The Portuguese government has been working on introducing mandatory B2G (Business-to-Government) electronic invoicing in recent years, alongside other obligations for the digitization of VAT compliance in the country.
This aligns with the European Union’s efforts towards harmonising the adoption of e-invoicing in public procurement. To achieve this goal, the EU has implemented Directive 2014/55/EU to outline the responsibilities and criteria for e-invoicing in public procurement processes. The EU requires Member States to enforce an obligation for the Public Administration to receive invoices electronically.
However, several Member States, such as Portugal, have taken a step forward by making the issuance of electronic invoices mandatory for suppliers of the Public Administration. The Portuguese mandate, known as “Electronic Invoicing to the Public Administration” (Fatura Eletrónica à Administração Pública – FEAP), was introduced to streamline invoicing processes and improve efficiency in transactions between businesses and the public sector.
What is B2G e-invoicing in Portugal?
In Portugal, Law Decree 111-B/2017 and subsequent amendments established the beginning of the obligation to issue, receive and process electronic invoices in public procurement. ESPAP (Entidade de Serviços Partilhados da Administração Pública) is the Portuguese entity responsible for the implementation and management of B2G e-invoicing.
This obligation is also present in the Public Contracts Code and requires suppliers of the Public Administration to issue all invoices to public sector entities in electronic format. This excluded contracts declared secret or accompanied by special security measures and contracts concluded following the simplified direct award process (contracts below EUR 5,000).
The implementation of this regime was gradual, starting with the mandatory receipt of electronic invoices by the Public Administration in April 2019. This was followed by a phased introduction of compulsory issuance of e-invoices for suppliers of the Public Administration, starting with large companies in January 2021. The implementation calendar has been postponed several times for small, medium and microenterprises. Currently, only large companies are required to issue invoices electronically.
What is a B2G e-invoice?
An e-invoice, according to the EU Directive on e-invoicing in public procurement, is an invoice issued, transmitted and received in a structured electronic format.
Electronic invoicing requires data creation in a structured format and its transmission from the seller’s system to the buyer’s system in an automated manner. As a result, the invoice can be automatically imported into the public entity’s system.
As per Portuguese regulations, the e-invoicing model to be adopted is the semantic data model proposed for the Portuguese standard known as CIUS-PT. There is no obligation to send a PDF document attached to the electronic invoice. An invoice in PDF format is not considered an electronic invoice as they do not comply with European standards.
Suppliers must also archive electronic invoices and ensure they are accessible for the period required by the tax authority, which is typically 10 years.
What are the consequences of non-compliance?
Considering the general obligation to issue e-invoices in the B2G sector, it is possible to identify four main legal consequences for non-compliance with this legal obligation:
- Judicial fulfilment of the obligation: an invoice that does not comply with B2G e-invoicing rules is in breach of a legal obligation and the issuer may be required to fulfil this obligation by judicial means.
- Non-payment of the invoice: the public contractor must refuse to pay a non-compliant invoice since this constitutes a violation of rules applicable to the payment of public expenditure.
- Inability to demand payment: the supplier will not be able to demand the fulfilment of the contract by the debtor since the established legal form has not been observed.
- Non-performance of the contract: if the contract also includes the legal obligation to issue and receive e-invoices in CIUS-PT, non-compliance may lead to an additional breach of contract and the application of contractual sanctions. Ultimately, it may also result in contract cancellation and impede participation in future public procurement processes.
When do companies need to comply with B2G e-invoicing in Portugal?
Currently, all public administration entities are obligated to receive e-invoices in the structured CIUS-PT format. Additionally, all large company suppliers to the public administration must issue e-invoices in the same format.
Although B2G e-invoicing became mandatory on 1 January 2023, Law Decree no. 54/2023 published in July 2023 postponed the obligation for micro, small and medium-sized enterprises once again – granting taxpayers a new deadline for compliance.
The postponement was first announced during the press conference of the Council of Ministers, without a new deadline for the entry into force of the obligation. However, with the decree’s publication, the new deadline of 31 December 2023 has been established.
Until then, micro, small and medium-sized companies can use invoicing mechanisms other than e-invoicing in the structured CIUS-PT schema when contracting with the Public Administration.
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