Home > Our Guide to Green Receipts (Recibos Verdes) in Portugal
Published at 2 November 2023
The Green Receipts system, introduced in the 1980s, was designed to provide a simplified way for freelancers and self-employed individuals to declare their income and pay taxes.
In 2003, changes were made to the Green Receipts system to make it more user-friendly, including the introduction of an online portal and recent years have seen increased efforts to digitalize the process, making it easier for individuals to issue and manage Green Receipts.
That said, the process can often seem confusing and complex, especially for foreigners or people who don’t speak Portuguese well, so we’ll break down the process for you.
- Green Receipts are essential for compliance with Portuguese tax regulations.
- They provide a transparent record of transactions between service providers and clients.
- Green Receipts are used for calculating and paying income tax and social security contributions.
Issuing Green Receipts in Portugal involves a relatively complex process. Let's walk through the steps:
2. Navigate to ‘Faturas e Recibos Verdes’ under the services section and select ‘Emitir’.
3. Choose either ‘Fatura ou Fatura-Recibo’ (the standard ‘recibo verde’) or ‘Recibo’ (a confirmation receipt for previously billed amounts).
4. Select the specific service or task you performed and input the service date.
6. In the ‘Importância recebida a título de:’ section, opt for ‘pagamento dos bens ou dos services’ to specify the billing reason.
7. Detail the service provided in the ‘Descriçao’ field.
8. Enter the service's cost in ‘Valor Base’.
9. Choose the appropriate VAT (IVA) regime in the ‘Regime de IVA’ section, either as exempt or standard.
10. In the ‘Base de Incidencia em IRS’ section, select ‘isento’ if your earnings are below €10,000 or 100% if they exceed that amount.
11. The ‘Imposto de Selo’ value is typically set at 0.
12. Finally, hit the ‘Emitir’ button, print out the resulting document, add your signature, and forward it to your client.
You’ll then need to pay any associated taxes and social security contributions and make sure you keep records of all issued Green Receipts for tax reporting purposes.
Avoiding common mistakes when issuing Green Receipts is crucial. Some of the most frequent errors include incorrect client details, underreporting income, or failing to meet reporting deadlines. Here are some tips to prevent these mistakes:
Understanding the tax system for freelancers in Portugal is a key element to correctly filing your green receipts. Let's break it down:
In Portugal, taxpayers, especially self-employed individuals and sole proprietors, have the option to choose between two primary tax regimes: the Organized Regime (Regime Organizado) and the Simplified Regime (Regime Simplificado). Here's a breakdown of the differences between the two:
1. Simplified Regime (Regime Simplificado)
This regime is designed for individual entrepreneurs, professionals, and small businesses. It's based on a simplified calculation of income, where tax authorities assume a certain percentage of the income as costs, without the need for the taxpayer to present actual expenses.
There's an income ceiling to be eligible for this regime. If the annual gross income exceeds a certain threshold (e.g., €200,000, but this can change), you may be required to switch to the organized regime.
There's no legal requirement to maintain detailed accounting records or hire an accountant, however, it’s strongly recommended, and it's essential to keep invoices and receipts for a minimum period.
2. Organized Regime (Regime Organizado)
This regime is more suitable for businesses with higher turnovers or more complex operations. It requires detailed bookkeeping and accounting.
The taxable income is determined based on the actual revenues minus the actual deductible expenses. All expenses related to the activity (e.g., rents, salaries, utilities) can be deducted, provided they are properly documented. There's no income limit for this regime and any taxpayer, regardless of their income, can opt for the organized regime.
Detailed accounting records must be maintained. It's essential to hire an accountant or use accounting software to ensure compliance with all tax and accounting obligations.
The primary difference lies in the calculation of taxable income and the level of accounting detail required. The Simplified Regime is more straightforward and is based on predetermined coefficients, while the Organized Regime requires detailed bookkeeping and allows for the deduction of actual expenses. The choice between the two often depends on the nature of the business, the volume of transactions, and the taxpayer's preference.
In Portugal, Value Added Tax (VAT), known as "IVA" (Imposto sobre o Valor Acrescentado), is a crucial consideration for freelancers. Here's a breakdown of the VAT system for freelancers in Portugal:
1. VAT Registration
Threshold: Freelancers are required to register for VAT if their annual turnover exceeds a certain threshold (e.g., €10,000, but this can change). Below this threshold, registration is optional.
Process: Registration is done through the tax authorities, either online via the Portal das Finanças or at a local tax office.
2. VAT Rates
Standard Rate: The general VAT rate in Portugal is 23%. This rate applies to most goods and services.
Intermediate Rate: Some goods and services, such as food and beverages, are taxed at a reduced rate of 13%.
Reduced Rate: Essential goods like certain foods, books, and medical products have an even lower rate of 6%.
3. VAT Exemptions
Small Business Exemption: Freelancers with a turnover below the VAT registration threshold are exempt from charging VAT. However, they also cannot reclaim VAT on their expenses.
