Retenção na Fonte

Retenção na fonte translates literally to "retention at the source": the tax is retained before it reaches you. If you're a trabalhador independente and your client keeps (or must keep) organised accounting (contabilidade organizada), as every Portuguese company does, that client doesn't pay you the full invoice amount. It holds back a slice for income tax (IRS) and sends it to the Autoridade Tributária on your behalf.

This isn't an extra tax. It's a prepayment of your annual income tax, collected in instalments throughout the year instead of in one lump sum.

Who withholds

The duty sits with the payer, and the test is the payer's accounting, not its nationality (Art. 101.º n.º 1 CIRS). A company, or a sole trader on organised accounting, must withhold. A private individual does not, and neither does a sole trader on the simplified regime.

A client abroad normally has no Portuguese organised-accounting obligation, so it pays the full invoice. The exception is a foreign company with a permanent establishment in Portugal that keeps organised accounting here: it withholds like a Portuguese company.

How the rates work

The rate depends on what kind of income you are paid for (Art. 101.º n.º 1 CIRS):

Income	Rate
Professional activities specifically listed in the Art. 151.º CIRS table (consultants, IT specialists, designers, architects, doctors, engineers and many more)	23%
Other services, including the table's catch-all code 1519 Outros prestadores de serviços	11,5%
Intellectual or industrial property and know-how, earned by the original holder	16,5%

The table rate was 25% until the 2025 State Budget (OE2025, Lei 45-A/2024) cut it, from 1 January 2025. If a Portuguese company owes you a 1,000-euro fee for consulting work, it pays you 770 euros and sends 230 euros to the tax authority. The percentage applies to the fee before VAT, so if you charge VAT on top, the client also pays you that VAT in full.

Source: OCC on OE2025.

Asking for a higher rate

You can ask your client to withhold more than the legal rate, at any whole-number rate above it: 25% instead of 23%, for example. You do it with a written declaration to the client, who does the withholding (Art. 98.º n.º 6 CIRS). Some freelancers choose this so the bill at filing time is smaller.

When your client should not withhold (dispensa)

Under Art. 101.º-B CIRS you can tell a client not to withhold if you expect your income for the year to stay below 15 000 €, the Art. 53 VAT threshold. Income from intermediation commissions is excluded. Two limits apply:

1. Last year counts too. If your income last year reached that amount, you cannot use the dispensa this year.
2. It ends when you cross it. Once your income in the year reaches the threshold, withholding applies again from the following month.

There is no separate first-year exemption. In your first year you use the same test as everyone else.

The dispensa is not automatic. The receipt for the payment (your Recibo Verde, receipt or invoice-receipt) carries the mention «Sem retenção, nos termos do n.º 1 do artigo 101.º-B do Código do IRS.», and you tell the client. If you don't, the client withholds, and is right to.

Separately, the client never has to withhold an amount below 25 euros on a single payment.

The annual reconciliation

At tax time, all the amounts withheld throughout the year are credited against your total IRS liability. If the withholdings exceed what you owe, you get a refund. If they fall short, you pay the difference. Think of it as forced savings toward your tax bill, managed by your clients on your behalf.