Remote worker using laptop in Lisbon apartment

Remote Work in Portugal for a Foreign Company: How It Works

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You can legally work remotely from Portugal for a foreign company, but only if someone carries the Portuguese employer obligations. That someone is a local entity of the company, an Employer of Record (EOR), or you yourself as a registered freelancer. Which one fits depends on the role, the length of the engagement and how much risk the company wants to hold.

This guide is written mainly for the company side, because that is where the legal exposure sits. If you are a worker, it will also show you what a compliant offer looks like and which questions to ask before you sign.

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TL;DR

  • A foreign company has three routes to a legal remote hire in Portugal: its own Portuguese entity, an EOR, or a freelance (independent) contract.
  • If the worker lives and works in Portugal, Portuguese Social Security and IRS withholding generally apply, whatever the employer’s country.
  • A senior worker who signs contracts or negotiates on the company’s behalf can create a permanent establishment and a Portuguese corporate tax bill.
  • Flat-rate home office allowances are taxable in Portugal unless they reimburse documented telework costs.
  • An EOR is the fastest way to test the market without a local entity. A freelance contract is only safe for genuinely independent work.

Table of Contents

Portuguese labor law follows the place where the work is performed. The European Commission’s guidance on telework states that the principle of lex loci laboris in Article 11 of Regulation 883/2004 remains the main rule for deciding which social security legislation applies. In practice, an employee sitting in Lisbon, Porto or Braga is covered by Portuguese rules, even if the payroll and the headquarters are in London, Berlin or New York.

That leaves three structures.

Route Who is the employer Best for Main risk
Own Portuguese entity Your local subsidiary or branch Teams of five or more, long-term presence Setup time, accounting and filings, local management
Employer of Record The EOR, on your behalf One to a few hires, market testing, fast start Contract and fee must be clear; you still direct the daily work
Freelance contract (recibos verdes) Nobody: the worker is independent Real project work with several clients Misclassification if the worker acts like an employee

None of these is universally best. A company hiring its first Portuguese engineer next month rarely wants to incorporate first. A company with 25 people in Portugal usually does.

What the foreign employer owes when the worker lives in Portugal

Contract and Social Security

The Portuguese government’s guide to working in Portugal says foreign nationals working in the country have the same rights and duties as Portuguese citizens. Employment contracts must be reported to Segurança Social. The same guide gives the 2026 national minimum wage as 920 euros per month, which is the floor for any full-time offer.

Contributions are split between the two sides. According to a Portugal tax guide for remote workers, the employer pays 23.75% and the employee 11%, and the employer withholds and remits the employee share. Budget the employer share on top of gross salary when you compare a Portuguese hire with a contractor in another country.

Portuguese minimum wage and contribution rates

IRS withholding

The employer must also withhold IRS (personal income tax) from salary using progressive tables that are updated annually, as the same guide explains. A foreign company with no Portuguese presence usually has no way to do this on its own, which is the main reason people turn to a local payroll provider or an EOR. Our note on Portuguese payroll tables and the monthly deadlines shows what a monthly cycle involves.

Home office costs

Many foreign employers pay a flat monthly “WFH allowance”. In Portugal this needs care. The tax authority’s Ofício Circulado 20249/2023, which interprets Law 83/2021 on telework expenses, treats telework payments as non-taxable only when they reimburse documented, telework-specific costs. A flat allowance with no proof of expense is taxable income and subject to IRS withholding.

The practical fix is simple: ask for invoices for the electricity, internet or equipment share, reimburse against them, and keep the file.

The risk most foreign companies miss: permanent establishment

Hiring one person without a local entity looks harmless. It can still create a taxable presence. Compliance commentary on remote-first startups notes that if the worker has authority to sign contracts or acts as a senior decision-maker, the foreign company may be deemed to have a permanent establishment in Portugal, exposing it to Portuguese corporate tax on revenue attributed to that presence.

This matters most for:

  • country managers and heads of sales who close deals from Portugal;
  • senior hires who negotiate with Portuguese clients or suppliers;
  • anyone who works from a fixed office space paid for by the company.

An individual contributor in engineering, design or support, who takes instructions from abroad and signs nothing for the company, is usually a lower-risk case. “Usually” is the operative word: the facts decide, so get a written assessment from a Portuguese tax adviser before you place a senior person.

The 183-day trap

The same source warns that authorities in countries like Portugal have been auditing cross-border arrangements going back to 2022, and that “temporary” remote arrangements often become non-compliant once a worker passes the 183-day threshold for tax residence. A pilot that was meant to last three months and quietly runs for a year is the typical case.

Social Security in two countries

Even when the worker is correctly classified as an employee, the company can end up owing contributions twice. Without an A1 certificate or equivalent documentation, contributions may be due in both the home country and Portugal. Check this early for any employee who is a citizen of another country or who splits time between two states.

Employee or freelancer: choosing the contract

The freelance route is popular with workers because it can look simpler: the person issues recibos verdes and bills the foreign company. It works when the person is genuinely independent: several clients, their own tools, their own schedule, a defined deliverable.

It fails when the arrangement looks like employment: fixed hours, a company email address, a manager who assigns daily tasks, one client only. In that case the person is an employee in substance, and the company carries the exposure. If you want someone embedded in your team, hire them as an employee through an entity or an EOR.

Two questions settle most cases:

  1. Would the company be comfortable if this person worked for a competitor next week? If not, it is not an independent relationship.
  2. Does the person decide how and when the work is done? If not, it is not an independent relationship.

