Income tax plus self employment tax

This is how I understand it - being a new-ish arrival in a similar position and how I have been advised by 3 accountants in Portugal. This is not tax advise.

48% is the maximum tax bracket - annual income over 75000 Euro. In my opinion the tax brackets in Portugal are high considering the low incomes that are required to fit into these high brackets. The pros of living in this wonderful country and worth the trade off in my situation - it may not be for others / yours.

As a self employed contractor - using the simple accounting regime, the tax authority considers 75% of your income as taxable. They assume 25% as being for expenses. Therefore you will be liable for 48% income tax / IRS (if you are in that top bracket) on the 75% and social security of 21.4% on that 75%. As you can see that is more than 50% - which is high. If you use the accounting regime (usually recommended for incomes of at least 50k annually) / pay an accountant, and have legitimate deductible expenses that can be used to lower your taxable income, that may be a better route.

If you are a first time resident or have not been resident for 5 years, you can take advantage of the NHR program. There is a lot of misleading information about this program. If you work in what is considered a 'high value activity' - there is an official list available online (but confirm if you qualify via an accountant or tax attorney), and if you receive income from abroad, you are able to be taxed at a rate of 20% for 10 years. Even if you are not working in a 'high value activity', registering may be beneficial if you get promoted into one of the qualifying categories within the 10 year period. (you can only register by the next March when you become a fiscal resident.). If you own an existing foreign company with management control outside of Portugal, you can receive dividends tax free which is a good option if you are a relatively successful entrepreneur with the necessary structures set up.

Social security contributions are not required for your first tax year, which is very helpful from a cash flow savings perspective. They are required from the 12th month of the first tax year, i.e. December. These amounts are paid every quarter. IRS is payable from April the following year. Tax years run from Jan-Dec.

I see you are from the US / citizenship based taxation - it is usually recommended that you get advice from both US and Portuguese based professionals in this scenario.

I just came across this site today, actually. Not sure if it will help you or not, but might be worth a look?

https://eportugal.gov.pt/en/cidadaos-europeus-viajar-viver-e-fazer-negocios-em-portugal/trabalho-e-reforma-em-portugal/imposto-sobre-o-rendimento-das-pessoas-singulares-irs-em-portugal

The income tax rates are progressive.

Income that falls within each income band is taxed at the applicable rate for that band, so if you're earning €76,000 only €1,000 of it is taxed at 48%, not the whole €76,000.

Thank you, I understand now.