Portugal Clarifies Invoice Correction and VAT Regularization Rules
Portugal’s Tax and Customs Authority (AT) has issued Circular Letter No. 25120/2026, consolidating the rules that apply to invoice corrections, credit and debit notes, and VAT adjustments. Published on July 28, 2026, the circular replaces the outdated Circular Letter No. 33129/1993 and reflects both the shift toward digital invoicing and the changes introduced by Decree-Law 97/2026. Any prior guidance inconsistent with the new circular is also revoked.
Credit Notes Cannot Replace Invoice Cancellation
The circular draws a clear line between corrections that affect the taxable amount or VAT due and those that do not:
- Credit notes may only be used to amend invoice data linked to a change in the taxable amount or the VAT due – they cannot be used to cancel an invoice outright.
- Formal or technical errors, such as an incorrect customer VAT number, name, or address, must instead be corrected by canceling the original invoice and issuing a new one.
- Debit and credit notes are mandatory when VAT is undercharged. Correcting overcharged VAT is optional for the supplier, but if they do, a credit note is required.
- The AT also separates the procedures and deadlines that apply depending on whether a correction stems from a change in the underlying transaction, a billing error, or an error in the legal qualification applied to the transaction.
For non-resident businesses registered for VAT in Portugal, this distinction is particularly relevant when managing corrections remotely, since it determines whether a credit note or a full cancellation and reissuance is required.
VAT Regularization Requirements
Any reduction in VAT now requires objective evidence that the customer either received the correction or was reimbursed. The circular formally recognizes digital records as valid proof – including electronic acknowledgments, customer portal logs, and email correspondence – alongside traditional physical documentation.
Suppliers may adjust overpaid VAT under an optional regularization procedure. The adjustment must be made no later than the end of the tax period following the one in which the qualifying event – such as returned goods or a granted discount – took place.
The circular also addresses VAT adjustments for transactions falling under the new housing incentive regime introduced by Decree-Law 97/2026.
Transitional Measure for Invoicing Systems
Recognizing that some invoicing systems cannot yet issue credit or debit notes that correct only the VAT amount, the AT allows a temporary workaround until December 31, 2026: businesses may cancel the original invoice through a credit note and issue a replacement invoice that references the original document and retains its original transaction date.
Next Steps
From 2027, businesses will be required to use targeted corrective documents in line with the new guidance, without relying on the transitional workaround. Organizations should update their invoicing and ERP processes before the end of 2026 to avoid more complex corrections, including potential amendments to previously filed VAT returns. Affected traders should also review their invoicing, documentation, and VAT reporting processes to ensure they can support VAT adjustments in the event of a tax authority review.
There’s more you should know about e-invoicing in Portugal – learn more about the new and upcoming regulations.
