Tiago opened his activity two years ago. This year, in July, he gets a notice from the Tax Authority: there’s a payment slip due by the 20th. “But I already settled my IRS in the spring!”. It’s not a mistake, nor double tax - it’s the advance payment (pagamento por conta), and it tends to catch people by surprise a few years after they open their activity.
What an advance payment is
It’s an advance on your IRS: instead of paying the whole tax in one go at declaration time, you hand over part of it during the year itself, in three instalments. Then, in the following year’s return, those advances are deducted from the final tax - and if you paid too much, the difference comes back in your refund.
In other words: it’s not extra tax. It’s the same tax, paid earlier and in parts. The legal basis is article 102.º of the CIRS, and it applies to anyone with category B income (green receipts / self-employed activity).
Who has to make them - and who’s exempt
It’s not everyone. And the good news is that you don’t have to do the maths: the Tax Authority (AT) calculates it and sends you the payment slips ready-filled, in the Conta-corrente on the Portal das Finanças, about a month before each deadline.
Because the AT uses your penultimate year’s return to calculate, someone at the start of their activity usually has no advance payments yet: they only arise once the penultimate year already had category B income - as a rule, from the third calendar year of activity. That’s the “surprise” that catches Tiago, now that his first year of invoicing serves as the basis.
How much and when
There are three equal instalments, with these fixed deadlines:
The year’s total comes from this formula (art. 102.º n.º 2 of the CIRS), then split in three (each instalment rounded up to the euro):
Year’s total = 65% × [ C × (RLB / RLT) − R ]
The rate is 65% (cut from the previous 76.5% by Law 45-A/2024, so you advance a bit less). If you only have category B income, the RLB/RLT fraction equals 1 and the sum simplifies.
So Tiago pays 520 € in July, 520 € in September and 520 € in December. None of it is new tax: in 2027, when he files his 2026 IRS, these 1,560 € are subtracted from whatever he has to pay.
Where they fit in your IRS
Once you’ve paid the slips, the advance payments don’t vanish: in the following year’s IRS return you enter them in box 6 of Anexo B (field 603) - or Anexo C, if you have organised accounting - and they are deducted from the final tax at assessment. Careful: the withholding figures are usually pre-filled, but the advance-payment value (field 603) doesn’t always appear automatically - check it, so you don’t lose the credit. That’s why people who make advance payments tend to owe less (or get a bigger refund) the following spring - they’ve been paying as they go.
You can reduce or stop them - but carefully
If you know you’ll earn a lot less this year than in the penultimate one (so, less IRS), the law lets you limit the instalment (art. 102.º n.º 5) or even stop the payments (art. 102.º n.º 4). The decision is yours - you don’t need prior authorisation from the AT: you reduce or skip the instalment, within the deadline, on the Portal das Finanças.
- You pay the 3 instalments at the slip amount
- No risk of interest
- If you overpaid, you get it back in the refund
- You reduce or cancel instalments on the Portal
- Makes sense if your income really has dropped
- Cutting too much has a cost (see warning)
For example, Sofia estimates that her total IRS for the year will be 2,000 € and has already built up 1,700 € in withholding and advance payments. There is still 300 € to cover: she cannot simply stop under paragraph 4, but she can limit the next 520 € instalment to 300 € under paragraph 5.
Careful: only limit it if you’re sure your income has fallen. If you cut too much and more than 20% of what you’d normally have paid is left unpaid, there may be compensatory interest (juros compensatórios) on the difference (it applies when the penultimate year’s assessment was done by 31 May and you stay in the same household). When in doubt, it’s safer to leave it as is and get the difference back in your refund than to risk the interest.
And the reverse is also possible: if you have clients who aren’t required to withhold tax for you (foreign clients, for instance), you can make voluntary advance payments - at least 50 € each - to pay tax as you go and avoid a big bill at the end (art. 102.º n.º 8).
✅ In summary
-
The advance payment is your category B IRS paid upfront, in 3 instalments (20 July, September and December), later deducted from the final tax. The AT calculates it and sends the slips - you don’t have to do the maths; but in the following year’s return, check the value in box 6 of Anexo B (or Anexo C, if you have organised accounting), field 603, which isn’t always pre-filled.
-
The formula is 65% × [C × (RLB/RLT) − R] of the penultimate year, divided by 3. You’re exempt if each instalment is below 50 € (or you’ve ceased the activity). You can stop the remaining instalments once withholding plus payments already made cover the year’s tax (art. 102.º n.º 4); and you can limit each instalment to what you still expect to owe, even without full coverage (art. 102.º n.º 5). But cutting too much - leaving more than 20% of what was due unpaid - can bring compensatory interest (under the conditions in the warning above).
-
With FIZ you track your income and withholding through the year, so you know whether the advance payment makes sense or whether you can limit it - and you reach July with no surprises. See how in your freelancer IRS and the plans.
