As an expat freelancer or business owner in Portugal, understanding the VAT (IVA) rules for cross-border services is essential. Whether you’re serving clients within the EU, the UK, or outside Europe, like in the USA or Dubai, applying the correct VAT treatment ensures compliance and can significantly impact your business operations. Let’s break down these rules so you can focus on growing your business with confidence.
1. Clients Outside the EU (e.g., USA, Dubai)
When you provide services to B2B clients based outside the EU, like in the USA or Dubai, these services are not subject to Portuguese VAT. This rule applies to services that are typically delivered remotely, such as IT consulting, design, and other professional work. Since these clients are located outside the EU, you issue your invoice without VAT. It’s crucial to add a note on the invoice, such as “Not subject to VAT according to Article 6, No. 6 (a) of the Portuguese VAT Code.” This indicates to both your client and the Portuguese tax authorities that the service falls outside the scope of VAT, simplifying the process for both parties.
2. Clients in the United Kingdom (UK)
Since Brexit, the UK is now treated similarly to other non-EU countries. When you provide B2B services to UK-based companies, the VAT rules align with those for clients outside the EU. This means you don’t charge VAT on your invoice, and you can use the same notation: “Not subject to VAT per Article 6, No. 6 (a).” UK companies receiving services from Portugal are responsible for any VAT obligations on their end, making it straightforward for you.
3. Clients Within the EU (e.g., France)
For B2B clients within the EU, like in France, a different rule applies. The reverse charge mechanism means that the VAT is handled in the client’s country rather than in Portugal. You issue the invoice without VAT, but you must include the note “Reverse charge – VAT due by the client.” This notation signals that the responsibility for VAT shifts to the client, who must declare and pay VAT in their home country.
Why Understanding VAT Matters
Complying with these VAT rules helps you avoid unnecessary taxes, simplifies your invoicing, and ensures you’re fully compliant with Portuguese and EU tax laws. By correctly applying these VAT treatments, you reduce the risk of tax penalties and make it easier for your clients to do business with you.
Need Assistance? GoalSeek Is Here to Help
VAT compliance can be complex, especially when working across borders. At GoalSeek, we specialize in helping expats in Portugal manage their tax obligations effectively. If you need assistance with VAT for cross-border services or any other tax-related concerns, our team is here to provide guidance tailored to your unique business needs. Contact us today for a consultation and take the first step towards seamless international business operations!
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