“Look, João, I just received €1,230 from the client!” — Sofia said to her husband while checking her MB Way. “No, Sofia. You received €1,000. The other €230 belong to the state.”
This conversation happens in thousands of households across Portugal every month. This is where the biggest confusion about VAT begins. Let us be clear once and for all: that extra money you charge clients is not yours. You are simply the state’s tax collector.
The VAT chain: how the money travels
Imagine the journey of a pastel de nata from the farm to your table:
- The egg producer sells eggs to the factory for €100 + €6 VAT = €106
- The factory makes the pastéis de nata and sells them to a supermarket for €500 + €30 VAT = €530
- The supermarket sells you a box of pastéis de nata for €10 + €1.30 VAT = €11.30
At each stage, VAT is charged. But here is the central mechanism: each business deducts the VAT it paid from the VAT it collected. The factory charges €30 but only remits €24 to the state (€30 − €6 it paid to the egg producer). The supermarket does the same.
You, as the final consumer, pay and deduct nothing. That is the whole point of VAT: it is a tax on final consumption.
Your role as a freelancer
As a freelancer registered for VAT, you are another link in this chain. When you provide a service, you act as a tax collector on behalf of the state.
Example — Ana, a designer:
- She creates a logo for a company for €1,000
- Because she invoices more than €15,000 per year, she must charge VAT
- On the invoice: €1,000 + €230 VAT (23%) = €1,230
- Of the €1,230 she receives: €1,000 is hers, €230 belongs to the state
⚠️ The most common mistake: treating VAT as income. It is not. If you spend the entire €1,230, you will have no money left to remit to the state. Always keep VAT mentally separate from your own income.
When you do not charge VAT (and that is perfectly fine)
If you invoiced less than €15,000 in the previous year, you can apply the exemption under Article 53 of the CIVA. You do not charge VAT — but you also cannot deduct the VAT on your professional expenses.
Example — Miguel, a programmer:
- He invoiced €12,000 in 2025 → in 2026 he is VAT-exempt
- He builds a website for €800 → the client pays €800 (no VAT)
- He buys a computer for €1,230 (€1,000 + €230 VAT) → he pays the full €1,230 and reclaims nothing
The exemption simplifies things considerably — but it means you cannot reclaim input VAT on purchases.
Quarterly declaration deadlines
If you are VAT-registered, you file a quarterly VAT return four times a year:
| Quarter | Period | Deadline |
|---|---|---|
| 1st | January – March | 20 May |
| 2nd | April – June | 20 September (summer extension) |
| 3rd | July – September | 20 November |
| 4th | October – December | 20 February (following year) |
Missing these deadlines results in fines. With the right accounting software, declarations are submitted automatically before the deadline.
What happens when you cross the €15,000 threshold
Once you exceed the exemption threshold, you must notify the AT through the Finance Portal (a declaration of changes) within 15 working days. From that point on, all your invoices must include VAT at 23%.
It means more administrative responsibility — but it also means you can deduct the VAT on your professional expenses, which can offset the burden depending on your volume of spending.
✅ In summary
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The VAT you charge is not yours — you are the middleman between the client and the state. Always keep that amount separate from your own income.
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If you invoice less than €15,000 per year, you are exempt — you do not charge VAT but you also cannot deduct VAT on expenses. Above that threshold, you start charging and deducting.
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With FIZ quarterly VAT declarations are filed automatically — no worrying about deadlines or forms.
