In binding information made available on the Tax and Customs Authority (AT) website on July 30, the IRS department explains, in response to a company's question, what commercial companies must do when hiring non-resident workers in Portugal who fall into the category of self-employed workers.

The Tax Authority begins by noting that, under the IRS Code, self-employment income paid to non-resident self-employed workers is considered to be obtained in Portuguese territory, "provided it is owed by entities that have their residence, headquarters, effective management, or permanent establishment therein to which the payment should be attributed."

In other words, "self-employment income is always considered to be obtained in Portuguese territory provided it is owed by an entity resident in Portugal," even if the services "are provided outside Portuguese territory," the Tax Authority explains. Since these amounts are subject to a 25% income tax rate, companies are "required to withhold tax at source when paying such income."

There can only be a full or partial exemption if the worker in question is a tax resident in a country that has entered into a tax treaty with Portugal designed to avoid double taxation, and if this treaty provides that taxation on income obtained in Portugal falls to the other state.

However, these are exceptional cases, which only apply if a bilateral or multilateral tax agreement exists. The AT's clarification concerns the general rule, which requires IRS taxation.

In addition to the obligation to withhold tax when paying for services provided, companies must also submit the Model 30 declaration to the Tax Authorities, which serves to report payments made to non-resident entities. This is the same declaration that local accommodation owners in Portugal must submit to the AT to declare commissions paid to multinational platforms such as Airbnb or Booking.

The AT clarifies that the obligation to submit the Model 30 declaration applies "even if the self-employed worker not resident in Portugal and benefits from a total or partial exemption from IRS withholding tax" under a tax agreement concluded between Portugal and the country where they reside.