IRS advance payments in Portugal: what self-employed workers need to know

Summary

• IRS advance payments (pagamentos por conta) are three prepayments on the income tax you will owe for the current year. They are not an extra tax.
• Anyone with self-employed income (category B) can be asked to pay them. The amount is set by the tax office, not by you.
• The legal deadlines are 20 July, 20 September and 20 December. In 2026 the second and third fall on a Sunday, so they move to 21 September and 21 December.
• The three payments together come to 65% of a figure based on your tax and income from the year before last, after the withholding tax you already paid is deducted.
• An instalment below 50 euros is not payable.
• You can lower or skip a payment if your income drops, but if you end up more than 20% short, compensatory interest can be added.

Introduction

If you work for yourself in Portugal, a letter about IRS advance payments can be a surprise. You filed your return, you paid what you owed, and then three more amounts appear with deadlines in July, September and December. For self-employed workers in Portugal, these IRS advance payments are called pagamentos por conta, and they are not a new tax. They are instalments on the tax bill for the year you are living in right now.

The idea is simple, even if the formula is not. The tax office collects part of this year’s income tax during this year, instead of waiting until the final assessment in the following summer. Everything you pay in advance is then subtracted from that assessment. This guide explains who pays, how much, when, and what you can do if your income is falling. It is general information, not tax advice, and the details depend on your own situation.

What are pagamentos por conta, and why do they exist?

IRS advance payments are three instalments on the income tax for the current year, paid during that same year by people with self-employed income. The tax office calculates each amount from your most recent completed assessment and sends you a payment document. The money is not lost. It is credited against your final tax bill, and anything you overpaid is refunded.

Portugal, like most countries, does not want a full year of tax arriving in one payment months after the income was earned. Employees solve this through monthly withholding on their salary. Self-employed workers solve it two ways at once: withholding on invoices, and these three instalments.

The rule sits in article 102 of the Portuguese income tax code. Holding category B income is what creates the obligation. Category B covers self-employed and business income, so it reaches most people working on green receipts in Portugal.

One point causes confusion. The payments you make in 2026 are not based on 2026 income, because nobody knows it yet. They use the year before last, so your 2024 figures. If your work has grown or shrunk since then, the instalments will not match reality. The law gives you a way to adjust, covered below.

Who has to make advance payments, and who does not?

You are in scope if you had self-employed income in the reference year and the formula produces an instalment of 50 euros or more. Below 50 euros, the instalment is simply not payable. People in their first years of activity usually pay nothing, because the calculation starts from a year in which they had no category B income yet.

You will usually pay if you have been self-employed for several years, your income is steady, and relatively little tax was withheld on your invoices. That last part matters more than people expect, and the next section shows why.

You will usually not pay if you registered recently. The calculation uses the year before last. If you had no self-employed income in that year, there is nothing for the formula to work with. You can also fall below the line because your tax that year was low.

You might choose to pay anyway. Article 102 allows voluntary advance payments where your clients are not required to withhold Portuguese tax, which is common if you invoice companies abroad. Each one has to be 50 euros or more. Nobody will ask you to do this, but it spreads the final bill. The self-employment tax calculator gives you a starting figure.

Rules differ per situation, and a tax residence change or a mixed year of employment and freelancing can change the picture entirely.

When are the IRS advance payment deadlines in 2026?

The legal deadlines are 20 July, 20 September and 20 December. When the 20th falls on a weekend or a public holiday, the deadline moves to the next working day. In 2026, 20 September and 20 December are both Sundays, so the second and third instalments are due on 21 September and 21 December.

IRS advance payment deadlines for 2026

These are the dates in the official 2026 payment obligations calendar. The payment document is normally available in the month before each deadline, and the amounts also appear on the assessment note. You can pay through home banking, Multibanco or direct debit. The Portugal tax calendar sets these dates next to your other filing duties.

How is the amount calculated, and where does withholding tax come in?

The three instalments together equal 65% of this figure: your net tax from the year before last, multiplied by the share of your total income that came from self-employment, minus the withholding tax taken on that self-employed income. The total is then split into three equal parts, each rounded up to whole euros.

Written out, the formula in article 102 is:

65% × [ C × (RLB / RLT) − R ]

The letters stand for:

• C: your tax for the year before last, after the deductions allowed in article 78 of the income tax code.
• RLB: your positive net self-employed income for that same year.
• RLT: your total net income for that year, from all categories.
• R: the total withholding tax taken on your self-employed income in that year.

