How to Pay International Contractors in Portugal [2025]

Opening up hiring to a global team brings opportunities to work with a massive array of talent. With today’s technology, hiring contractors in places like Portugal is easier than ever, no matter where your international business is based. However, when it’s time to pay your workers, you must know the correct steps to comply with Portugal’s labor laws and tax laws.

Learn how to correctly classify, onboard, and pay contractors according to Portugal’s employment laws so you’re ready to go as soon as you receive your first invoice.

Step #1: Classify your workers

There are some great benefits to hiring Portuguese self-employed contractors rather than full-time employees. For example, employers are not responsible for administering employee benefits for self-employed workers or deducting taxes from contractors’ paychecks. Instead, the contractor deals with their own tax remittance and social security payments (Note: The only exception is if a contractor earns up to 80% of their revenue from you. In those instances, you are responsible for a 5% social security tax on any payments made to that contractor).

However, misclassifying workers in Portugal can come with harsh penalties, including:

• Retroactive contributions to social security and the Wage Compensation Fund

• Compliance with work accident insurance requirements

• Retroactive credits for paid holidays, Christmas and holiday allowances (statutory bonuses), meal allowances, and other benefits afforded to full-time employees

• Fines upwards of €9,000

If a Portuguese worker raises a misclassification claim, the Portuguese courts will look at the contract agreement as well as the arrangement in practice (i.e. how your contractor actually completes their work for you) to determine whether the arrangement is a sham.  Below, learn more about the factors they consider.

Step #2: Determine the best way to pay your contractors

After you develop your contract agreement, the next step is figuring out the best way to pay your contractor. With the rise of global workforces and remote work, employers now have more choices than ever for making international payments. Here are some options:

• Bank wires. In this case, you would open a Portuguese bank account and use that to deposit funds into your contractor’s accounts. You may also use your own bank to send a global wire transfer.

• International money orders. Money orders can be slow, as you will need to physically purchase a money order and then the contractor will need to physically deposit it. Money orders can also come with fees and bad exchange rates.

• Digital wallets or payment platforms. Not every digital payment platform is available in Portugal. For example, CashApp and Venmo are not available. You may choose to use platforms like Wise to transfer funds. However, note that exchange rates can change daily, making it difficult to predict your outgoing amounts.

• Global payroll services. In most cases, contractors aren’t included in regular payroll, as they aren’t subject to the same withholdings. Instead, contractors invoice for their services, which is then processed by accounts payable.

Step #3: Use global payroll software to process payments 

As you saw in the previous step, there are many options for paying contractors in Portugal, but the fastest and simplest way is paying contractors through global payroll software.

With Rippling, you can pay contractors across the world. Here’s a preview of how Rippling’s global payroll system works:

Step #4: Calculate and file your tax forms

Employers aren't required to withhold and pay taxes for contractors in Portugal. Instead, freelancers issue what are known as green receipts (recibos verdes). After invoicing, contractors will issue a green receipt, which stands as proof of payment and which they use to declare their income for tax purposes. Self-employed individuals must use this any time they complete a service or sell a product. Be sure to always keep records of payments to contractors and any green receipts you receive.

If your company is based in the United States, have any international contractors fill out an IRS Form W-8BEN. This certifies their foreign contract status.

Effortlessly manage contractors around the world

Growing your international workforce is easy with Rippling. You can pay international contractors in Portugal and around the world all in one place.

FAQs about paying contractors in Portugal