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0.75 or 0.35? 5 rules to know which coefficient applies to your work
Step Inside Accounting · Practical guide
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1. Understand the difference between 0.75 and 0.35
The coefficient is the share of what you invoice that counts as income. The rest is treated as expenses, without you having to prove them:
- 0.75 – professional activities specifically listed in the IRS activity table: 75% of what you invoice is taxed;
- 0.35 – other services that are not in that table: 35% is taxed.
For the same turnover, the tax base under the 0.35 coefficient is less than half of the one under 0.75. That is why it is worth understanding exactly where your work fits.
2. A professional activity is one that is in the table
The IRS activity table lists the professions treated as professional activities, each with a four-digit code. Some examples:
- architects (1001) and engineers (1003);
- accountants (4013) and economists (4014);
- lawyers (6010);
- IT programmers (1332), designers (1336) and translators (1334);
- physiotherapists (5012) and nutritionists (5013);
- private tutors (8010) and trainers (8011).
If the service you provide is not in the table, the activity is classified with a CAE code – for example, event organisation or cleaning services – and the coefficient is 0.35.
3. Be careful with code 1519
The table includes a residual code, 1519 – Other service providers. It should only be used when your service does not fit any specific code, either in the table or a CAE code. As it does not correspond to a specific profession, the 0.35 coefficient applies and, when the client withholds, the 11.5% rate.
Do not choose it just because it means less tax. If your work corresponds to an activity in the table – for example, programming or design – the Tax Authority can correct your classification and apply 0.75 to previous years, with interest.
4. The coefficient follows what you do, not just the code
Your activity code should reflect the service you actually provide. If you do different things, you can have a main code and secondary codes, and each invoice should be issued under the code of the service it relates to. For example, a translator who also organises events invoices translations under the translator code (0.75) and events under the events CAE code (0.35).
If you change jobs, or if the code you chose does not match what you do, correct it with a declaration of changes of activity on the Portal das Finanças.
5. The coefficient also changes withholding – but not Social Security
The same split applies to withholding tax: for activities in the table, a client with organised accounting withholds 23% (on the mainland); for other services, 11.5% – see our article on withholding tax. In Social Security there is no difference: contributions are calculated on 70% of what you invoice for any service.
In your first two years of activity, both coefficients may be reduced (by 50% in the first year and 25% in the second), if you have no salary or pension: 0.75 becomes 0.375 and then 0.5625; 0.35 becomes 0.175 and then 0.2625. See the benefits of the 1st and 2nd year.
Example
Marta and Sónia each invoice €30,000 a year and are past their first two years of activity.
- Marta is a translator (code 1334, in the table): taxable income of €22,500 (75% of €30,000).
- Sónia organises events (CAE code, outside the table): taxable income of €10,500 (35% of €30,000).
With the same turnover, Marta is taxed on €12,000 more. On the other hand, if a client with organised accounting pays her €1,000, it withholds €230; from Sónia, €115. For both, Social Security is calculated on €21,000 (70% of €30,000).
Team tip
Before you open your activity, describe to us in two sentences what you are going to do and for whom. That is what decides the code – and the coefficient. If you already have an open activity and are not sure your code is right, send us your registration details (situação cadastral): correcting it now is much cheaper than during a tax inspection.
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This article is for information only and does not replace professional advice. Figures and rules are those in force at the date of publication and may change.
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