A worked example makes it concrete. Say your 2024 assessment showed 6,000 euros of tax after deductions. Of your 30,000 euros of net income, 24,000 came from freelance work, so the ratio is 0.8. That gives 4,800 euros. Your clients withheld 1,200 euros during 2024, which is subtracted, leaving 3,600 euros. Take 65% of that and you get 2,340 euros, split into three instalments of 780 euros each.

This is why withholding tax matters so much here. The more tax your clients took at source, the smaller R makes the result, and the smaller your instalments. Freelancers who invoice mostly foreign clients, where no Portuguese tax is withheld, tend to see the largest advance payments. Almost nothing was collected during the year, so the system collects it this way instead. The exemption from withholding is a different case: it only applies while your income is expected to stay below the article 53 threshold, and at that level the instalment almost always falls under the 50 euro floor.

Can you reduce or stop a payment if your income drops?

Yes. The law lets you lower an instalment when it is higher than the difference between the tax you expect to owe and what you have already paid. You can also stop paying when withholding plus earlier instalments already cover your expected tax for the year, or when you stop receiving self-employed income. You act by the deadline for that instalment.

There is no separate application and no approval to wait for. You decide on your own records, and pay a lower amount, or nothing, by the due date of that instalment. In practice you generate a payment document for the amount you believe is correct on the Portal das Finanças. The Portal das Finanças user guide shows where those screens sit.

The risk sits in cutting too deep. When your annual return is processed, the tax office compares what you paid with what you should have paid. If more than 20% of the normal amount went unpaid because you reduced or stopped, compensatory interest can be charged. Two further conditions apply: the assessment for the reference year must have been issued by 31 May of the payment year, and the taxpayers must still be in the same household. The interest runs day by day from the end of each payment deadline until the date the assessment is legally due, at the legal interest rate.

A reduction is a forecast, and you carry the cost of getting it badly wrong. The 20% buffer is generous, but it is not unlimited.

What happens if you pay late, and how are the instalments settled?

A missed instalment does not disappear. The amount stays due, and late payment interest (juros de mora) runs from the day after the deadline until the debt is paid. The instalments you did pay are credited against the tax for the year in which you paid them, so nothing is paid twice. If the total you paid exceeds your final tax, the difference is refunded.

Everything withheld on your invoices and everything paid as advance instalments is deducted from the tax for that year. When the assessment lands the following year, you see the gross tax, then those amounts taken off, then a balance to pay or a refund. The refund is due by the normal payment deadline for that assessment. If the tax office is late through its own fault, interest is owed to you.

Interest on late tax payments is owed from the moment the legal deadline passes, and keeps running until the amount is settled. Paying a few days late is not a disaster. Leaving an instalment open adds cost without reducing the tax itself. If you are behind on filings too, a correctly prepared resident IRS return (Modelo 3) is the first step.

Pagamentos por conta and retenção na fonte are not the same thing

These two get mixed up constantly, and the reason is understandable. Both take money before the final tax bill, and both are deducted from it at the end. Everything else is different.

Withholding tax, or retenção na fonte, happens invoice by invoice, but only when your client keeps or is required to keep organised accounts. Such a client holds back a percentage of the amount on your green receipt and pays it to the tax office in your name, while a private individual as a client withholds nothing. You never touch that money. The rate depends on the activity, and professional activities listed in the official table are withheld at 23% when the client has that withholding obligation. Freelancers expecting to stay under the annual threshold can ask not to have tax withheld. Our guide to withholding tax on green receipts covers the mechanics and the exemption.

Advance payments work the other way around. Nothing is held back by anyone. You receive a payment document for a fixed amount, three times a year, calculated by the tax office from an old assessment. The timing is fixed by the calendar rather than by your invoicing. And crucially, withholding reduces the advance payments, because it sits inside the formula as R.

A short way to remember it: withholding is tax your client sends in as you earn, while advance payments are tax you send in yourself on a schedule. For the wider picture, see how much self-employed people pay in Portugal.

Tytle helps self-employed people in Portugal understand which of these apply to them and accounts for those amounts in the filing. If an advance payment notice has arrived and the figure does not match your year, you can go through it with us before the deadline.