Specific Services: Some professional services, like medical or educational services, may be exempt from VAT.
4. VAT Returns
Frequency: Depending on the freelancer's turnover and the nature of their business, VAT returns can be filed monthly, quarterly, or annually. Monthly and quarterly filings are more common for freelancers with higher turnovers.
Process: VAT returns are filed electronically via the Portal das Finanças. Freelancers must report the VAT charged on their sales (output VAT) and the VAT paid on their purchases (input VAT). The difference is then either paid to the tax authorities or reclaimed.
5. Special VAT Regimes
Cash Basis Regime: Freelancers can opt for this regime, where they only account for VAT when payment is received, rather than when the invoice is issued. This can help with cash flow, especially if clients are slow to pay.
6. VAT on International Services
EU Clients: For B2B services provided to clients in other EU countries, the "reverse charge" mechanism applies. This means the freelancer doesn't charge VAT, but the client accounts for it in their own country.
Non-EU Clients: Services provided to clients outside the EU are generally exempt from VAT.
VAT for freelancers in Portugal is determined by various factors, including turnover, the nature of services, and the client's location. Proper understanding and management of VAT obligations are essential to ensure compliance and optimize cash flow.
Social Security is another vital aspect to consider for freelancers on Green Receipts in Portugal.
1. Social Security Registration
2. Contribution Rates
General Rate: As of the last update, freelancers typically contribute 21.4% of their taxable income to Social Security. However, this rate can vary and may be subject to changes. There are reduced rates for certain categories of freelancers, such as those starting their activity for the first time.
3. Contribution Base
Contributions are based on 70% of the declared monthly income for those providing services and 20% for those selling goods. Freelancers can request to adjust their contribution base, increasing or decreasing it within certain limits set by the authorities.
4. Payment Frequency
Social Security contributions are typically made on a monthly basis, with deadlines set by the authorities.
- Healthcare: Contributions ensure access to the National Health Service (SNS) in Portugal.
- Pensions: Regular contributions allow freelancers to accumulate pension rights for retirement.
- Maternity/Paternity and Sickness Benefits: Freelancers are entitled to benefits during periods of maternity/paternity leave or prolonged sickness, provided they meet certain contribution requirements.
6. Exemptions and Reductions
Starting Period: Freelancers starting their activity for the first time may benefit from reduced rates for a certain period.
Low Income: Freelancers with very low income or those who simultaneously work as employed workers might be exempt from making contributions or may qualify for reduced rates.
7. International Considerations
EU/EEA Nationals: Citizens from EU/EEA countries might be subject to different rules based on bilateral agreements and EU regulations. It's essential to verify one's status to avoid double contributions in both the home country and Portugal.
Non-EU Nationals: Depending on bilateral agreements between Portugal and the freelancer's home country, different rules might apply.
Social Security for freelancers in Portugal is a structured system ensuring that self-employed individuals have access to essential benefits like healthcare, pensions, and other social protections. Proper understanding and management of Social Security obligations are crucial for compliance and to take full advantage of the benefits offered.
Green Receipts, known as ‘Recibos Verdes’ in Portuguese, are official documents issued by freelancers and self-employed individuals in Portugal to bill for their services or products.
Yes, if you're a registered freelancer or self-employed individual in Portugal, you must issue a Green Receipt for every service or product you provide, regardless of the amount.
You can register online via the Portal das Finanças or at a local tax office. Once registered, you'll have access to the online platform where you can issue Green Receipts electronically.
If your annual turnover is below a certain threshold (e.g., €10,000), you might be exempt from certain obligations. However, it's still recommended to issue Green Receipts for all transactions.
If you realize an error after issuing a Green Receipt, it's essential to rectify it as soon as possible. You can cancel the incorrect receipt and issue a new one with the correct details.
Yes, depending on your VAT regime and the nature of your service or product, you might need to charge VAT on your Green Receipts. It's crucial to understand your VAT obligations to ensure accurate billing.
Yes, you can issue Green Receipts to international clients. However, the VAT implications might differ based on the client's location and the nature of the service or product.
Absolutely. In Portugal, freelancers who issue "green receipts" (recibos verdes) are typically required to make social security contributions. These contributions ensure they receive benefits similar to traditionally employed individuals, such as access to healthcare, pensions, and unemployment benefits. The exact amount freelancers need to contribute depends on their income and the specific category they fall under. However, it's essential for anyone operating under green receipts to be aware of these obligations and ensure timely payments to avoid penalties.
Yes, freelancers in Portugal who issue green receipts may also be subject to Value Added Tax (VAT) if their annual turnover exceeds a specific threshold. As of my last update in 2022, this threshold was €10,000. If a freelancer's revenue surpasses this amount, they are required to charge VAT on their services and remit this to the tax authorities. The standard VAT rate in Portugal is 23%, but reduced rates (e.g., 6% and 13%) apply to certain goods and services. Freelancers should consult with a local tax professional to ensure compliance and understand any sector-specific VAT rates or exemptions.