Do freelancers in Portugal charge VAT (IVA) to clients in the US or UK?
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Navigating the maze of the Portuguese tax system is a rite of passage for every expat, and nothing causes more late-night anxiety than the dreaded IVA. I remember sitting at my kitchen table in Lisbon, staring at my first invoice for a UK client, paralyzed by the fear that a single wrong click on the Finanças portal would bring the tax authorities knocking on my door. This guide clears the fog, explaining exactly why you generally do not charge VAT to clients in the US or UK and how to document it correctly to stay legal.
Understanding the Concept of Place of Supply for Services
The first thing you need to wrap your head around is the "Place of Supply" rule. In the world of Value Added Tax (VAT), or Imposto sobre o Valor Acrescentado (IVA) as we call it here, the tax is generally due in the country where the service is consumed, not necessarily where it is produced. If you are sitting in a cafe in Porto designing a website for a company in New York, the "supply" is technically happening in the United States.
For most professional services—think consulting, programming, marketing, or writing—the Portuguese tax code follows the "B2B" (Business to Business) rule. This rule dictates that when you provide services to a taxable person (a business or a registered freelancer) outside of Portugal, the service is not subject to Portuguese IVA. Instead, the responsibility for any applicable local taxes shifts to the client. This is a massive relief for those of us trying to keep our prices competitive on the global market.
However, the distinction between the European Union and "Third Countries" like the US and UK is vital. While EU transactions often require a VIES registration and specific "Reverse Charge" mentions, the US and UK are treated as non-EU exports. You are essentially exporting your intellectual labor. When you are Issuing Green Receipts (Recibos Verdes): VAT (IVA) and Withholding Tax, you must select the correct exemption code to signal to Finanças that this money is leaving the EU zone.
The VAT Threshold and the Simplified Regime
Before you worry about international invoices, you need to know if you are even required to be in the "IVA regime" at all. Portugal offers a small business exemption under Article 53 of the CIVA. As of 2025 and moving into 2026, the threshold for this exemption has been steadily adjusted. If your annual turnover is below €15,000, you can remain in the "Isenção" (Exemption) category for small players.
If you fall under this threshold, you don't charge IVA to anyone—not to the local bakery in Lisbon, and certainly not to a tech firm in London. However, once you cross that €15,000 line, you move into the monthly or quarterly VAT reporting cycle. This is where most expats get confused. Even if you are "in the regime," you still won't charge the 23% to your US or UK clients, but you will have to report these "zero-rated" sales on your quarterly declarations.
Many freelancers make the mistake of thinking that because they don't charge IVA to their American clients, they don't need to file the quarterly VAT return. Trust me, the Portuguese tax office does not like silence. You still need to submit a "nil" or "informative" return showing your international sales. If you are just starting out, it is worth looking into Starting as a freelancer: Simplified Regime vs Organized Accounting in Portugal to see which path saves you more on administrative headaches.
Issuing Your First International Recibo Verde
When you log into the Portal das Finanças to issue your first invoice (the Recibo Verde), the interface can feel like something out of a 1990s computer lab. To invoice a client in the US or UK, you will need their full business name, address, and their local tax identification number (like an EIN in the US or a VAT number in the UK).
The magic happens in the dropdown menu for the "Regime de IVA." Because you are not charging the standard 23%, you must select an exemption clause. For services provided to clients outside the EU, the most common clause is "IVA – autoliquidação Regra geral art.º 6.º, n.º 6, alínea a)". This essentially tells the Portuguese government: "This service was supplied at the client's location, and they are responsible for any tax."
Managing the currency is the next hurdle. Your Recibo Verde must be issued in Euros, but your client likely wants to pay in Dollars or Pounds. I highly recommend using Wise to receive these funds. They provide you with local US or UK bank details, allowing your client to pay via a standard domestic transfer. Once the money hits your Wise account, you can convert it to Euros at the mid-market rate, which is often significantly better than what a traditional Portuguese bank like Millennium or CGD would offer you. This ensures that the amount you receive matches the amount you declared on your How to correctly fill out a Recibo Verde on the Finanças portal.
Mandatory Phrases and Documentation for US/UK Clients
While the Recibo Verde is the official legal document in the eyes of the Portuguese state, your international clients will usually expect a "commercial invoice" as well. This is a document you create yourself (perhaps in Canva or Word) that looks more professional and includes your branding.
