# Small Business question help needed



## Janina k (Nov 30, 2011)

Hello

We want to start a small business selling a certain type of food product. As we don't expect to trade over 10,000€ per year would we still have to charge tax on the food product involved. The reason that sales would be under 10,000€ per year is that the product is a seasonal item.

Krystyna


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## MrBife (Jul 26, 2009)

Janina k said:


> Hello
> 
> We want to start a small business selling a certain type of food product. As we don't expect to trade over 10,000€ per year would we still have to charge tax on the food product involved. The reason that sales would be under 10,000€ per year is that the product is a seasonal item.
> 
> Krystyna


You don't say what the product is so we don't know how it gets served. The food business is a difficult one in most European Countries and the extra rules in Portugal makes it even more of a challenge - throwing up all kinds of licensing and red tape issues. Couple that with the requirement to submit accounts and other fixed costs and it starts to look unlikely that any business turning over 'under 10k' a year will be making enough to cover overheads let alone make a living for its owner. There are usually economies of scale so you may have to develop a business plan that gives you a bigger turnover in order to end up actually making some profit.


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## Janina k (Nov 30, 2011)

*Reply*

Hello

Thank you MrBife for your reply. 

The product is one that will only work for the Christmas and Easter time market so it's not something that would scale for a year round business. Also Fred and I don't want to work but we would like help a family member sell some of his product before Both Easter and Christmas his products sell year round in the UK. But he has a new line that we feel that we can sell some and make a little money as well. Because of the nature of the products they would not sell any other time of year that's why we know it won't take anywhere near 10,000€. Should it be that it was a year round business then yes the items would attract tax at the rate of 23%.

Thank you for taking the time to reply

Krystyna


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## canoeman (Mar 3, 2011)

Is the family friend UK based, if so it would be easier to sell as an agent and no VAT/IVA would come into it, but whether UK or here you'd still need to comply with all the food, labelling regulations.
The dreaded ASAE are governing-policing body ASAE
Why 23% on food stuffs? variable rates apply in this area

As Mr Bife has said you would need to increase turnover to make it all viable it's not just tax and IVA but also Social Security min payment is around 160€ pm pp.

Portugal is not like UK for small business S/S is far higher and tax regime very different with very low IVA thresholds, see below.

Simply there are two tax systems
Simplified that you take a straight % as expenses against turnover pay tax, S/S on balance
or
You must employ an accountant/bookkeeper to do monthly returns

Then how do you actually set yourself up? two options self employed or a company of one type or another, 

IVA: If your income equals or exceeds EUR 10,000 in any tax year 1 January to 31 December, you have until 31 January of the following year to register for VAT.

IVA returns must be submitted and payments must be made, by the 15th (or next working day) of the second month following the end of the VAT period.

VAT periods end on 31 March, 30 June, 30 September and 31 December
. 
So returns and payments have to be by latest 15(16) May, 15(16) August, 15(16) November and 15(16) February.


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## travelling-man (Jun 17, 2011)

I confess to not knowing anything about this at all and am making one or two assumptions but I would guess the product will be sold mostly online?

If so, could the site and company that sells the product be based in the UK, comply with UK labelling and tax requirements and you just keep a stock here in PT, take the sales orders via the UK site and post from here?

If that would work, you could probably just declare the income in the UK which would be simpler. 

Just ignore this if my assumptions are wrong.


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## canoeman (Mar 3, 2011)

Products must have Portuguese labeling, even if just a translation on a sticker if sold here, but not if bought directly from a non Portuguese supplier

If your a Resident here then you are required to make a yearly tax return if you earn above min wage* declaring* World Wide income and any tax paid .


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## siobhanwf (Mar 20, 2009)

What is the minimum wage here in Portugal Canoeman?


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## canoeman (Mar 3, 2011)

Currently 565.83€ pm never quite sure whether this is times 12 or 13 though


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## canoeman (Mar 3, 2011)

These are tax bands, 


Tax %	Tax Base (Euro)
11.5%	up to 4,898
14% 4,899-7,410
24.5%	7,411-18,375
35.5%	18,376-42,259
38% 42,260-61,244
41.5%	61,245-66,045
43.5%	66,046-153,000
46.5%	153,001 and over


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## oronero (Aug 24, 2012)

canoeman said:


> These are tax bands,
> 
> 
> Tax %	Tax Base (Euro)
> ...



I have a couple of questions regarding taxation and social security costs.

Am I correct in thinking that if you earned as a wage for example 20,000 euros would the tax payable be calculated as follows below, giving a tax liability of approx 4178 euros?

first 4,898 @11.5% = 563.27 euros
for the portion between 4,899-7,410 @ 14% = 351.68 euros
" " " " 7,411-18,375 @ 24.5% = 2,686.42 euros
" " " " 18,376 -20,000 @ 35.5% = 576.87 euros

Do the social security payments also increase with wages or are they fixed irrespective of earnings?

