Quick Summary (TL;DR)

Portuguese companies paying foreign service providers may be required to withhold tax at a 25% rate.
By submitting the Model 21-RFI and a valid tax residence certificate, it is possible to apply double taxation treaties and avoid overpayment.

1. What is withholding tax on payments to foreign providers?

Withholding tax is the act of deducting and remitting tax to the State at the time of payment.
When a Portuguese company pays a foreign entity without a permanent establishment in Portugal, tax may need to be withheld if the income is deemed obtained in Portuguese territory.

Examples

• ✅ Consultancy or technical services provided from Spain → usually subject to withholding.
• ❌ Software licences or online subscriptions provided entirely abroad → generally exempt.

Legal basis: Articles 4 and 94 of the Corporate Income Tax Code (CIRC) and applicable Double Taxation Treaties (DTTs).

2. Applicable withholding tax rates in 2025

Without a double taxation treaty in force, the general withholding rate is 25% on the gross payment made to the foreign supplier.

Example: A Portuguese company pays €10,000 to a U.S. consultant → must withhold €2,500 unless a treaty applies.

If a double taxation treaty (DTT) exists, the rate may be reduced or fully exempt, provided the correct documentation is submitted.

3. Applying double taxation treaties with Model 21-RFI

Portugal has over 80 double taxation treaties in force.
To benefit from treaty relief, the foreign beneficiary must submit the Model 21-RFI form.

Updated rules since 2019

Following Law No. 119/2019, certification by the foreign tax authority is no longer required.
Instead, the payer must obtain:

1. The Model 21-RFI completed and signed by the beneficiary; and
2. A tax residence certificate issued by the competent authority in the supplier’s country of residence.

Both documents must be dated before the service is provided and remain valid for one year.

Model versions

• 🇪🇸 Portuguese / Spanish – exclusive for Spain.
• 🌐 Portuguese / English – for all other countries.

📎 Download Model 21-RFI – Portuguese Tax Authority (AT)

4. Mandatory declaration – Model 30

Even if no withholding occurs, all payments to non-residents must be reported to the Portuguese Tax Authority using Model 30.

• Deadline: by the end of the month following the payment;
• Submission: online via the Portal das Finanças;
• Penalties: fines and potential loss of tax deductibility for non-compliance.

5. Practical examples and common mistakes

Example 1 – With treaty (Spain)

The Spanish provider sends a signed Model 21-RFI (PT/ES) and a valid tax residence certificate.
→ Payment is exempt from withholding.
→ The Portuguese company still files the Model 30.

Example 2 – Without treaty (USA)

If no certificate of residence is provided, the Portuguese payer must withhold 25% of the total payment.

Frequent mistakes

• Applying exemption without proper documentation;
• Failing to request a residence certificate;
• Using outdated forms;
• Omitting the Model 30 declaration.

6. Best practices for compliance

• Always verify if a double taxation treaty exists with the supplier’s country;
• Request the Model 21-RFI and tax residence certificate before payment;
• Keep copies of documents for at least four years;
• Submit the Model 30 within the legal deadline;
• Consult a certified accountant when in doubt.

7. Conclusion

Complying with Portuguese withholding tax rules on payments to foreign suppliers prevents penalties and ensures legal compliance.
The process is now simpler – just a signed Model 21-RFI and a valid residence certificate.
Accurate and timely documentation protects your business from unexpected tax costs.

Key Takeaways

• Check if the income is deemed obtained in Portugal.
• Apply the double taxation treaty using Model 21-RFI.
• Attach a valid tax residence certificate.
• Report payments using Model 30.
• Avoid penalties and loss of deductibility.

Frequently Asked Questions (FAQ)

Do I have to withhold tax when paying a foreign company?

Yes, if the income is deemed obtained in Portugal and no treaty exemption applies.

Does Model 21-RFI need certification by the foreign tax authority?

No. Since 2019, only the signed form and residence certificate are required.

What happens if I don’t file the Model 30?

You may face fines, and the expense may no longer be tax-deductible.

Is the Model 21-RFI valid for one year?

Yes, it must be renewed annually to continue applying the treaty benefits.

Useful Links

• Portuguese Tax Authority – Double Taxation Treaties
• Order of Certified Accountants – Model 21-RFI Guidance