Benefitting from Portugal's NHR scheme as a freelancer with foreign clients

1/ by effective tax rate, do you mean it includes “social security tax + income tax” or is that just the income tax ?

That’s Social Security plus Income Tax. (Or SS + PIT in the shorthand.) Maybe effective tax rate is the wrong term, but essentially the total figure that needs to be paid to local tax authorities.

2/ could you please provide quick steps of how you get to that 31 % number ?

  1. Gross income: 50,000
  2. Simplified regime ‘Professional Services’ Coefficient: 75%
  3. Net income: 37,500 (50,000 * 0.75)
  4. PIT 20% NHR rate: 7,500 (37,500 * 0.2)
  5. Social Security taxable income – the lower of:
    1. 70% of your gross income (50,000 * 0.7 = 35,000) or
    2. IAS @ 435 (12 * 12 * 435.76 = 62,749.44)
  6. Social Security at 21.4%: 7,490 (35,000 * 0.214)
  7. Take home (Gross - PIT - SS = Net): 50,000 - 7,500 - 7,490 = 35,010
  8. Effective tax rate: 29.98% (1 - (35,010 / 50,000))

The number is slightly different as social security is calculated according to ~70% of your gross not your net income (figure after applying vocational co-efficient) as I originally thought. (In fact SS calculation is a little more involved than this putting you into a tier based on some multiple of IAS, but crucially for the self-employed there is a cap at 12 times IAS according to my understanding.)