I just want to know roughly the principle not the exact amount, thanks.


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## canoeman (Mar 3, 2011)

canoeman said:


> If your a Resident here then you are required to make a yearly tax return if you earn above min wage* declaring* World Wide income and any tax paid .


OOPs should have said minimum taxable income,

Yes to the progressive tax rates, there are deductions of course that lower your tax liability.
Social security payments if employed, employer pays around 24% employee 11-15%

Self employed 1st 12 months honeymoon period to establish earnings, contributions based on that, there are lower rates for low earners but general is appox 150-165€pm regardless of whether you earn or not, there are changes in force and I believe you can now appeal and get reductions


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## oronero (Aug 24, 2012)

Sorry I meant to ask about the social security rates for the self-employed, whether they were capped at a level or not, would it make a difference if you were for example earning 40,000 as opossed to 20,000 euros?


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## canoeman (Mar 3, 2011)

Self employed 29.5% don't know if there's a cap, can never work out how so many Portuguese can afford to be self employed

see here for rates Segurana Social


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## oronero (Aug 24, 2012)

*canoeman*, thanks for the link, unfortunately it states that the section about self employed contributions is being updated and there is no information.


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## oronero (Aug 24, 2012)

It certainly is a hefty amount, if it is 29%, that would mean that if my calculations are right that from 20,000 euros, you would be taking home about half of it!

I am sure that like most of the world money talks and 'CASH' is king, much easier for the self-employed than those that are employed! 

I wonder how much of their actual income is actually declared...I remember hearing rumours that Brazil was notorious for people under declaring their income...perhaps it is the same in the Iberian peninsula?


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## canoeman (Mar 3, 2011)

Yes it is a hefty percentage but don't forget this is offset against income for tax purposes, it's similar to UK but way of claiming different.

Link gives information for me, try main site Segurana Social then on left Trabalhador Indepente next page top line Contributinas next page Taxa Contributinas

If you using English option you will get that message on most pages it's only very basic information available in English, but all information available in Portuguese, then use a translate option

This is one of the reasons there is so much of a crack down on the black economy, it's a reason although only a minor? reason Portugals where it is now.


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## oronero (Aug 24, 2012)

oronero said:


> It certainly is a hefty amount, if it is 29%, that would mean that if my calculations are right that from 20,000 euros, you would be taking home about half of it!
> 
> I am sure that like most of the world money talks and 'CASH' is king, much easier for the self-employed than those that are employed!
> 
> I wonder how much of their actual income is actually declared...I remember hearing rumours that Brazil was notorious for people under declaring their income...perhaps it is the same in the Iberian peninsula?


Thanks *canoeman* though I can read Portuguese to a certain standard (generally fine for comics) I saw the English translated version button and clicked that. Perhaps the information is all there in the Portuguese version but not in the English one.


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## canoeman (Mar 3, 2011)

Yes full information *only* in Portuguese


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## anapedrosa (Mar 21, 2011)

oronero - Google translate works well on that site.


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## oronero (Aug 24, 2012)

I checked again this evening in Portuguese this time and again it said that it was being updated.

I was checking the rates for self-employed which if my understanding is correct is the *Trabalhador Independente* tab on the left hand side.

I will check in a couple of weeks time to see if it has been updated.


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## anapedrosa (Mar 21, 2011)

I just checked the Contribuições - Taxas Contributivas under Trabalhador Independent and it came up with a set of tables - unfortunately as it is an image the translation does not work.


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## oronero (Aug 24, 2012)

*anapedrosa*, I don't know how you did that, I am obviously not clicking the right button, I shall get onto it right away once more.

Maybe it's time that I started to try and read a book and put the comics down!


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## oronero (Aug 24, 2012)

It seems to revert back to the table for employees.


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## anapedrosa (Mar 21, 2011)

Right above where it says Trabalhador Independente there is a line as follows.
'Inscrição Contribuições Prestações (benefícios)' 

Click on Contribuições (contributions)
Then on the next page click on Taxas Contributivas (contribution rates)

See if that works.

If it doesn't, I have printed a PDF of the page and can e-mail it to you if you want to PM me an e-mail address.


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## oronero (Aug 24, 2012)

Thanks *anapedrosa*, I have done that exactly as you instructed which is what I had done already and if you look at the top of the table in the black headed bar it says... *'Trabalhador por Conta de Outrem' *! Thanks for trying to help me anyway. 

Maybe as a self employed person you are supposed to pay the rate of the employer and employee combined.


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## anapedrosa (Mar 21, 2011)

If you scroll down, you will see a table below it that is labelled Trabalhadors Independents - it says in general 29,6 - perhaps that is what you are looking for?


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## oronero (Aug 24, 2012)

Would I be correct in thinking that the 29.% social security payment is calculated on the theoretical 20,000 euros gross or on the amount following the tax deduction?

