VAT in Portugal as a solo entrepreneur: deceptively simple, frustratingly complex.

I've been a solo entrepreneur in Portugal for a few years now. When people ask me how VAT works here, I always give the same answer: the basics are simple, and the details will make you want to lie down.

The Portuguese call it IVA (Imposto sobre o Valor Acrescentado). Same concept as VAT everywhere else. You charge it on your services, collect it from the client, and hand it over to the state. If you're a freelancer on the simplified regime, there are really only two scenarios to start with: either you're exempt, or you charge VAT, 23% on the mainland. Let me explain both, and then let me explain why it gets worse.

The two starting points

When you register as a solo entrepreneur in Portugal, the tax authority puts you in one of two VAT situations.

If your turnover in Portugal in the previous year was under €15,000.00 (the 2026 threshold) and you don't export goods, you qualify for Art. 53 of the CIVA (Código do IVA). This means you don't charge VAT on your sales. Zero percent. When you issue a Recibo Verde or an invoice to a domestic client, you include exemption code 122, which tells the recipient "I'm a small business exempt from VAT under Portuguese law." For purely domestic work you don't collect VAT, you don't remit VAT, and you don't file periodic VAT returns.

There is one catch, and almost every expat freelancer hits it. When you buy a service from a foreign supplier (AWS, Google Workspace, Microsoft 365), you become liable for the VAT on that purchase yourself, and you file a periodic VAT return for the periods in which that happens. Art. 53 covers what you sell, not what you buy from abroad.

If you're above the threshold (or you voluntarily opted into the normal VAT regime), you charge 23% on mainland Portugal. You collect it from your clients, file quarterly VAT returns, and pay the difference between the VAT you collected and the VAT you paid on deductible business expenses.

For domestic clients (a company in Lisbon hiring you to build their website) this is clean. You issue an invoice with 23% IVA, they pay you the invoice total (less any IRS they withhold at source, unless you're exempt from withholding), you set aside the VAT portion and send it to the state. Done.

If this were the whole story, I wouldn't be writing this post.

Three territories, three rate tables

Here's the first thing that catches people off guard: Portugal doesn't have one set of VAT rates. It has three.

Mainland Portugal uses 23% (standard), 13% (intermediate), and 6% (reduced). Madeira uses 22%, 12% and 4%. The Azores use 16%, 9% and 4%. These are the autonomous regions, and they have their own rates. See the full VAT rates table for all three territories.

Foreign clients: where it gets interesting

When you invoice a business client outside Portugal, a concept called "place of supply" determines whether Portuguese VAT applies at all.

The rule for B2B services (CIVA Art. 6) is straightforward in principle: the place of supply is where the customer is established, not where you are. So if I'm in Lisbon providing software development services to a company in Stockholm, the place of supply is Sweden. Portuguese VAT doesn't apply. I charge 0%.

This is the rule that applies to the vast majority of solo entrepreneurs providing services to foreign business clients. Developers, designers, consultants, writers, translators, if your client is a business in another country and you're providing a service (not a physical good), you almost certainly fall under Art. 6, and the answer is 0% Portuguese VAT.

The legal reason is the same wherever that business is, inside the EU or not. What differs is the paperwork around it.

EU clients and the reverse charge

When your client is a business in another EU member state, the reverse charge mechanism shifts the VAT obligation to the buyer. You charge 0% Portuguese VAT, and your client self-accounts for VAT in their own country at their local rate.

On your invoice, you use exemption code 115, whose basis is Art. 6.º n.º 6 a) CIVA read a contrário, and which prints the mention IVA - autoliquidação. You also need to include your client's EU VAT number and verify it through VIES (the EU's VAT number validation system). And if you are in the normal VAT regime you report the transaction in your Recapitulative Statement (a periodic filing that lists your intra-EU supplies of services and goods), which under the Article 53 exemption is no longer required for operations from 1 July 2025 onward.

This system works well. The tax is paid, just in the client's country instead of yours.

But here's a distinction that trips people up constantly.

EEA is not EU (and your accountant cares)

Norway, Iceland, and Liechtenstein are in the European Economic Area (EEA) but not in the European Union. For VAT they are third countries, exactly like the United States.

The invoice doesn't change. When I invoice a Norwegian company for consulting services, I charge 0% Portuguese VAT, use the same code 115 and print the same IVA - autoliquidação, because the legal basis is the same Art. 6.º n.º 6 a) read a contrário.

What changes is everything around the invoice. VIES and the Recapitulative Statement are EU systems, so there's no VIES check and no Recapitulative Statement entry. And on the periodic VAT return, sales to a business in a third country go in a different field from sales to a business in another EU member state. If you mix them up, your quarterly filings will be wrong.

I learned this the hard way when my accountant flagged a Norwegian client I'd been reporting as intra-EU. The invoice was correct. The reporting wasn't.

B2C: the asymmetry nobody warns you about

Everything I've described so far is B2B, services to business clients. Services to private individuals (B2C) follow different rules, and they're less intuitive.

For B2C services, the general rule flips: the place of supply is where you (the supplier) are established. So if a private individual in Germany hires me for freelance work, the place of supply is Portugal, and I charge Portuguese VAT at 23%.

The same default applies to a private individual in the United States. What changes outside the EU is a closed list of services in Art. 6.º n.º 11 CIVA: the services of consultants, engineers, lawyers, economists and accountants, advertising, data processing and the supply of information, and the licensing of copyright and similar rights, among a few others. If the service is on that list and the private client is established outside the EU, Portuguese VAT doesn't apply: 0%, code 090. Electronically supplied services to someone outside Portugal have a rule of their own too.

