Avoid the immediate registration trigger that catches freelancers off guard
Introduction
Most freelancers in Portugal operate under the belief that they don’t need to worry about VAT until the end of the year. This assumption causes costly audits.
While the standard exemption limit is €15,000, there is a “hard ceiling” at €18,750 that changes the rules instantly. If you cross it, you don’t get to wait until January to fix your status. You have 15 days to register, or you face fines and back-taxes on income you already spent.
Here is how the Artigo 53 exemption works in 2026, how to calculate your true turnover, and how to avoid the immediate registration trap.
The rules of Artigo 53 in 2026
The VAT exemption (regime de isenção) allows freelancers to issue invoices without adding the standard 23% tax. In exchange, you cannot deduct VAT on your business expenses.
As of January 2026, the rules established by the major reform of July 2025 remain in force.
Who qualifies
You qualify for the exemption if:
- You are a tax resident in Portugal or the EU.
- Your annual turnover in national territory is under €15,000.
- You do not trade in specific excluded goods (like waste materials).
Who is excluded
Since July 1, 2025, taxpayers with a tax residence outside the European Union cannot use the Artigo 53 exemption. If you are a freelancer with a fiscal address in the US, UK, or Brazil, you must register for the normal VAT regime immediately, regardless of how low your income is.
Note: Freelancers with contabilidade organizada (organized accounting) are now eligible for the exemption, a change that fixed a long-standing exclusion.
The math: What counts toward the €15,000?
The most common mistake is summing up every invoice you issue. The €15,000 threshold applies only to turnover generated in Portuguese territory.
What to include
- Sales of goods or services to clients based in Portugal.
- Invoices issued with the code M10 (IVA – regime de isenção).
What to exclude
- Services provided to clients outside Portugal (exports).
- B2B services to EU clients (where the “place of supply” is the client’s country).
- These are usually invoiced under M40 (IVA – autoliquidação) and do not count toward your internal €15,000 cap.
If you earn €50,000 from US clients and €2,000 from Portuguese clients, you generally remain exempt from charging VAT in Portugal because your national turnover is only €2,000.
The trap: €15,000 vs. €18,750
There are two ways to lose your exemption. One is manageable; the other is an emergency.
Scenario A: The standard transition (€15,001 – €18,749)
If your national turnover exceeds €15,000 but stays below €18,750:
- Status: You remain exempt for the rest of the current year.
- Action: You must submit a declaration (Declaração de Alterações) in January of the following year.
- Result: You start charging VAT from February of that following year.
Scenario B: The immediate trigger (€18,750+)
If you exceed the threshold by more than 25% (surpassing €18,750) within the calendar year:
- Status: Your exemption ends immediately.
- Action: You must submit the Declaração de Alterações within 15 working days of the transaction that pushed you over the line.
- Result: You must charge VAT on that specific transaction and all future ones.
Example:
You have invoiced €14,000 to Portuguese clients. You issue a new invoice for €5,000.
- Total: €19,000.
- You have breached the €18,750 hard limit.
- You must add VAT (23%) to that €5,000 invoice.
- You must register for the normal VAT regime immediately.
How to fix your status (Form 12208)
When you need to change regimes, you submit the Declaração de Alterações (Form 12208) via the Portal das Finanças.
Deadlines to watch:
- Standard change: Submit between January 1st and January 15th of the year following the breach.
- Immediate breach: Submit within 15 days of the invoice date.
The penalty risk:
Failing to submit this form on time carries a fine between €300 and €3,750. Failing to charge VAT when required carries a penalty of up to 100% of the missing tax.
Invoicing correctly while exempt
Even if you don’t charge VAT, you must tell the tax authority why on every receipt (Recibo Verde).
- Domestic clients: Select “IVA – regime de isenção [art.º 53.º]”. This signals the income counts toward your cap.
- Foreign clients (EU/Non-EU): Select “IVA – autoliquidação [regras de localização]”. This signals the tax is not due in Portugal, keeping your national counter low.
New reporting rule:
If you use the cross-border exemption, you may need to file a Quarterly Declaration (Declaração Trimestral) by the end of the month following each quarter. This applies mostly to EU-based traders operating across borders.
Common traps (and how to avoid them)
- Assuming foreign income counts toward the limit
→ Leads to unnecessary VAT registration. Only count turnover from Portuguese clients (national territory). - Crossing €18,750 and waiting until January
→ Triggers fines for late registration and missing tax. If you hit €18,750, register within 15 days. - Non-EU residents claiming exemption
→ Illegal as of July 2025. If your tax address is outside the EU, you must be in the normal VAT regime. - Forgetting the “Partial Year” rule change
→ Turnover is no longer annualized. If you start in November and earn €14,000, you are safe (under the old rules, this would have been annualized to exceed the limit).
Bottom Line
The €15,000 limit is a soft warning; the €18,750 limit is a hard wall. If you work primarily with foreign clients, your risk is low, but you must use the correct invoice codes (M40) to prove it. If you work with Portuguese clients, track your cumulative total monthly. Crossing the 25% margin without immediate action is the fastest way to trigger an audit in 2026.
FAQ
Does income from US or UK clients count toward the €15,000 limit?
Generally, no. Services provided to clients outside Portugal are considered “exports” or located in the client’s country. They do not count toward the national turnover threshold for Artigo 53.
What happens if I start my activity in October?
As of the July 2025 updates, turnover is not annualized. You have the full €15,000 limit available for the months you are active in that first calendar year.
I live in Brazil but have a NIF. Can I be VAT exempt?
No. Since July 1, 2025, the Artigo 53 exemption is unavailable to taxpayers with a tax residence outside the European Union. You must register for the normal VAT regime.
Do I pay VAT on the whole year if I pass the limit?
If you pass €15,000 but stay under €18,750, you only start charging VAT the following year. If you pass €18,750, you must charge VAT on the transaction that crossed the line and all subsequent ones. You do not retroactively pay VAT on the earlier exempt invoices.
Can I deduct business expenses if I am VAT exempt?
No. The trade-off for not charging VAT is that you cannot deduct the VAT you pay on business expenses (laptops, coworking, internet).
What is the penalty for not registering for VAT?
Fines for failing to submit the declaration range from €600 to €7,500. Additionally, you may be fined 30% to 100% of the VAT you failed to charge.
Does the €15,000 limit include VAT?
No. The threshold is based on the value of services or goods net of VAT (líquido de imposto).
