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!
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.
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:
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.
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:
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.
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.
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.
Registering for VAT is only the first step. From the day of your registration's effective date, you must:
Furthermore, every VAT-registered individual is required to:
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.
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.
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:
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