Monthly retainer: how to invoice fixed clients

Hugo, a freelance developer, landed a dream deal: a client pays him €1,500 a month to be available and handle whatever comes up. It’s called an avença (a retainer) - a fixed, recurring amount for ongoing services. It’s great for cash flow, but it changes two things in your tax life worth understanding before you sign.

What it is (and how you invoice it)

A retainer is a fixed monthly amount for a continued provision of services (maintenance, consultancy, support, social-media management, etc.). For tax, it has no special regime: each month you issue an invoice (or fatura-recibo, when you invoice and get paid in one act) for the retainer amount, just as for any service.

So day to day it’s simple - what changes is the scale and the concentration on a single client.

What changes for tax

The retainer counts as normal category B income. The rules are the same as for any service, just applied to a fixed, repeated amount:

The retainer month by month

Income tax (IRS)

Category B income: in the simplified regime, the taxable base is 75% of the amount (0.75 coefficient, for art. 151.º professions)

Social Security

In the standard quarterly regime, 21.4% on 70% of the retainer (there are exemptions, the ±25% option and minimums) - predictable, because the amount is fixed

VAT (IVA)

If you're not exempt (art. 53.º or art. 9.º) and the operation is located in Portugal, you charge VAT (usually 23% in mainland) on the retainer

Withholding tax

If the client is an entity required to withhold (and you're not exempt), they withhold 23% (art. 151.º professions) when paying each retainer

The upside: because the amount is always the same, it’s the easiest income to plan a freelancer can have - you know with good approximation what you’ll invoice and pay (the final income tax still depends on the whole year).

The catch: economic dependence

Here’s what almost no one thinks about when signing. If the retainer is large relative to the rest of what you invoice, that client can pass 50% of your services (category B) income - and then Social Security starts to look at the two of you differently.

You gain (economically dependent)

Above 50% from a single client, you become 'economically dependent'
It's one of the conditions for the cessation-of-activity benefit if they let you go

It shifts to the client (contracting entity)

The client may become a 'contracting entity'
It may start paying its own Social Security contribution (if all conditions are met)

It’s not a bad thing - it may even help you meet one of the conditions for the cessation benefit, which a freelancer with many clients doesn’t have as easily. But your client may not know that a large retainer may turn it into a contracting entity, with its own contribution - worth raising beforehand. (That obligation only arises when three things come together: more than 50% of your services income coming from it, you being subject to contributions, and having had at least 6 times the IAS in services income during the year - in total, not just from that client.)

Careful: a retainer shouldn’t tie you down. Keep, if you can, more than one client - not only for the tax-dependence risk, but because losing a retainer that was 80% of your income is a shock. A retainer is a good anchor; don’t let it become your only one.

✅ In summary

A retainer is a fixed monthly amount for ongoing services - you issue one invoice (or fatura-recibo) a month, like any service (income tax on 75%, Social Security 21.4% × 70%, VAT if not exempt). The advantage is that it’s predictable.
Mind economic dependence: if one client passes 50% of your services income, you become economically dependent (which helps meet one of the conditions for the cessation benefit) and it may become a contracting entity (with its own contribution, if all conditions are met). Raise this with the client before signing.
With FIZ retainers are recorded and recurring, and you immediately see each client’s weight in your total - so you notice in time if you’re nearing 50%. See the plans.