Reverse Charge
Autoliquidação do IVA
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A VAT mechanism where the buyer, not the seller, accounts for VAT. Standard for cross-border B2B services within the EU.
The reverse charge is an EU VAT rule that shifts the responsibility for reporting VAT from the seller to the buyer. Instead of the seller collecting VAT and paying it to their tax authority, the buyer self-assesses the VAT in their own country.
For Portuguese solo entrepreneurs (trabalhadores independentes), this comes up whenever you provide services to a business in another EU country. You issue the fatura without VAT, and your client handles the VAT on their end.
How it works in practice
Say you're a Portuguese freelance developer billing a German company. Normally, you'd charge 23% Portuguese VAT. But under the reverse charge:
- You verify the client's VAT number on VIES, it's valid
- You issue an invoice without VAT, noting the exemption reason
- The German company reports the VAT in Germany at the German rate (19%)
- You report the invoice as income in Portugal, but with zero VAT
The client effectively pays VAT to their own tax authority instead of to yours. This prevents businesses from having to reclaim VAT across borders, which would be slow and bureaucratic.
The exemption note on the invoice
Portuguese tax law requires you to state why no VAT is charged. For reverse charge on B2B services, the typical references are:
- Article 6(6)(a) of the CIVA: the Portuguese VAT code rule that places the supply in the buyer's country
- Article 196 of the VAT Directive: the EU-wide rule making the buyer liable for VAT
Descodify adds this automatically when you invoice an EU business for services.
Only EU member states
Reverse charge is strictly an EU VAT mechanism. It applies to the 27 EU member states, not to EEA countries like Norway, Iceland, and Liechtenstein, which are outside the EU VAT system despite being part of the single market. Switzerland, the UK (post-Brexit), and all other non-EU countries are also excluded.
For services to businesses in these countries, Portuguese VAT simply doesn't apply under the place-of-supply rules (Article 6 CIVA). The practical result is the same (you don't charge VAT) but the legal basis and reporting are different:
- EU B2B services → reverse charge (buyer self-assesses VAT in their country)
- Non-EU services (including EEA, UK, Switzerland) → outside the scope of Portuguese VAT entirely
Why it matters for cash-basis freelancers
Since reverse charge invoices carry no VAT, the VAT timing issue disappears. Income under the simplified regime is declared based on payment, not invoicing, so issuing a reverse charge fatura to a foreign client doesn't change when you owe IRS or Social Security contributions.
Frequently asked questions
When does reverse charge apply to Portuguese freelancers?
When you provide services to a VAT-registered business in another EU country. Instead of charging Portuguese VAT, you issue the invoice without VAT and the client accounts for it in their own country. This is the default rule for B2B services under Article 6 of the CIVA.
Do I still need to report reverse charge invoices to the tax authority?
Yes. The invoice must be issued and reported normally, it still counts as income for IRS purposes. The only difference is that no VAT is charged. You must include a note on the invoice referencing the VAT exemption (typically Article 6(6)(a) of the CIVA or Article 196 of the VAT Directive).
How do I verify my client qualifies for reverse charge?
Check their VAT number on VIES (the EU's VAT Information Exchange System). If the number is valid, the client is VAT-registered and reverse charge applies. If they're not VAT-registered (or they're a consumer, not a business) you charge Portuguese VAT at the normal rate.
Does reverse charge apply to clients in Norway, Switzerland, or the UK?
No. Reverse charge only applies within the EU's 27 member states. EEA countries (Norway, Iceland, Liechtenstein) are not part of the EU VAT system, and neither are Switzerland or the UK (post-Brexit). For services to businesses in these countries, Portuguese VAT simply doesn't apply under the place-of-supply rules (Article 6 CIVA). The result is the same (no VAT on the invoice) but the legal basis is different.
What happens if I accidentally charge VAT on a reverse charge invoice?
You'd be charging VAT you shouldn't have. The client can't deduct it (it's not valid in their country), and you'd owe it to the Portuguese tax authority. You'd need to issue a credit note to correct the original invoice and reissue it without VAT.
Related terms
A formal invoice issued through certified software or the AT portal. For solo entrepreneurs on the simplified regime, income tax and Social Security remain cash-basis (tied to payment) regardless of when the invoice is issued.
VIESVAT Information Exchange SystemThe EU's free online tool for verifying VAT numbers. Confirms whether a business is VAT-registered and, in Portugal's case, reveals the name and address behind the number.
Proforma InvoiceFatura ProformaA commercial document that looks like an invoice but has no fiscal or legal meaning, essentially a detailed quote that doesn't create any tax obligation.