You have three clients: one withholds income tax, another does not, and the third is a company abroad. Each invoice feels like a different puzzle.
It is not complicated — these are just three situations with distinct rules. Here is how each one works.
Client 1: Portuguese company with withholding tax
Most Portuguese companies withhold income tax at source when paying freelancers. The rate for residents is 23% (Art. 101 CIRS).
What happens:
- You issue an invoice for €1,000
- The company pays you €770 (withholds €230)
- The €230 is handed over to the tax authority by the company, as an advance payment of your annual IRS
How you fill in the receipt:
- Company NIF
- Amount: €1,000
- VAT: 0% — Art. 53 CIVA (if you are exempt)
- Withholding tax: ✓ 23%
At year end, in your IRS declaration, those €230 already withheld are credited against what you owe. If you overpaid, you get the difference back.
Client 2: individual or company without withholding
Individuals never withhold income tax. Some small businesses (sole traders, other independent workers) also do not withhold. If your client is not required to withhold, you receive the full amount.
What happens:
- You issue an invoice for €500
- You receive €500 in full
- You pay all the IRS in the annual declaration (April–June of the following year)
How you fill in the receipt:
- Client NIF (or 999999999 for individuals without a NIF)
- Amount: €500
- VAT: 0% — Art. 53 CIVA
- Withholding tax: ✗ No
Note: with individual clients you need to set aside part of what you receive for IRS. Practical rule: keep 15–25% of each receipt so you are not caught off guard in April.
Client 3: foreign company
Clients outside Portugal — in the EU or elsewhere — do not withhold Portuguese income tax. That is your responsibility.
What happens with VAT:
- For EU clients (companies with a European VAT number): apply the reverse charge rule — you invoice without VAT and indicate “VAT — reverse charge”
- For clients outside the EU: no VAT (export of services)
- For private individuals in the EU: apply Portuguese VAT normally
How you fill in the receipt:
- Foreign NIF or 999999990 (foreign client without a Portuguese NIF)
- Amount agreed in euros (or the contract currency)
- VAT: 0% — reverse charge (for EU companies) or export exemption
Summary table
| Client type | IRS withholding | VAT on invoice | You receive |
|---|---|---|---|
| Portuguese company (≥ €10,000/year) | 23% | 0% (if exempt) | 77% of amount |
| Portuguese individual | No | 0% (if exempt) | 100% of amount |
| EU company | No | 0% (reverse charge) | 100% of amount |
| Non-EU company | No | 0% (export) | 100% of amount |
What changes in practice
Have several clients with different conditions? Each invoice is filled in the same way — only two fields change: withholding yes/no and the VAT exemption reason.
The tracking work is the same too: your e-fatura records everything automatically and in the IRS declaration all your income appears together, regardless of its source.
✅ In summary
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Portuguese companies withhold 23% income tax at source — you receive less immediately, but that amount has already been paid to the tax authority on your behalf. It is credited in your annual IRS.
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Individuals and foreign clients do not withhold — you receive the full amount and pay all the IRS in the annual declaration. Always set a percentage aside.
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With FIZ the software automatically adjusts the withholding and VAT fields for each client type — you do not need to memorise the rules for each situation.
