Do I need to charge VAT as a freelancer in Portugal?

VAT (IVA) is separate from IRS and from social security, and it is the piece freelancers most often discover late.

The Article 53 exemption

If your turnover in the previous calendar year stayed under 15,000 euros, you can invoice under the Article 53 regime with no VAT charged. Your invoices carry a mention of the exemption, and in exchange you cannot reclaim VAT on your own business purchases. You choose this when you open your activity at Financas, and the system checks your turnover each year.

Crossing the threshold

Go over 15,000 euros and you must notify Financas and start charging VAT, at 23 percent on mainland Portugal, with lower rates in Madeira and the Azores and reduced rates for a small list of services. Registration brings periodic VAT returns, monthly or quarterly depending on turnover, and the right to deduct input VAT.

The move is not retroactive on invoices already issued under the exemption, but the deadline to declare the change is tight, so watch your running total from around 12,000 euros rather than waiting for the year end.

Foreign clients

Most remote freelancers bill abroad, which changes the picture. Services supplied to a business established in another EU member state are generally taxed where the client is, under the reverse charge, so you invoice without Portuguese VAT and the client accounts for it. That requires a valid VAT number on both sides and registration in the VIES system, plus a recapitulative statement. Services to clients outside the EU are usually outside the scope of Portuguese VAT.

Note that reverse charged and out of scope turnover still counts towards your 15,000 euro exemption threshold, so billing only foreign clients does not keep you exempt forever.

Alongside VAT

Portuguese business clients also withhold 23 percent IRS at source on recibos verdes, with an exemption available for low earners. That is a prepayment of your income tax, not an extra cost.

The freelancer tax and social security guide covers registration, invoicing and the first year timeline.