Guide to Registering and Paying VAT as a Freelancer in Portugal

If you are a freelancer who provides products or services to customers in Portugal, you must register and pay for VAT in Portugal. This abides by the “destination principle” of the European Union VAT system. The standard Portuguese VAT rate is 23%, with reduced rates of 13% and 6% sometimes applicable based on the products you sell. It is administered by The Portuguese Tax and Customs Authority, which is also in charge of all updates and tax-related information in Portugal. The threshold in Portugal is EUR 12,500, which means you only need to register for VAT if and when your annual revenue exceeds this amount. 

If keeping up with all these VAT rules as a freelancer seems overwhelming, we’ve got you. This guide provides all the information you need to know about the Portuguese VAT system. Let's get started!

VAT Rates in Portugal for freelancers

What are the various VAT rates in Portugal? The Portuguese government has assigned four different VAT rates, and freelancers must charge their clients based on the type of services or goods they transact.

  • The Standard Rate - Unless the items or services you offer are in the reduced rate or zero-rate category, you should charge the standard VAT rate of 23%.
  • The Reduced Rate of 13% - The reduced rate applies to items such as restaurant food, wine, diesel for agriculture, entrance fees to some cultural events, some goods and services to be used during transportation, etc.
  • The Reduced Rate of 6% - The further reduced rate of 6% applies to some books, specific newspapers, specific medical and dental care programs, disabled persons’ medical equipment, fruit juices, some works of arts, collector’s items, etc.
  • Zero VAT Rate (0%) - Some services like international passenger transport are exempt from VAT and are charged a 0% rate; however, they are still eligible for returns. Hence, you should keep a record of the sales of these services and create a report based on your returns.

When should you register for VAT as a freelancer in Portugal?

If your annual turnover meets or exceeds EUR 12,500, you are liable to charge VAT to your customers. In addition, you must ensure you satisfy the following conditions: 

  1. You sell or self-supply goods or services
  2. The goods or services you sell or self-supply are VAT liable 
  3. Your sales occur as a commercial activity
  4. You sell or self-supply in Portugal

Self-employed individuals whose annual turnover does not exceed EUR 25,000 are not required to declare the commencement of their activity. Instead, they can choose to issue a single invoice for their goods and services over a year, indicating the total turnover for that year. Once you satisfy these conditions, you must register for VAT to avoid penalties. 

If you are an expat freelancer conducting economic activities in Portugal, you must register for VAT. If you apply as a non-resident, you may complete the registration without setting up a local corporation. While there is no threshold for VAT registration in Portugal for expats, they are required to follow local reporting, payment and compliance protocols.

How to register for VAT in Portugal as a freelancer

As a sole proprietor in Portugal, you must submit a declaration of commencement of activity before beginning the registration process. In addition, if your practice is liable to register for VAT, you must prepare the following documents for submission:

  • Information about your annual revenue, taxable financial transactions, and bank account information.
  • A power of attorney for the fiscal representative (if someone else is representing you)

If you are a permanent resident or citizen of Portugal, you do not need a fiscal representative. If you are based in an EU member state outside of Portugal, you can submit your declaration of commencement of activity via a Portuguese representative. However, if you are a non-EU expat freelancer with no residential address in Portugal, you require a fiscal representative for all VAT related purposes.

Registering Online:

You can register directly by following the steps on the Portuguese Tax and Customs Authority website. Note that the website is only offered in the Portuguese language.

Registering Offline:

You can submit the documents mentioned above in person to any Portuguese Tax and Customs Authority department. You can also submit your declaration of commencement of activity at the Citizens’ Bureau (Loja de Cidadão). Following the 'effective date of registration' (i.e. the day you register for VAT), you must pay VAT to the Portuguese Tax and Customs Authority quarterly.

Alternatively, you can also register using the Mini One-Stop Shop, an EU-wide tax system that allows you to consolidate all of your EU VAT in one single tax return. This scheme is optional but convenient and beneficial if you have customers in multiple countries within the EU, including Portugal. MOSS allows you to avoid registering in each Member State of consumption. 

VAT obligations for freelancers in Portugal

Registering for VAT is only the first step. From the day of your registration's effective date, you must:

  • Charge the correct VAT rate
  • Pay any VAT owed to Portuguese Tax and Customs Authority
  • File VAT returns
  • Maintain VAT records and a VAT account.

 

Furthermore, every VAT-registered individual is required to:

  • Keep track of all purchases, accounts and transactions for at least eight years.
  • Keep a running total of their VAT account.
  • Ensure that their VAT invoices are in electronic format, authentic, correctly signed and that the disclosure details are outlined in the Portuguese VAT codes.
  • Use only approved foreign currency exchange rates.

Please note that you cannot claim VAT on records of items that have already been received or sent and if you haven’t issued VAT invoices on the sale of those items.

Report VAT as a Freelancer in Portugal

Freelancers can issue a single invoice once a year reporting the sales of all their goods and services if their yearly turnover is below EUR 25,000. However, if your annual turnover is less than EUR 650,000, you have to report VAT quarterly. On the other hand, if your annual turnover is greater than EUR 650,000, VAT accounts should be maintained and reported monthly.

How to keep VAT and invoicing records as a freelancer in Portugal

If you are based in Portugal but provide services to clients in other EU countries, it may be convenient for you to opt for the aforementioned VAT MOSS system. In this case, you must maintain your VAT records for around ten years. You can choose to store these records electronically, on paper, or in a software application in a precise, readable, complete, and simple form. 

Generally, as a freelancer, you must maintain a record of the following documents:

  • Printed copies of the invoices you send out,
  • Received invoices
  • Agreements on sell-billing.
  • The self-billing vendors' names, addresses, and VAT numbers.
  • Notes (debit/credit)
  • Records of imports and exports.
  • You must also preserve records of bank statements, check stubs, cash books, till rolls, and paying-in slips in addition to your VAT account.

 

Automate VAT tasks with Xolo as a freelancer

Automating daily admin tasks will go a long way towards helping you focus your energy into growing your business and maintain a better work-life balance as a freelancer. Save your time and get rid of admin hassles with Xolo like magic. With Xolo Go, you can legally and simply invoice your clients in Portugal and ones overseas. You'll get in your toolbelt an automated VAT calculator, invoice generator and business bank account to manage all your finances from one place. 

If you want to start your own business from anywhere without any compliance risks, Xolo Leap will help you with an e-Resident company registration and provide you with all you need to run it smoothly.

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