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 23%. 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 annual revenue is under €15,000 (the 2026 threshold; it's been raised a few times over the years), you qualify for Art. 53 of the CIVA (Codigo do IVA). This means you don't charge VAT at all. Zero percent. When you issue a Recibo Verde or an invoice, you include exemption code 122, which tells the recipient "I'm a small business exempt from VAT under Portuguese law." You don't collect VAT, you don't remit VAT, and you don't file periodic VAT returns. It's genuinely simple.

If you're above €15,000 (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 what you collected and what you spent 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 gross amount, 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 22/12/4. The Azores use 16/9/4. These are the autonomous regions, and they set their own rates. See the full VAT rates table for all three territories.

Most freelancers providing services never think about this because the standard rate applies to most professional services and all three territories use their respective standard rate. But if you're a mainland business providing services to a client in the Azores, which rate applies? The answer depends on the nature of the service and where it's performed. For most B2B services, the place of supply rules (which I'm about to get into) resolve it. But for things like construction work or on-site consulting, the rate of the territory where the work happens applies.

It's an edge case. But edge cases are where VAT lives.

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.

But the reason it's 0% matters. And the reason differs depending on where your client is.

EU clients and the reverse charge

When your client is a business in another EU member state, something specific happens. Under the reverse charge mechanism, the VAT obligation shifts 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 090 (referencing Art. 6 of CIVA). You also need to include your client's EU VAT number and verify it through VIES (the EU's VAT number validation system). And you report the transaction in your Recapitulative Statement (a periodic EU-specific filing that tracks cross-border B2B services).

This system works well. It's been in place for decades. The tax is paid, just in the client's country instead of yours. Both tax authorities are happy.

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. This matters more than you'd think.

The EU reverse charge mechanism, VIES validation, and the Recapitulative Statement are all EU systems. They don't extend to EEA countries that aren't EU members. So when I invoice a Norwegian company for consulting services, I still charge 0% Portuguese VAT, the place of supply is still Norway under Art. 6, but the legal mechanism is different. There's no reverse charge. No VIES check. No Recapitulative Statement entry.

The result on your invoice looks almost identical: 0% VAT, exemption code 090. But the underlying legal basis is "place of supply outside Portuguese territory" rather than "EU reverse charge." Your accountant needs to categorize these differently. The tax authority treats them differently in reporting. And 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%.

But if a private individual in the United States hires me for the same service, the place of supply is outside the EU entirely, and Portuguese VAT doesn't apply. Zero percent.

Read that again. EU private individual = Portuguese VAT. Non-EU private individual = no Portuguese VAT. The EU B2C case is the odd one out, and it catches people off guard because the B2B rule works the other way around (0% for both EU and non-EU business clients, just with different mechanisms).

There's a logic to it, the EU wants to ensure VAT is collected somewhere within the single market, but it's not intuitive.

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.

In-person events and catering: conferences, workshops, catering services. VAT applies where the event physically takes place. If you cater a corporate event in Spain, Spanish VAT rules apply.

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

Digital services to EU consumers: this is a big one for anyone selling digital products (SaaS, e-books, online courses) to private individuals in other EU countries. Under the OSS (One-Stop Shop) scheme, you charge VAT at the rate of the consumer's country. A German consumer pays 19%, a French consumer pays 20%, etc. You report and remit all of this through a single portal in Portugal rather than registering for VAT in every EU country separately.

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 secret language

Whenever you issue an invoice or Recibo Verde with 0% VAT, the Portuguese tax authority requires you to specify a motivo de isencao, 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 two that matter most for solo entrepreneurs:

Code 122: Art. 53 exemption. This is the small business exemption. Your annual revenue is under €15,000, so you're not in the VAT system at all. You use this code on every invoice, domestic or foreign.

Code 090: Art. 6 place of supply. This is for when you are in the VAT system but the service is supplied outside Portuguese territory. You use this for foreign B2B clients (both EU and non-EU) and for non-EU B2C clients.

These codes aren't arbitrary bureaucracy. They communicate specific legal information to the tax authority and to your client. Code 122 tells the client "this supplier isn't charging VAT because they're exempt." Code 090 tells the client "this supplier isn't charging VAT because the tax point is in your country, not mine." The distinction matters for the client's own VAT accounting.

If you're on Art. 53, you use code 122 for everything, the small business exemption overrides the place of supply rules because you're not in the VAT system in the first place.

If you're on the normal VAT regime, you use code 090 for foreign services and charge the applicable rate for domestic services.

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 090, verify their VAT number on VIES, report in Recapitulative Statement.

Foreign business client (non-EU)? Charge 0%, code 090. 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 0%, code 090.

That covers probably 95% of 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 getting the exemption code wrong doesn't change the amount on the invoice but does create reporting problems down the line.

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 while preserving cash-basis accounting. What happens when you cross €15,000 mid-year, the two-tier tolerance mechanism and when registration becomes immediate.