Originally published at: Recibo Verde in Portugal: All You Need To Know About Green Receipts | Go VisaFree
If you’re planning to move to Portugal and work there as self-employed, you’d better get familiar with green receipts. You’ll need them when you’re working independently and in need to send invoices to your clients. In this article, we’ll explain what green receipts mean and how you can use them.
First, let’s begin with the definition of green receipts.
What Is Recibo Verde (Green Receipt)
In Portugal, green receipts are used as invoices, receipts, or invoice-receipts that self-employed workers are required to issue anytime they offer a service to a customer or sell products.
In a nutshell, green receipts are invoices that you, as a self-employed individual, are going to send in order to comply with Portugal’s tax obligations.
So what is the difference between an invoice, receipt, and invoice-receipt?
Invoice
An invoice is equal to the invoice provided to the customers, which includes all descriptive information about the work accomplished as well as the value of the service. It’s issued once the work is complete.
Receipt
A receipt is a document that is issued after you receive the money specified on the invoice. You’re going to provide the consumer with the receipt, and you should keep a copy to handle your annual billing.
Invoice-receipt
If the dates of invoice and receipt match, you can issue an invoice-receipt. It’s the combination of an invoice and receipt and can be issued if the former’s date is the same as the latter.
Eligibility To Issue Green Receipts
If you’re self-employed or a freelancer, you’re eligible to issue Recibo Verde, Green Receipts in Portugal. The criteria are that you aren’t employed by the company you’re providing service as a freelancer.
If you have a fixed contract with a company and want to work as a freelancer for another company, you can open activity and issue a green receipt.
Note that you’ll also need to check your profession’s eligibility to issue green receipts. There are two categories for this:
Personal Income Tax Code (CIRS): You can check Finanças Portal for the list of activities (only available in Portuguese)
Code of Economic Activity (CAE): Used for self-employed workers who carry out a set of activities provided for by the National Institute of Statistics (INE).
Why Work With Green Receipts: Advantages
Here is the best part: Advantages. Let’s quickly go through the benefits of working as a self-employed and being able to issue green receipts.
Pros
- You Can Work From Any Location: When you’re self-employed and working on green receipts, you choose your own location. You can be anywhere in the world but still, keep your financial relationship with your clients.
- You Have Control Over Your Schedule: When you’re working as your own boss, you have complete control over your schedule. You can decide on your working hours and control your financial documents online.
- You’re Able To Work With Different Companies: As a self-employed, you’re not tied to one company and can choose the companies you want to work with. Plus, you’ll gain experience in different industries and departments as a freelancer.
Why Not Work With Green Receipts: Disadvantages
Well, as you might guess, there are some disadvantages to working with green receipts as a self-employed. Here are some of them:
Cons
- Beware of False Green Receipts: There are some businesses that might get service from you but try to trick you into work like their regular employees. They do this to exempt themselves from their responsibilities. So make sure you know what you’re getting into.
- Unpredictable Income: It’s nice to be working as your own boss however be prepared to earn different amounts every month. The good news is this will change when you become more experienced and have a more predictable workflow.
How About Taxes and Social Security
Even if you’re self-employed, you’re liable to pay taxes in Portugal. Let’s quickly go through the taxes you’ll pay even you’re not employed by a company and are issuing green receipts.
Even if you’re self-employed, you’re liable to pay taxes in Portugal. Let’s quickly go through the taxes you’ll pay even you’re not employed by a company and are issuing green receipts.
IRS – Income Tax for Individuals
IRS is the personal income tax that applies to the income of residents in Portugal and non-residents who earn income in Portugal. The amount is based on the income by the relevant tax band.
In general, you’re required to make a declaration twice a year. It can be done online. If you’re not familiar with this sort of paperwork and taxes in general, we can recommend that you speak to a professional.
Social Security
As a self-employed person, you’ll also need to make a contribution to Portuguese Social Security (Segurança Social). The rate for self-employed workers is 21.4 percent. The good thing is in return, you become entitled to some benefits, such as sickness allowance, unemployment benefits, and etc.
VAT (IVA)
If you have a business that has a turnover of more than €10,000 on taxable goods and services, you’ll be liable to pay VAT. Find below the rates:
- 23% on taxable goods and services
- 13% on food and drink
- 6% on essential necessities including certain foods, books, newspapers, medicines, transport, and hotel accommodation.
You can be exempted from VAT if;
- your turnover is less than €10,000 and your activity started before 31 March 2020,
- your turnover is less than €11,000 and your activity started before 1 April 2021,
- your turnover is less than €12,500 and your activity starts as of 2021.
Note that these figures and rules might change so it’s wise to check them from time to time.
Conclusion
There you have it. Hope this article will give you the necessary information to issue green receipts in Portugal. Are you planning to work in Portugal? Make sure you read our Living in Portugal article before you plan your move. Good luck!