The green receipts (recibos verdes) system is one of Portugal’s most common ways to provide independent services. It is particularly used by freelancers, consultants, and liberal professionals. This article explains green receipts, the tax obligations involved, and the rules independent workers must follow.
What Are Green Receipts?
Green receipts are electronic tax-relevant documents issued through the Portuguese Tax Authority’s online portal. They may act both as an invoice and as proof of payment. Therefore, they confirm that a service was performed without an employment contract.
Who Must Use Green Receipts?
Several professionals must issue green receipts when providing services:
- Freelancers work autonomously without employment contracts.
- Consultants and liberal professionals include lawyers, architects, designers, and translators.
- Sole proprietors providing services to companies or individuals.
How to Open Activity with Green Receipts
Before issuing recibos verdes, you must open an activity with the Tax Authority. This can be done online or in person through the tax portal. At this stage, you must declare the type of activity, the VAT regime, and the IRS regime.
Tax Obligations of Independent Workers
1. Personal Income Tax (IRS)
Income obtained from green receipts is taxed under Category B of the IRS. By default, workers can remain in the simplified regime (provided conditions are met) or opt for organisation. In the simplified regime, only part of the income is taxed, depending on the activity.
2. Value Added Tax (VAT)
Most workers using green receipts are subject to VAT, unless exempt under Article 53 of the VAT Code. If annual turnover exceeds €13,500 or the activity is not exempt, VAT must be charged and declared periodically.
3. Social Security Contributions
Independent workers must contribute to Social Security, except in specific exemption cases. The standard contribution rate is 21.4% of the relevant income.
4. Withholding Tax
Sometimes, withholding tax is mandatory. Typically, the rate is 25% when invoicing companies or entities. Professionals with an annual income below €12,500 may be exempt, if appropriately declared on the green receipt.
Declarative Obligations
Workers using green receipts must respect strict reporting duties:
- Activity declaration before issuing the first receipt.
- VAT returns are monthly or quarterly, depending on turnover.
- Annual IRS declaration, including Category B income
- Activity closure declaration when ending the independent activity.
Why Expats Should Engage a Tax Advisor for VAT Compliance
For expats using green receipts in Portugal, VAT obligations can be complex. Understanding which invoices require VAT and how to submit declarations is not straightforward. Penalties for late or incorrect VAT filings can be severe and expensive. A certified accountant ensures correct classification, timely submissions, and peace of mind. Rather than adopting a “do-it-yourself” approach, working with a tax advisor protects you from costly mistakes and unwanted fines.
Practical Tips for Freelancers
- Keep all receipts and invoices organised, comparing simplified versus organised.
- Pay close attention to deadlines to avoid fines and interest charges.
- Consult a certified accountant to optimise the position and maintain compliance.
Conclusion
Recibos verdes are an essential tool for independent work in Portugal. However, they carry strict fiscal and social obligations. Meeting these rules is crucial to avoid problems with the Portuguese Tax Authority and to ensure a sustainable professional activity. Expats in Madeira or elsewhere should always seek tailored professional advice before issuing green receipts.
This article is for informational purposes only and does not replace professional advice from a certified accountant or lawyer.
The founding of Madeira Corporate Services dates back to 1996. MCS started as a corporate service provider in the Madeira International Business Center and rapidly became a leading management company… Read more
