e-Fatura: The Guide to Portugal's e-Invoice System

e-Fatura is a digital e-invoice platform introduced by the Autoridade Tributária e Aduaneira, Portugal's main tax authority office. Since its inception in 2013, it has played a significant role in curbing tax evasion and enabling entrepreneurs and consumers to benefit from various tax deductions.

This guide will delve into what this system is, how it operates, and why it's so useful for businesses.

What is e-Fatura?

The app serves a dual purpose: preventing tax evasion (which is good for the Portuguese Government) and facilitating tax deduction (which is good for the Portuguese consumer). In a nutshell, it requires the issuance and communication of invoices for all economic transactions, ensuring that all business activities are duly recorded and appropriately taxed.

If you're an entrepreneur in Portugal, understanding and utilizing this app is critical, as it not only ensures compliance with local tax laws but also opens up opportunities to reduce tax liabilities through eligible deductions.

How Does e-Fatura Work?

• Registration: New app users need to sign up at Portal das Finanças to receive a password for access. The registration process is pretty straightforward—all you need is a NIF.

• Access: Once registered, log into the e-Fatura section on the Portal. Here, you can view and manage all the expenses linked to your NIF.

• Validation: The app allows you to confirm if the deductible categories of your invoices are correctly assigned. This is crucial for ensuring that you receive the appropriate tax deductions.

This all might seem a bit complex for entrepreneurs and consumers at first, but it's integral for accurate tax reporting and benefiting from tax deductions.

Using a QR Code to Register Invoices

In Portugal, all invoices issued by services to clients contain a QR code that can be scanned to register invoices electronically. This direct invoice registration process can be used by anyone with mobile devices that support QR code technology, making it easier to manage receipts that have been left behind.

Countries With Mandatory Electronic Invoicing

Mandatory electronic invoices exist all over the world and are supported by most European Union (EU) countries, including Portugal.

Denmark pioneered electronic invoicing in the EU in 2005 and was followed by Sweden, Finland, Austria, Slovenia, Italy, Spain (2008), Portugal, Slovakia, Hungary, Cyprus, Ireland, Latvia, Malta, Romania, Poland, and Luxembourg (2020).

Benefits of Using e-Fatura for Entrepreneurs and Consumers

Using the e-Fatura system offers benefits for entrepreneurs and consumers primarily in the form of tax deductions. After all, you can easily claim several fiscal deductions by recording and validating expenses linked to your NIF.

The app also provides you with a single platform where you can classify and update all of your fiscal data, making it easier for taxpayers to review their every invoice and comply with mandatory guidelines.

Benefits of e-Fatura for Portugal's Tax Authority

Portugal's tax authority has been fiercely promoting its e-invoice app because it wants to incentivize entrepreneurs and consumers to officially report their every expense. After all, the more taxpayers spend, the more the State makes!

The app has been all over the news since 2013 because it is in the best interest of the Portuguese Republic that people have an incentive to register invoices quickly and conveniently. In the long term, it also has the benefit of promoting overall tax education in the country.

Tax Benefits: Expenses Covered in Portugal's e-Invoice Set-Up

By using the app's functionalities, Portuguese consumers can request invoices issued to be considered for tax deductions. To make the most of this, all you need to do is register invoices and see if their correspondent expense fits into any of the following deductible categories:

Health Expenses

Including not only medical services but also expenses related to health insurance.

Maximum deduction: 15%

Maximum amount deducted to taxpayers: €1.000

Education Expenses

Including general kindergarten to college expenses such as books, school meals, and student accommodation.

Maximum deduction: 30%

Maximum amount deducted to taxpayers: €800

Property Expenses

Including rent, home loan fees, and property renovations.

Maximum deduction: 30% (renovations) and 15% (others)

Maximum amount deducted to taxpayers: €500

Retirement Expenses

Mainly for supporting home care expenses.

Maximum deduction: 25%

Maximum amount deducted to taxpayers: €403,75

General Family Expenses

Including utility bills, grocery expenses, and fuel.

Maximum deduction: 45% (single-parent household) and 35% (two-parent household)

Maximum amount deducted to taxpayers: €335 (single-parent household) and €250 (two-parent household)

VAT

Applicable to a variety of services, from restaurants to hair salons.

Maximum deduction: 15%

Maximum amount deducted to taxpayers: €250

Tax Compliance: Best e-Invoice Practices

To make the most of e-Fatura, regular engagement with the system is essential. Here are some best practices for managing your e-Fatura account effectively:

• Regular check-ins: Make regular check-ins to stay updated with your invoices and tax deductions, preventing the accumulation of unverified invoices.

• Invoice validation: Ensure that all your invoices are correctly categorized. If you find any discrepancies or missing invoices, update them promptly. Pay attention to all details.

• Record keeping: Keep physical or digital document copies of your invoices, as this helps in cross-verifying fiscal data and resolving any potential discrepancies.

• Deadline awareness: Be aware of important deadlines such as those for validating invoices and submitting tax returns, as missing these can affect your tax deductions. Consult our Portuguese Tax Calendar to make sure you never miss a deadline!

By adhering to these practices, you can:

• Streamline your tax management.

• Capitalize on all available tax deductions.

• Comply with mandatory tax authority regulations.

Remember: to correctly classify invoices issued and update fiscal data is to be one step closer to proper invoicing!

e-Fatura for Independent Workers

• Expense categorization: Independent workers must indicate for each invoice whether the full amount or only a part of it is spent for professional activities. This distinction is crucial for accurate tax deductions.

• Partial expense deductions: If only a part of an expense is related to professional activities, only 25% of its value is considered for tax purposes.

• Income reporting changes: Since 2019, the Autoridade Tributária assumes that only 10% of the income under the simplified regime is spent on professional activities. Independent workers need to provide proof if their professional expenses exceed this percentage.

Understanding these nuances is key for independent workers to maximize their tax benefits and maintain compliance with the Portuguese Republic's tax laws.

Summary

In Portugal, the e-fatura system is an essential tool that allows parties, including individuals and companies, to manage their tax-related documentation more efficiently. This digital platform enables users to search for and verify invoices using any compatible device, streamlining the process of tax filing and ensuring compliance with local regulations. This innovation not only simplifies tax management for companies but also enhances transparency and accountability in financial transactions

Rauva's Invoicing Feature: An Efficient Alternative

Rauva simplifies invoice creation and management, ensuring that all your transactions are accurately recorded and easily accessible. This feature not only streamlines your invoicing process but also complements general electronic invoicing by making it easier to track and categorize expenses for tax purposes.

By integrating Rauva's invoicing system into your business operations, you can enhance financial management and focus more on growing your business.