Portugal’s New Invoicing and E-Archiving Rules Published But Uncertainty Remains

In February 2019, Portugal published extensive and comprehensive legislation intended to regulate the invoicing processes in a growing digital environment. To this end, the country consolidated and reformed previous pieces of law scattered across the Portuguese legal system. Although some rules were already in force from the publication of this Law-Decree 28/2019, taxpayers expected further instructions as the law delegated supplementary regulations to executive bodies deferring the effectivity of the law.

On 1 October, the Portuguese tax authority issued the Letter 30213 aiming to clarify the rules set out by the Law-Decree. Whilst these clarifications are welcome, the market remains dissatisfied, behaving like a hungry beast wanting more to eat.  Clarity is needed around the new mandatory invoice content and the software certification processes, which still leave certain questions unanswered.

What’s new?

The 1 October Letter brought good news to foreign taxpayers transacting in Portugal, and their need to comply with the Portuguese legislation by issuing invoices through certified software. The deadline for this was previously 1 January 2020, however the Letter has postponed the entry into force until 1 January 2021. The new deadline grants foreign entities one additional year to conform with the legislation, while the complete technical and legal frameworks are settled in the country.

Amid the clarifications issued by the Portuguese tax authority, a safe port was effectively created when it comes to stand-by legislation. Back in February when the Law-Decree was introduced, it also announced new mandatory content for invoices, namely an obligation to include a QR code on invoices issued after 1 January 2020, but without stipulating how this QR code must be generated. The recent Letter from the Portuguese tax authority has however assured taxpayers that technical specifications for compliance with the new content requirements, notably the application of a QR code, is still to be regulated. Whether or not the deadline remains, is still to be seen.    

Significant changes for scanning

Not only the outbound flow of invoices was subject to clarifications from the tax authorities, but also the digitization of the inbound flow of paper invoices. The Portuguese tax authority explained that the current legislation allows documents created before the publication of the Law-Decree to be dematerialized. This means that, after meeting legal and technical requirements, taxable persons may scan and store electronic files, and discard at least ten years of paper invoices created in the past. The previous requirement to keep paper invoices for three years post conversion from paper to digital, together with  pre-approval by the tax authority before invoices can be destroyed, is now entirely abolished.    

What’s missing?

Despite the recent clarifications and enhancements brought by the tax authority, further regulation is still expected. The Law-Decree has great potential to achieve the VAT control ambitions of the tax authority, as well as to facilitate compliance for Portuguese and foreign businesses, however until additional legal and technical specifications are published, notably on certification processes and requirements, these goals are at risk of being derailed. The coming months will be decisive in shaping the invoicing compliance framework in the Iberic country.