The obligation to contribute to Social Security is a fundamental issue for all entrepreneurs and managers in Portugal. In the case of managing partners, there are often doubts about when and how these contributions should be made - especially if the managing partner is paid or not.
In this article, we will explain in a simple and straightforward manner the main differences in the contribution obligations of paid and unpaid managing partners, as well as the administrative procedures to take into account in order to comply with the law.
Who is considered a Managing Partner?
Legally, a managing partner is an individual who, in addition to holding shares in a company (usually in the form of quotas), exercises management or administrative functions.
In Portugal, this figure appears more frequently in private limited companies (Lda.) and has the following characteristics:
- Responsible for the day-to-day management of the company;
- Holds the power to represent the company vis-à-vis third parties;
- You may (or may not) receive remuneration for the performance of your duties.
The appointment of a managing partner usually appears in the articles of association or in the minutes of the general meeting, and must be formally communicated to the Social Security and Tax Authorities, as required by current legislation.
Contribution Obligations for Paid Managing Partners
When the managing partner receives remuneration for the performance of his duties, the total contribution rate of 34.75% applies to the amount of the remuneration. This rate is distributed as follows:
- 23.75% to be paid by the employer (the company);
- 11% borne by the employee (managing partner).
Contributory base
The basis on which contributions are levied is the remuneration actually received by the managing partner. However, there is a minimum limit:
- The amount on which contributions are based can never be less than the Social Support Index (IAS).
Associated Rights
By contributing to Social Security, the paid managing partner has access to various social benefits, such as:
- Sickness benefit;
- Parental allowance;
- Unemployment benefit (under certain conditions);
- Disability or old age pension.
These contributions ensure the necessary social protection for the managing partner himself and, at the same time, guarantee compliance with the company's legal obligations.
Contribution Obligations for Unpaid Managing Partners
It is possible that a managing partner does not receive any remuneration for his managerial duties. Nevertheless, in certain situations, the law imposes an obligation to contribute to social security. This happens when:
- The managing partner is not covered by another compulsory social protection scheme (for example, if he or she is not employed or is not a pensioner).
Contributory base
If there is no remuneration, the contribution base is the minimum amount corresponding to the IAS.
Contribution rate
The applicable rate remains at 34.75% of the IAS and must be paid as follows:
- 23.75% borne by the company;
- 11% borne by the managing partner himself.
Administrative Procedures
To formalize the absence of remuneration, the managing partner must:
- Communicate the situation to the Social Security by submitting documentation such as the memorandum and articles of association or the minutes of the general meeting , which clearly state that you are a manager without remuneration;
- Ensuring that all updates to Social Security are made within the legal deadlines.
Exceptions and Exemptions
Despite the above rules, there are cases in which the managing partner may be exempt from contributing:
- Accumulation of functions with another professional activity
If the managing partner has another professional activity that involves contributions to a compulsory social protection scheme, as long as the income from this activity is higher than the IAS, they may be exempt from contributions as managing partner. - Disability or old-age pensioner
Anyone who is already a pensioner (disability or old-age) under any compulsory national or foreign social protection scheme may also be exempt from contributing as a managing partner.
Required documentation
In order to prove these situations of exemption, the managing partner must submit this to Social Security:
- Declaration or proof that you are covered by another compulsory social protection scheme with income above the IAS;
- In the case of pensioners, proof of invalidity or old age pension.
Administrative Procedures
The communication of situations in which managing partners start, change or cease their activity to the Social Security system is fundamental to guaranteeing the correct contributory framework.
What should be communicated?
- Appointment of a new managing partner (start-up).
- Change in pay status (from unpaid to paid or vice versa).
- Termination of office (when the managing partner ceases to hold office).
Required documents
- Copy of the articles of association or minutes of the general meeting showing the appointment and remuneration of the managing partner.
- FormRV1011-DGSS - Communication of start of activity/Change of elements/suspension/cessation of activity to employer, available on the Social Security portal.
Communication deadlines
Communication must be made within 10 working days of any change (appointment, change in remuneration or termination of office).
Consequences of Non-Compliance with Contribution Obligations
Failure to comply with Social Security obligations can have serious consequences for the company and the managing partner:
- Interest on arrears: Late contributions are subject to interest on arrears, increasing the amount owed.
- Administrative offense proceedings and fines: Social Security can trigger proceedings that result in large fines.
- Impact on Social Protection: The managing partner may see their social protection rights (access to benefits, pensions, etc.) jeopardized as a result of missing contributions.
- Regularity of contributions: The company may be prevented from taking part in public tenders or from accessing certain support if its contribution situation is not regularized.
Final considerations
The distinction between remunerated and unremunerated managing partners is essential for determining social security contributions. In both cases, the rates can be as high as 34.75% of the tax base, the latter being defined by the actual remuneration or, if there is no remuneration, by the value of the IAS.
In order to ensure compliance with the law and the social protection of the managing partner, it is essential to keep the information up to date with Social Security, complying with the deadlines and legal formalities.
If you have any doubts, it is advisable to enlist the help of certified accountants or a network of specialized professionals, such as BTOCNET, to ensure that all your tax obligations are met in a rigorous and timely manner.
Want to know more?
- See the Social Security Portal for official forms and information.
- Talk to BTOCNET for personalized support in accounting and management.
