Withholding Tax
Retenção na Fonte
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A percentage of income tax that a client with organised accounting (every Portuguese company) deducts from payments to freelancers and sends directly to the tax authority, as an advance on the freelancer's IRS.
If you're freelancing in Portugal and you've just invoiced your first Portuguese client, you might be surprised when the payment arrives lighter than expected. That's withholding tax, called retenção na fonte in Portuguese, and it catches a lot of expat freelancers off guard.
How it works
When a client that keeps organised accounting (contabilidade organizada) pays you for services, it doesn't send you the full amount. Every Portuguese company is in that position. The client deducts a percentage and pays it directly to the tax authority (Autoridade Tributária) on your behalf. It's a prepayment of your annual income tax (IRS), not an extra charge.
For activities specifically listed in the Art. 151.º CIRS table, the rate is 23% since 1 January 2025, reduced from 25% by the 2025 State Budget (OE2025, Lei 45-A/2024). For a 1,000-euro fee at that rate, with no VAT on the invoice (the percentage always applies to the amount before VAT):
- You receive 770 euros from the client
- The client sends 230 euros to the tax authority
- At year-end, those 230 euros are credited against your IRS bill
Source: OCC on OE2025.
The rates
| Rate | Applies to (Art. 101.º n.º 1 CIRS) |
|---|---|
| 23% | Professional activities specifically listed in the Art. 151.º table, which includes architects, doctors, engineers, consultants and IT specialists (alínea b)) |
| 11,5% | Other services, including the table's catch-all code 1519 Outros prestadores de serviços (alínea c)) |
| 16,5% | Intellectual or industrial property and know-how, earned by the original holder (alínea a)) |
Your rate depends on the activity you are paid for, so check your registered activity codes.
A higher rate, if you ask for it
You can ask a client to withhold at any whole-number rate above the legal one, for example 25% instead of 23%. You do it with a written declaration to the client (Art. 98.º n.º 6 CIRS). It is useful if you'd rather have a larger prepayment than a bill at filing time.
Foreign clients usually don't withhold
This is the detail that confuses many expat freelancers: the duty falls on clients that keep, or must keep, organised accounting in Portugal. A company in Berlin, Amsterdam or New York normally pays you the full invoice amount. No deduction, no withholding. The exception is a foreign company with a Portuguese permanent establishment that keeps organised accounting here.
A private individual in Portugal doesn't withhold either. The obligation sits with the payer, not with you.
When your client should not withhold
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 same figure as the Art. 53 VAT threshold. Income from intermediation commissions is excluded. You cannot use it if last year's income reached that amount, and withholding applies again from the month after you reach it during the year.
There is no special exemption for your first year of activity. A new freelancer uses the same test.
You claim it on the receipt for the payment (your Recibo Verde, receipt or invoice-receipt) with the mention «Sem retenção, nos termos do n.º 1 do artigo 101.º-B do Código do IRS.», and you tell your client. If you forget, the client will withhold anyway.
Year-end reconciliation
Everything balances out when you file your annual IRS return. The total withholdings from all your clients are summed up and subtracted from your tax liability. Overpaid? You get a refund. Underpaid? You pay the difference. It's essentially a forced instalment plan for your income tax, managed by your clients throughout the year.
For more on the Portuguese term, see the retenção na fonte entry.
Perguntas frequentes
What is withholding tax for freelancers in Portugal?
When a client that keeps organised accounting (every Portuguese company does) pays a freelancer for services, it withholds a percentage of the payment and sends it to the tax authority as a prepayment of the freelancer's income tax (IRS). The freelancer receives less than the invoice amount, but the withheld amount is credited against their annual tax bill.
How much withholding tax will my Portuguese client deduct?
It depends on the activity. Professional activities specifically listed in the Art. 151.º CIRS table are withheld at 23% since 1 January 2025, down from 25%. Other services, including the table's catch-all code 1519, are withheld at 11,5%, and intellectual or industrial property income you hold as the original owner at 16,5% (Art. 101.º n.º 1 CIRS).
Can I ask my client to withhold a higher rate?
Yes. Under Art. 98.º n.º 6 CIRS you can give the client a written declaration asking it to withhold at a whole-number rate above the legal one, such as 25%. It means a smaller bill when you file your IRS.
Do I pay withholding tax when invoicing foreign clients?
Normally no. The duty falls on payers that keep, or must keep, organised accounting in Portugal, so a foreign client pays the full invoice amount, unless it has a permanent establishment in Portugal with organised accounting. You settle your income tax through your annual IRS return.
Can I be exempt from withholding tax in Portugal?
Yes, if you expect your income for the year to stay below 15 000 € and last year's did not reach it (Art. 101.º-B CIRS); income from intermediation commissions is excluded. Withholding applies again from the month after you reach that amount. There is no separate first-year exemption. You claim it with the mention «Sem retenção, nos termos do n.º 1 do artigo 101.º-B do Código do IRS.» on your receipt and tell the client.
Is withholding tax an extra tax on top of my income tax?
No. It's not an additional tax, it's a prepayment of your annual income tax (IRS), collected in instalments by your clients throughout the year. When you file your annual return, the withheld amounts are credited against your total tax liability. If too much was withheld, you get a refund.
Termos relacionados
Income tax that a client with organised accounting (every Portuguese company) withholds when it pays a solo entrepreneur for services, and sends directly to the tax authority as an advance on the freelancer's IRS.
Recibo VerdeGreen ReceiptA combined invoice-receipt (fatura-recibo) issued by solo entrepreneurs in Portugal through the Portal das Finanças when they receive payment for services.
Trabalhador IndependenteSelf-Employed WorkerThe Portuguese term for an independent worker or sole entrepreneur, the equivalent of a freelancer or sole trader in other countries.
Regime SimplificadoRegime Simplificado de Tributação · Simplified Tax RegimePortugal's simplified IRS regime for self-employed individuals, where taxable income is calculated using fixed coefficients applied to gross revenue. Companies have a separate simplified regime under IRC.