not income tax, and mostly passes through you rather than out of you, but it governs your invoices and your quarterly cash flow.
Organised accounting. You can elect contabilidade organizada instead, and above €200,000 of prior-year income you must. It taxes your real result: real expenses come off, contributions come off in full, and the ten per cent rule disappears. It also obliges you to pay a certified accountant. We model the simplified regime only.
Thinking about a company instead? The Portuguese founder route runs the same invoices through corporate tax and dividends. And if the country itself is still open: the Spanish autónomo works on the opposite principle: there you deduct what you actually spent, and the social security bill lands every month whether or not a client paid you.