Throughout the year, many independent workers are faced with an essential question: should I do not retention at the source? This mechanism, which acts as an IRS advance to the state, can significantly influence the financial management of professionals to green receipts. With different applicable rates and specific rules depending on income and activity, understanding the operation of retention at the source is critical to avoiding unpleasant surprises when hitting finance accounts.
What is retention at the source?
Source retention is an early payment mechanism of the Singular Persons (IRS) income tax. Whenever a dependent, independent or pensioner worker receives an income, part of that value is retained by the state. This amount acts as an advance of the tax due, being later adjusted when the annual IRS statement was delivered.
In the case of independent workers, retention at the source depends on the volume of billing and the nature of the activity performed. Not everyone is required to do it, and some may choose to make it voluntarily to avoid high payments at the time of tax settlement.
Who is dismissed to retention at the source?
Independent workers who have annual category B yields less than 15,000 euros are exempt from retention at the source. In addition, activities such as hotels, restoration and travel agencies are not subject to this obligation.
Even though they are dismissed, these professionals must declare the dismissal at the time of the green receipt issuance. It is important to remember that by not retention at the source, the worker may not be entitled to IRS reimbursement or, in some cases, be called to pay the tax due at the time of accuracy.
We recommend:
What are the retention rates for green receipts?
Source retention rates vary depending on the type of activity performed. In 2024, the following percentages apply:
- 23% For professionals in the IRS Code activities table, such as lawyers, architects, doctors and teachers.
- 20% For workers in high value added activities, including scientists and artists, as well as for unusual residents in Portugal.
- 16,5% For income from intellectual, industrial ownership or provision of information on experience in the commercial and industrial sectors.
- 11,5% for professionals not included in the activity table or for isolated acts.
If it exceeds the limit of 15,000 euros annual, retention at the source becomes mandatory and should be applied immediately on the next invoice.
How to correctly fill the green receipt?
As you refer to, when issuing a green receipt, the independent worker should properly indicate whether he is dispensed with retention at the source. For this, you should select the option “Retention Exemption-Art. 101-B of the IRS Code” on the Finance Portal.
If you choose to retention, or if you are obliged to this, you must choose the correct incidence base:
- 100% for most independent workers.
- 50% for certain categories of health professionals and for workers with permanent disability equal to or greater than 60%.
- 25% For some health professionals with permanent disability greater than 60%.
- 50% For former residents, according to Article 12-A CIRS.
In addition, between April and June of each year, it is necessary to declare in Annex B of the IRS declaration the total retention at the source made the previous year.
Source retention may seem like a bureaucratic detail, but it is essential for good financial management. Knowing the rules and applying them correctly avoids unpleasant surprises and ensures proper fiscal planning.
Also read:
