Invoicing Foreign Clients from Portugal: When Is There VAT?

• For most services, a business customer established outside Portugal is outside Portuguese VAT: art. 6.º n.º 6 CIVA makes taxable only the services to taxable persons established in Portugal and to non-taxable persons when you are the provider here.
• A private individual is different. A service to a consumer in another EU country is normally taxable in Portugal, and so is one to a consumer outside the EU unless it is on the list in art. 6.º n.º 11.
• The invoice must state why no VAT is charged (art. 36.º n.º 5 e)) and the customer's name, address and tax number (n.º 5 a)).
• A service to a business in another EU country that is not taxable in Portugal must go in the declaração recapitulativa (art. 29.º n.º 1 i)).
• Some services follow other rules, such as those tied to real estate, events, passenger transport and electronic services to consumers.

Invoicing a client abroad from Portugal does not mean you never charge VAT. Whether Portuguese IVA applies depends on three things: whether the customer is a business or a private individual, where the customer is established, and what kind of service you supply. For most services, a business customer outside Portugal is outside Portuguese VAT and the invoice carries no IVA, but a consumer usually is not. This page sets out the rule, the exceptions, what the invoice must say and the EU declaration that follows. If you are still setting up, start with the recibos verdes guide.

Three questions decide it

The place-of-supply rules are in art. 6.º of the CIVA. For services, n.º 6 makes a service taxable in Portugal in two cases: it is supplied to a taxable person whose seat or establishment is in Portugal, or it is supplied to someone who is not a taxable person by a provider whose activity is based in Portugal. A service to a business abroad matches neither case, so it is not taxable here. A service to a private individual abroad matches the second case, so it is, unless an exception applies.

The list in n.º 11 is what the draft rules of thumb usually miss. It covers the transfer of copyright, patents, licences and trademarks, advertising, the services of consultants, engineers, lawyers, economists and accountants and study offices in all fields, data processing and information, banking, financial and insurance operations, the supply of staff, and the hire of movable goods other than vehicles. If your customer is a private individual established outside the Community, those services are not taxable in Portugal. A service that is not on the list, and is not caught by another exception, follows the general rule.

Who counts as a business customer

Art. 6.º n.º 6 a) refers to the taxable persons of art. 2.º n.º 5, which are the people who independently and habitually carry on a business or profession (art. 2.º n.º 1 a)), and legal entities that must be registered for intra-EU transactions. In practice you need to know that the customer is acting as a business, and to be able to show it later. For a customer in another EU country, ask for the VAT number, check it on the European Commission's VIES service, and keep a record of the check with the date. For a customer outside the EU, keep something that shows it is a business, such as its registration document or tax identification number. A freelancer buying for private use, or a sole trader who gives no business details, is a consumer for this purpose.

What the invoice must say

Art. 36.º n.º 5 requires an invoice to show the names, addresses and tax numbers of the supplier and, when the customer is a taxable person, of the customer, the price net of tax, the rate and tax charged, and the reason why VAT is not applied if that is the case (alínea e)). When you issue the invoice or recibo on the Portal das Finanças, you choose the reason from the list the Portal offers. For a business customer abroad the legal basis is the place-of-supply rule of art. 6.º n.º 6, which is also the reference the AT itself uses when it defines the recapitulativa. Pick the option that names that rule, and use the same reason for every invoice to the same kind of customer.

It is not an exempt supply. Exempt operations are those the code lists as exempt, and they carry their own reasons. A service outside the scope of Portuguese VAT because of where it is located is a different thing, and stating an exemption reason for it puts the wrong legal basis on the invoice.

The recapitulativa for EU business customers

When you supply a service to a taxable person established in another EU country and the service is not taxable in Portugal because of art. 6.º n.º 6 a), art. 29.º n.º 1 i) requires you to list it in the declaração recapitulativa. It is filed electronically. Its contents are the customer's country and VAT number and the value, per customer. The period follows how you file your periodic VAT return (art. 41.º): if you file monthly, the recapitulativa is due by the 20th of the following month. If you file quarterly, it is due by the 20th of the month after the quarter (RITI art. 30.º n.º 1). The AT's instructions add that a quarterly filer whose intra-EU supplies of goods exceed €50,000 in the current or any of the four previous quarters must file monthly. That threshold is about goods, so it rarely applies to a freelancer who sells only services. The obligation arises only for periods in which you had such operations. The AT allows services that are exempt in the customer's country, such as financial and insurance services, to be left out. For VAT return deadlines and the exemption, see the VAT guide for freelancers.

If you are under the article 53 exemption

Art. 53.º n.º 1 exempts a taxable person established in Portugal who has not carried out export operations or connected activities and whose annual turnover in Portugal in the previous year did not exceed €15,000. The exemption is about VAT you would otherwise charge on operations in Portugal. A service that is not taxable in Portugal in the first place does not become taxable because you are exempt, and a service to a consumer in the EU that would be taxable here is covered by the exemption. What this guide does not settle is which reporting duties, including the recapitulativa, apply to someone in the exemption who supplies services to EU businesses. Confirm that with the AT or a certified accountant before your first such invoice, and see the article 53 section of the VAT guide for the thresholds.

Services with their own place-of-supply rule

• Services connected to real estate are taxed where the property is (n.º 7 a) and n.º 8 a)). An architect designing for a building in Portugal charges Portuguese VAT whoever the customer is.
• Admission to cultural, artistic, scientific, sporting or educational events, and ancillary services, are taxed where the event takes place (n.º 7 e) and n.º 8 e)).
• Passenger transport, restaurant services and short-term hire of a means of transport follow where they are carried out or where the vehicle is made available.
• Electronic services, telecommunications and broadcasting supplied to a private individual established outside Portugal are not covered by the consumer rule in n.º 6 b) (n.º 9 h)). So Portugal does not locate them here under that rule, the customer's country decides the rest, and whether you must register somewhere else is outside this guide.

What does not change

VAT treatment does not change your IRS category. Income from a foreign client is still category B income for a Portuguese resident, and your CAE code and activity registration apply as usual.

Checklist before the first foreign invoice

• Is the customer a business or a private individual? Ask for business details and keep them.
• Where is it established: Portugal, another EU country, or outside the EU?
• Is your service on one of the special lists (real estate, events, transport, electronic services)?
• For an EU business, check the VAT number on VIES and record the date of the check.
• State the reason VAT is not charged on the invoice, using the Portal option that names the place-of-supply rule.
• Diarise the recapitulativa for every period with a service to an EU business, and confirm your filing frequency.
• If you are under the article 53.º exemption, confirm the reporting duties before the first EU business invoice.