In the UK you can expect that deductions for both tax and social security payments to be around 30% for say £16,000 but in Portugal the equivalent being 20,000euros it would seem that your deductions for tax and social security payments amount to approx 54%...Wow and ouch!!!!


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## anapedrosa (Mar 21, 2011)

oronero said:


> Would I be correct in thinking that the 29.% social security payment is calculated on the theoretical 20,000 euros gross or on the amount following the tax deduction?


This is where I defer to Canoeman - he has a much greater understanding of this than I do. My skills are limited to surfing the internet and reading basic Portuguese.


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## oronero (Aug 24, 2012)

*anapedrosa*, thanks for your help this evening.  :clap2:


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## anapedrosa (Mar 21, 2011)

My pleasure.


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## Courtney744229 (Nov 29, 2012)

Hello!

I'm brand new to this site and can't work out if I can start a new thread yet or not. Anyway I am in a relevant thread so here's my scenario, if anyone has any information it would be greatly appreciated:

I'm an Australian chick. I want to start up a small business that I can operate in both Australia and Canada (and hopefully eventually elsewhere as well) but not at the same time. Its a service business so no importing/exporting or selling goods. 

Do I have to register the business in Canada? and can I even do this as an Australian? Could I just operate it as an Australian business in Canada? Every agency I call seems to give me conflicting advise :/

Thanks so much for any help and advise

Court


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## canoeman (Mar 3, 2011)

Still opens for me, you must use Portuguese option and follow steps I posted and it gives you all S/S contributions

Trabalhador Independente on new page click on Contribuições on new page click on Taxas Contributivas


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## oronero (Aug 24, 2012)

*canoeman*, thanks I was having a 'blonde moment' last night, I 'couldn't see the wood for all the trees'!


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## oronero (Aug 24, 2012)

Courtney744229 said:


> Hello!
> 
> I'm brand new to this site and can't work out if I can start a new thread yet or not. Anyway I am in a relevant thread so here's my scenario, if anyone has any information it would be greatly appreciated:
> 
> ...


Hello 'Aussie chick', I am not sure if you are aware that you have posted on a country specific part of the site, being Portugal and not Canada.

Perhaps you have seen *anapedrosa*'s reply as she is in Canada, not sure but maybe she can still help you. 

Best of luck Court in your endeavour.


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## oronero (Aug 24, 2012)

oronero said:


> Would I be correct in thinking that the 29.% social security payment is calculated on the theoretical 20,000 euros gross or on the amount following the tax deduction?
> 
> In the UK you can expect that deductions for both tax and social security payments to be around 30% for say £16,000 but in Portugal the equivalent being 20,000euros it would seem that your deductions for tax and social security payments amount to approx 54%...Wow and ouch!!!!


*canoeman* is my understanding of the above correct?


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## siobhanwf (Mar 20, 2009)

Hi Courtney and a very warm :welcome: to Expatforum.

I have already sent you a private message suggesting you repost your request in CANADA. You will get more response from there. 

Hope you enjoy being part of our GLOBAL family 







Courtney744229 said:


> Hello!
> 
> I'm brand new to this site and can't work out if I can start a new thread yet or not. Anyway I am in a relevant thread so here's my scenario, if anyone has any information it would be greatly appreciated:
> 
> ...


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## canoeman (Mar 3, 2011)

You pay 29% on the gross then on IRS returns it's deducted plus whatever other allowances, expenses you might claim then any + or - refunded or paid.

The major difference with the Portuguese system is that everything is calculated with your year end IRS return and not based on a Tax code and NI payments as a % of earnings, bit more like being self employed in UK but with heftier S/S payments.


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## oronero (Aug 24, 2012)

Sorry to be so dense but is that tax calculated also on the gross or on what is left after social security payments have been deducted?


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## canoeman (Mar 3, 2011)

Simplified explanation

Gross earnings - S/S contributions - any claimable allowances = taxable income


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## oronero (Aug 24, 2012)

:clap2:

Yipee!!!

:juggle:

I have it sussed in my head now, the blondeness has gone, the mist has cleared!

Thank you all for your help and persistance. 

So to conclude if you earn 20,000 euros, your social security deductions of 29.6% amount to 5,920 in deductions, leaving you with 14,080 euros.

If you have paid for medicines and other allowable deductions this is then taken from that sum. For the simplification of this process we shall imagine that there are no deductions, tax is paid on the remaining 14,080 euros, being...

first 4,898 @11.5% = 563.27 euros
for the portion between 4,899-7,410 @ 14% = 351.68 euros
" " " " 7,411-14,080 @ 24.5% = 1,633.90 euros

2,548 euros tax liability approx.

So your 20,000 euros earnings would leave you with a net figure of 11,532 euros after all deductions.

It would seem that 40% disappears from the gross wage which is not as bad as I initially thought!


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