Spain or Portugal: Where Self-Employment Pays More

Spain and Portugal tax the self-employed differently. Find out which tax system is more beneficial for foreigners in 2026

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For foreigners who legally reside in the European Union and want to try themselves not in employment but in their own business, choosing a country to register in is one of the first practical questions. Many looking for a place for self-employment settle on Spain or Portugal: both countries are open to foreigners, have clear registration procedures, and a comparatively affordable cost of living. But once it comes to taxes and social contributions, the difference between the systems becomes noticeable – and it's often what determines how much money is actually left in a self-employed person's account at the end of the month. In this article, we break down how taxation works for those who work for themselves in Portugal and Spain, and what to consider when choosing a country in 2026.

Whichever country you choose for self-employment, applying for a work visa or activity permit usually starts with gathering the right set of documents. A mistake or a missing certificate can cost you weeks of delay or even a refusal. 

Visit World's "Work Guide" gathers up-to-date information on which documents are needed to apply for a work visa as a citizen of any country. Just enter your citizenship and destination country, and the full list of requirements will arrive in your inbox as a PDF within minutes. 

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Which foreigners can legally start a business in Spain or Portugal?

The ability to register as self-employed depends primarily on the type of residence permit, not on citizenship: the right to work for yourself is usually held by those whose permit grants labor market access – residents through family reunification, holders of long-term residence permits, certain humanitarian or other status categories, and so on. At the same time, some types of permits restrict or completely prohibit running one's own business, so before registering, it's worth checking the specific conditions of your status with the immigration office of your country of residence. After that, the registration procedure itself is practically the same for a foreigner who has confirmed their right to work, regardless of citizenship.

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Portugal: recibos verdes, IRS, and Segurança Social contributions

Self-employed people in Portugal operate under the recibos verdes system – "green receipts" that confirm each payment received from a client.

The IRS income tax here is progressive, with nine brackets and rates of roughly 13% to 48%, depending on annual income. But for a newly started business, the actual burden is lower than it looks: in the first year of activity, the taxable base is reduced by 50%, and by 25% in the second year, so the effective rate at the start is noticeably lower than the nominal one.

Social contributions to Segurança Social amount to 21.4%, but they are calculated on only 70% of income, and new self-employed workers are automatically exempt from these contributions for the first 12 months of activity. The standard VAT (IVA) rate in Portugal is 23%.

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Spain: the autónomo regime, IRPF, and Seguridad Social contributions

In Spain, the equivalent status is called autónomo, and the IRPF income tax consists of a national and a regional part, so the combined rate – roughly 19% to 47% – depends not only on income but also on the autonomous community where you're registered as a tax resident.

The social contribution system was reformed back in 2023: the monthly payment is now tied to real net income, and for 2026 it ranges roughly from €200 to over €590 depending on the income "tier." However, new autónomos have access to the discounted tarifa plana – a base contribution of around €80 a month (together with the additional MEI charge, it comes to roughly €88 total), which applies for the first 12 months and can be extended for another year if net income doesn't exceed the national minimum wage. VAT (IVA) in Spain is standardly 21%.

Everything you need to know about taxes in Spain in 2026 – read our detailed guide.

VAT and cost of living: what else to keep in mind

The 2-percentage-point VAT difference (23% versus 21%) matters mainly for those selling goods or services to local clients within the country: freelancers billing foreign clients usually operate under different VAT logic, so this difference is less critical for them.

Everyday factors are worth considering too: rent in Lisbon is traditionally lower than in Madrid or Barcelona, and access to public healthcare and banking services for foreigners who have recently obtained a residence permit is already well established in both countries as of 2026. Regardless of the country, registering as self-employed requires roughly the same basic set of documents:

- a taxpayer identification number (NIF in Portugal or NIE in Spain);

- proof of residential address;

- an open local bank account;

- registration of the business activity with the tax authority.

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So which is ultimately more advantageous: Portugal or Spain?

There's no single answer – it all depends on expected income, the type of clients, and your planning horizon.

Portugal looks more attractive in the first year specifically: the social-contribution exemption combines with the reduced IRS tax base, so both of the biggest expense lines get lighter at once.

Spain's tarifa plana keeps the monthly contribution almost as low, but after a year or two the contribution starts depending on real income on a progressive scale, and IRPF can vary by region of residence. If you plan to steadily grow your income and build the business long-term, Spain's more flexible system of adjusting contributions to income may prove more convenient. The final decision is best made with a calculator in hand and after consulting a local accountant – rates and thresholds are revised every year.

Whichever tax system turns out to be more advantageous, the decision to relocate doesn't start with a calculator – it starts with the right set of documents for your specific "citizenship – destination country" pair. Requirements for self-employment in Spain and Portugal differ even for citizens of the same country, depending on the path you take to get there – a self-employment visa, a family reunification permit, or another basis. Missing a single certificate at this stage means risking a delayed application review or even a refusal before you even get to registering your own business. 

Visit World's "Work Guide" lets you check the current list of documents separately for Spain and for Portugal – just enter your citizenship and chosen destination country. The information arrives by email as a PDF within minutes, so you can compare the requirements of both countries before making a final decision.

Check your document list in Visit World's Work Guide and move toward your own business abroad without unnecessary delays. 

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