# Sole trader social security (year 2)



## andromi (Sep 3, 2014)

Hi,

First post. Totally confused with Portuguese taxation.

I'm trying to understand how social security is calculated for sole traders.

Imagine I start a business and in the first year make E100,000 in revenue. I opt for the simplified regime. I file a joint return with my wife who isn't working. I ignore tax credits, pension contributions and any other deductibles (if there are any?).

This gives for year 1:

Taxable income of 75,000 (75% of gross).
I divide this figure by two, diddle about in Excel and get an income tax amount of 11,195 for a single person. 
Multiply this number by two and our total income tax bill is 22,390 for the year.
This leaves a net income of 52,610.


Now assume I again make E100,000 gross revenue in year 2. How do I determine my social security amount and subsequently, my net income?


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## canoeman (Mar 3, 2011)

Social Securirty is "free" 1st year, the 1st year IRS is used by S/S to determine "band" your in for contributions. Just to keep it simple you also have an option to pay a higher rate to increase your "Pension"

Handy calculator here http://www.pedropais.com/seguranca-social/calculadora-seguranca-social-trabalhadores-independentes also IRS calculator in the top ribbon

Don't forget VAT/IVA + 9,975€ turnover you have to register for IVA and you need to revisit your IRS calculation


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## andromi (Sep 3, 2014)

Thanks for the link, Canoeman.

I used the calculator and plugged in 100,000 as above to get a list of three bands for social security at a rate of 29.6% on taxable income of 70,000.

Rank, Contribution Base, Monthly Contribution
9, 3353.76, 992.71
10, 4192.20, 1240.89
11, 5030.64, 1489.07

My default rank is 11 but apparently I can opt to pay SS at either of the lower bands. What are the benefits/issues with choosing a lower band of SS?

How is the contribution base determined? What does it mean?

Additionally, I have to multiply the monthly contribution rate of 1489.07 by 14 months to get 29.8% of 70,000. What's up with that?


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## canoeman (Mar 3, 2011)

You should get detailed professional advice everyone's circumstances just that bit different to be important
Believe the higher bands give an enhanced Pension
Portugal tax year is Jan to Dec but a simple answer to the 14 months is holiday pay


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## TonyJ1 (May 20, 2014)

andromi said:


> Hi,
> 
> First post. Totally confused with Portuguese taxation.
> 
> ...


Is this trading or services - the rate applicable to trading (buying and selling of goods) is only 15%. The 75% rate is applicable to service type revenue


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## andromi (Sep 3, 2014)

this is for services.


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## TonyJ1 (May 20, 2014)

*Trader*



andromi said:


> this is for services.


Just a bit confused - You call yourself a 'trader' - in Portuguese tax terms totally different consequences to providing services


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