So for private clients the line isn't simply EU versus non-EU. It depends on what you sell. For business clients the answer is the same everywhere outside Portugal: 0% and code 115.

The exceptions that break the pattern

The place of supply rules I've described are the general rules for services. There are specific categories of services where different rules apply, usually tied to a physical location:

Property-related services: architecture, construction, property management, real estate valuation. The place of supply is where the property is located. If you're a Portuguese architect designing a house in France, French VAT applies, not Portuguese.

Events and catering: admission to conferences, fairs and similar events is taxed where the event physically takes place, and so is catering. If you cater a corporate event in Spain, Spanish VAT rules apply.

Short-term hire of vehicles: VAT where the vehicle is handed over to the customer.

Digital services to EU consumers: this is a big one for anyone selling digital products (SaaS, e-books, pre-recorded online courses) to private individuals in other EU countries. Once your cross-border sales of these to EU consumers pass €10,000.00 in a calendar year, you charge VAT at the rate that applies to that product in the consumer's country. Below that, Portuguese VAT applies unless you choose otherwise. The OSS (One-Stop Shop) scheme is optional: it lets you report and pay all of this through a single portal in Portugal instead of registering for VAT in every EU country. A course taught live by a person is not an electronically supplied service.

Most freelancers providing professional services (development, design, consulting) don't hit these exceptions. But if you do anything involving physical locations or digital products sold to consumers, you need to know they exist.

VAT exemption codes: the AT portal's own language

Whenever you issue an invoice or Recibo Verde with 0% VAT, the Portuguese tax authority requires you to specify a motivo de isenção, an exemption reason code. This is the AT portal's way of asking: "Why aren't you charging VAT? Which specific legal provision applies?"

There are dozens of codes, see the full VAT exemption codes reference if you need a specific one. The ones that matter most for solo entrepreneurs:

Code 122: Art. 53 exemption. This is the small business exemption: your previous year's turnover in Portugal was under €15,000.00, so you don't charge VAT. It is not the code for every invoice, though: Art. 53.º only reaches operations taxable in Portugal, so it covers your domestic work and not a B2B service supplied to a business outside Portugal.

Code 115: Art. 6.º n.º 6 a) CIVA, a contrário. The service is supplied where your foreign business client is, EU or not, so it is outside Portuguese VAT and your client accounts for any VAT due. This one does not depend on your regime, which is the part that catches people.

Code 090: Art. 6.º specific rules, n.º 7 onward. A narrower case than its name suggests: a listed service to a private client outside the EU, for example. Not the answer for a foreign B2B client.

These codes aren't arbitrary bureaucracy. The code is the legal mention printed on your invoice. Code 122 tells the client "this supplier isn't charging VAT because they're exempt." Code 115 tells the client "this supplier isn't charging VAT because the supply isn't taxed in Portugal, so any VAT due is yours to account for." The distinction matters for the client's own VAT accounting.

Being on Art. 53 does not collapse this to one code. Localisation is decided before exemption: Art. 6.º sits in the Incidência chapter, so a service supplied to a taxable person in another Member State is not taxable here at all and there is no Portuguese exemption left to claim. AT states it plainly in ficha doutrinária n.º 12969, saying that independentemente of whether the supplier is in the regime especial de isenção, the invoice takes IVA - autoliquidação. So: 122 on your domestic invoices, 115 on that one.

If you're on the normal VAT regime, foreign business clients get code 115 as well, and domestic clients get the applicable rate.

The practical takeaway

If you've read this far and your head is spinning, here's the good news: for the vast majority of solo entrepreneurs providing services, the actual decision tree is small.

Domestic business client? Charge 23% (or 0% with code 122 if you're Art. 53 exempt).

Foreign business client (EU)? Charge 0%, code 115, verify their VAT number on VIES, and report in the Recapitulative Statement if you are in the normal VAT regime. If the VAT number doesn't check out, the answer can change.

Foreign business client (non-EU, including Norway)? Charge 0%, code 115, IVA - autoliquidação. No VIES, no Recapitulative Statement.

Foreign private individual (EU)? Charge 23%, same as domestic (unless you're Art. 53 exempt).

Foreign private individual (non-EU)? Charge 23% by default (unless you're Art. 53 exempt). If your service is on the Art. 6.º n.º 11 list (consulting, engineering, legal, accounting, advertising, data processing and the others), charge 0% with code 090.

That covers most situations for freelance developers, designers, consultants, translators, and writers. The exceptions I described (property, events, digital products to consumers) are real but they affect specific industries.

The complexity isn't in any single rule. Each rule makes sense on its own. The complexity is in the number of rules, the distinctions between them (EU vs. EEA, B2B vs. B2C, general services vs. location-specific services), and the fact that the exemption code is the legal mention on the invoice: a wrong code makes the invoice itself wrong, even when the amount is right.

If you're unsure which scenario applies to you, we built a VAT guide that walks you through the decision tree step by step. Answer a few questions about your business and your client, and it tells you the rate and the exemption code. It's the tool I wish I'd had when I was trying to figure out whether my Norwegian client counted as "EU" (it doesn't).

Related: Invoicing foreign clients as a solo entrepreneur in Portugal, how the two-step invoicing process works for foreign clients. What happens when you cross €15,000 mid-year, the two-tier tolerance mechanism and when registration becomes immediate.