To ensure both documents are bulletproof for an audit, you should include a specific "Reverse Charge" note. For the UK, even though they have left the EU, the principle remains similar for digital services. A simple line stating "Service subject to reverse charge in the country of receipt" is usually sufficient. For the US, since there is no federal VAT, the service is simply considered "outside the scope" of Portuguese tax.
| Client Location | Business Type | VAT Rate | Required Note on Invoice |
|---|---|---|---|
| United States | B2B (Company) | 0% | Reverse Charge / Article 6 |
| United Kingdom | B2B (Company) | 0% | Reverse Charge / Article 6 |
| Portugal | B2B or B2C | 23% | Standard Rate |
| EU (Excl. Portugal) | B2B (VAT Registered) | 0% | Reverse Charge / EU VAT Directive |
| US/UK | B2C (Individual) | 23% | Generally taxed in PT (Exceptions apply) |
This table covers the broad strokes, but keep in mind that "B2C" (Business to Consumer) transactions are a different beast. If you are teaching a private yoga class over Zoom to an individual in London, the rules might require you to charge Portuguese IVA because the client is not a taxable business entity. This is a common trap for those Freelancing in Portugal (Recibos Verdes): Taxes, Social Security, and Setup. Always verify if your client has a business tax ID before assuming the 0% rate.
Quarterly VAT Declarations and Reporting Requirements
Even if 100% of your clients are in the US and you never collect a single Euro of IVA, you are still an active part of the VAT system once you are "in the regime." Every three months, you must tell the government how much you "exported." This happens via the "Declaração Periódica de IVA."
This is actually a moment where you can make the system work for you. In Portugal, if you are in the VAT regime, you can often "deduct" the IVA you pay on business expenses. If you buy a new laptop at Worten or pay for a coworking space in Lisbon, you are paying 23% IVA. Since you aren't collecting any IVA from your US clients to "offset" this, the government may actually owe you a refund, or more commonly, a credit toward future taxes.
Many of my expat friends use their tax savings to build a safety net. If you have extra cash from a big US contract, putting it into a high-yield account like Trade Republic can help that money grow while you wait for your next Social Security payment to come due. Just remember that you should always keep your "tax money" separate from your "living money." If you are also dabbling in the crypto space with a platform like Binance, remember that those gains have their own reporting rules, which are separate from your freelance VAT obligations. For more on the reporting side, check out VAT returns for freelancers: How to submit the Declaração Periódica de IVA.
Managing the "Recibos Verdes" Workflow
The rhythm of freelancing in Portugal is quarterly. Every three months, you will handle your VAT, and every three months, you will also handle your Social Security (Segurança Social) declarations. It can feel like a part-time job just to stay compliant.
One tip I wish I had known earlier: always keep a spreadsheet of your exchange rates. Since you are issuing the Recibo Verde in Euros but being paid in USD or GBP, there will always be a slight discrepancy between the day you "invoiced" and the day you were "paid." The Portuguese tax office usually wants you to use the exchange rate from the day the service was completed or the invoice was issued. Using Wise makes this much easier because they provide clear statements with the exact Euro value received.
If you find this whole process overwhelming, you aren't alone. Most of us eventually reach a point where we hire a professional. It is a smart move to look for Finding a reliable English-speaking Contabilista for your complex IRS return once your business grows. A good accountant will ensure you are using the correct "Isenção" codes and can help you navigate the nuances of the Portuguese Taxes for Expats: IRS, Tax Residency, and Filing Deadlines.
Common Pitfalls and How to Avoid Them
The biggest mistake I see is the "Double Invoice" error. This happens when a freelancer issues a Recibo Verde on the Finanças portal and also sends a separate PDF invoice to the client, but doesn't clearly link the two. Your PDF invoice should always reference the number of the Recibo Verde to show they are the same transaction.
Another pitfall is forgetting the "NISS" and "NIF" requirements. To work legally as a freelancer, you need both your tax number (NIF) and your social security number (NISS). If you are new to the country, getting these in order is the first step before you even think about an invoice. You can find the steps for this in the guide on Opening a Sole Proprietorship (Trabalhador Independente) in Portugal.
Finally, don't forget that if you are in your first year of activity, you might be eligible for a The first-year Social Security exemption for new freelancers in Portugal. While this doesn't change your VAT situation, it significantly boosts your take-home pay from those US and UK contracts. Every Euro counts when you are trying to build a life in the sun.
Final Thoughts on International Invoicing
Working with the US and UK from Portugal is one of the best ways to enjoy the "Portuguese lifestyle" while maintaining a "Global income." Once you get past the initial hurdle of understanding that you don't need to add 23% to your international prices, the process becomes second nature.
Just remember:
- Check if you are over the €15,000 threshold.
- If yes, issue Recibos Verdes with the Article 6 exemption code.
- Keep your business address and tax IDs for the US/UK clients updated.
- File your quarterly reports even if they are zero-rated.
- Use a reliable tool like Wise to handle the currency conversion so you don't lose your profits to bank fees.
The administrative burden of Portugal can be heavy, but once you find your rhythm, it’s a small price to pay for a Tuesday afternoon surf or a long lunch in a sunny plaza.
Disclaimer
The information provided in this article is for educational and informational purposes only and does not constitute professional tax, legal, or financial advice. Tax laws in Portugal are subject to frequent changes, and individual circumstances vary significantly. Always consult with a certified Portuguese accountant (Contabilista Certificado) or a qualified legal professional before making any decisions regarding your tax status or invoicing procedures. Use of the mentioned financial platforms is at your own risk.