How an Employer of Record works for a remote hire

With an EOR, the provider becomes the legal employer in Portugal. It issues the Portuguese employment contract, registers the employee with Segurança Social, runs payroll with IRS withholding, and handles statutory leave and the 13th and 14th month pay conventions. You manage the work, set objectives and decide who is hired. Our explainer on what an employer of record is and how hiring without a setup works goes through the model step by step.

The model fits when:

  • you want to hire one to ten people and test the market before incorporating;
  • you need a start date in days rather than months;
  • your company has no Portuguese HR or payroll knowledge;
  • you want the option to move the team to your own entity later.

It fits less well when you already have a Portuguese entity and an in-house HR function, or when you plan to scale beyond a team size where a subsidiary is cheaper.

A practical checklist before the first Portuguese hire

  1. Define the role. Does the person sign contracts, negotiate or manage others? If yes, request a permanent establishment review first.
  2. Pick the structure. Entity, EOR or freelance, based on the section above.
  3. Check the residence status. EU and EEA citizens can work in Portugal without a work visa. For other nationalities, the government explains how to request a residence visa for dependent work and the separate process for independent professional activity.
  4. Check Social Security coverage. Ask whether an A1 certificate applies.
  5. Write the contract in line with Portuguese law. Probation period, notice, leave, working time and the right to disconnect are not optional extras.
  6. Set the expense policy. Reimburse against documents, not flat sums.
  7. Plan payroll. Monthly withholding and Social Security filings have fixed deadlines.

Our compliance checklist for hiring in Portugal expands the legal points, and the checklist for hiring remote teams covers the operational side.

Our perspective

The questions we hear most often start with a salary and end with a risk. A founder wants to pay a Portuguese developer the same net figure as a contractor elsewhere, and finds out that the real cost includes the employer’s Social Security share, mandatory holiday pay and the structure needed to withhold tax correctly.

Our perspective — overview diagram

We see three patterns repeat. First, companies underestimate how quickly a “trial” becomes permanent, and so they miss the point at which the arrangement needed proper structuring. Second, they treat a freelance contract as a shortcut for someone who is, in everything but name, a team member. Third, they hire a senior commercial person remotely without asking whether that person creates a taxable presence.

Our advice is plain. Decide the structure before the offer letter, not after the first payslip. Use an EOR when speed and low commitment matter, and move to your own entity when the team and the revenue justify it. We support both routes, so the recommendation follows your situation rather than our service list. Whatever you choose, keep the paperwork consistent with how the person actually works.

— Paulo

Hiring in Portugal without a local entity

If you are a foreign company and want to bring in remote talent in Portugal, we act as the employer of record, run Portuguese payroll and handle the legal and HR administration, with English-speaking support. See our Employer of Record services for how it works, or our payroll services in Portugal if you only need payroll. When you are ready to set up your own subsidiary or need visa and relocation help, the Softlanding in Portugal page covers both. We do not publish prices, so ask us for a quote based on your headcount and roles.

For workers: what to check in an offer

If you are the person looking for remote work with a foreign company, these checks protect you.

  • Who is the employer on paper? A Portuguese entity or EOR means Social Security and IRS are handled for you. A foreign company paying you directly with no Portuguese setup should prompt questions.
  • Does the salary clear the floor? For full-time employment the 2026 minimum is 920 euros a month, according to the official government guide.
  • Are you a real freelancer? If you have one client, fixed hours and a manager, ask for an employment contract instead.
  • Who pays your home office costs? Reimbursements against invoices are tax-neutral, but flat allowances are taxed.
  • Do you owe tax anywhere else? Residence, double taxation treaties and your annual IRS return depend on your personal situation. The government’s guide to taxes and Social Security for migrants is the right starting point, and a Portuguese accountant (contabilista certificado) should confirm your case.

We work for companies, not individuals, so we cannot advise on your personal tax return. We can, however, tell you that a compliant employer will answer all five questions without hesitation.

FAQ

Can a foreign company hire someone in Portugal without a Portuguese entity?

Yes. The usual way is through an Employer of Record that employs the person locally on the company’s behalf. The alternative is an independent contractor arrangement, which is only valid if the person is genuinely self-employed. Hiring an employee directly from abroad with no Portuguese registration exposes both sides to Social Security and tax problems.

Which taxes apply when I work remotely from Portugal for a foreign company?

As an employee, you generally pay IRS through withholding and Social Security of 11%, while the employer owes 23.75%, per the tax guide cited above. As a freelancer, you invoice, register with the tax authority and handle your own contributions. Your exact liability depends on your residence and any applicable treaty, so check it with a certified accountant.

Does a remote worker create a permanent establishment for the company?

They can, particularly if they have authority to sign contracts or act as a senior decision-maker. Junior and non-commercial roles carry less risk. Ask a Portuguese tax adviser to review senior and sales hires before they start.

Is a home office allowance taxable in Portugal?

A flat allowance with no proof of cost is taxable income, according to the tax authority’s circular on telework expenses. Reimbursing documented telework-specific costs is treated differently. Keep invoices on file for every reimbursement.

Do non-EU citizens need a visa to work remotely from Portugal?

In general, a non-EU national who will be employed in Portugal needs a residence visa or permit for that activity. The government publishes the steps for dependent work visas. Your nationality and the type of work change the process, so confirm it with the consulate or AIMA before relocating.

Sources

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