6%, 13% or 23%: which VAT rate you apply

Rita runs an event catering business. In a single week she issues one invoice for the meal service at a wedding and another for selling a few hampers of gourmet products. She sits down to work through her receipts and stops: “wait - do these carry the same VAT rate?”.

They do not. And this is where a lot of people trip up. IVA (Portuguese VAT) does not have one single rate. It has three on the mainland - 6%, 13% and 23% - and the rate does not depend on who you are, it depends on what you sell. The same professional can have to apply different rates depending on the product or service on the invoice.

Let us make this clear, without the legalese.

The three rates: reduced, intermediate and standard

All three sit in Article 18 of the Código do IVA (the CIVA, the body of VAT rules). The logic is simple: the more essential the item, the lower the rate.

The key is the two lists (Lista I and Lista II, two annexes to the CIVA that enumerate, one by one, the goods and services with a lower rate). If what you sell is on Lista I, you apply 6%. If it is on Lista II, you apply 13%. If it is on neither, it falls under the general rule: 23%.

What sits at each rate

You do not need to memorise the lists, but it helps to have a sense of the kind of things that fall into each one.

Reduced rate (6%) - life’s essentials:

• Basic food products - bread, milk, eggs, meat, fish, fruit and vegetables
• Medicines and pharmaceutical products
• Books, newspapers and magazines
• Hotel accommodation
• Passenger transport

Intermediate rate (13%) - mostly the hospitality sector:

• Ready-to-eat meals - restaurant service, takeaway, home delivery
• Food and drink services (except alcoholic drinks and soft drinks)
• Ordinary wines
• Preserved fish and molluscs
• Musical instruments

Standard rate (23%) - by default, this is where most freelancer services land:

• Clothing, household appliances, telecommunications
• Alcoholic drinks and soft drinks
• And the overwhelming majority of professional services - design, programming, consultancy, marketing…

This is why, if you provide office-type services (designer, programmer, consultant), your rate is almost always 23%. Your activity is not on any list, so it falls under the general rule. If you are still unsure what VAT is and why it is not your money, start here: VAT - where it comes from, where it goes.

Example: Rita and two rates in the same week

Back to Rita. She has two invoices to issue, and they are at different rates.

The ready-to-eat meal service is hospitality - Lista II, intermediate rate. She applies 13%.

Basic food products sit on Lista I, reduced rate - 6%.

Two invoices, two rates, the same professional. Notice the rate does not change because Rita is the one issuing it - it changes because what she sells on each invoice is different.

Warning: the classic mistake is always applying the same rate “because that is what I did last time”. The rate follows the good or service, not your profile. And there’s a costly detail in catering: the meal service is 13%, but alcoholic drinks (including wine served with the meal) and soft drinks are 23%. On a single catering invoice you can have lines at 13% (food) and 23% (drinks). If you put everything at 13% for convenience, you are undercharging VAT and the state will want the difference.

What about Madeira and the Azores? The rates are lower

Here is the part almost everyone misses: the Autonomous Regions have lower rates than the mainland. This is set out in Article 18(3) of the CIVA itself.

The practical rule: you apply the rate of the region where the transaction is deemed to take place, not the one where you live. A service supplied and consumed in the Azores carries the Azorean rate; the same service on the mainland carries the mainland rate.

Example - Bruno, a designer: Bruno lives in Porto and invoices design at 23%. If he registers his activity and starts supplying services from Funchal, for transactions located in Madeira his standard rate becomes 22%. It is not a saving for him (VAT is not his money - it belongs to the state), but the figure on the invoice changes, and he has to get it right.

The regional rates change through each region’s own legislation. If you invoice into Madeira or the Azores, check the rate in force before you issue - this is one of the points where it is easy to be left with an out-of-date figure.

How to find your activity’s rate

Rule of thumb for the typical freelancer:

1. Do you provide professional services (design, code, consultancy, copywriting, marketing)? Almost certainly 23% - you are not on any list.
2. Do you work with food, accommodation, books, healthcare, transport? Go to Lista I (6%) and Lista II (13%) - the official CIVA annexes - and see exactly where what you do fits.
3. Do you invoice into Madeira or the Azores? Use the regional rates.

If you are unsure about a specific entry on the lists, do not guess: confirm before you issue. A wrong rate on an invoice forces you to cancel and reissue - more work than getting it right first time.

✅ In summary

1. There are three rates on the mainland - 6%, 13% and 23% - and the rate depends on what you sell, not who you are. Lista I → 6%, Lista II → 13%, everything else → 23%. Most freelancer services land at the standard rate (23%).

2. Madeira and the Azores have their own, lower rates (Madeira 4/12/22%, Azores 4/9/16%). You apply the rate of the region where the transaction is located, not where you live.

3. With FIZ you pick the VAT rate at the moment you invoice - 6%, 13% or 23% - and your quarterly VAT return is prepared and filed from your receipts, without you adding up rates by hand. See the plans.