“Portugal is falling behind by continuing to postpone mandatory digital invoicing”

Are there any particularities in the Portuguese market that other markets do not have? Or is it a gray market for Somos, similar to Spain or Greece?
No no. Firstly, Portugal is one of our three centers of excellence. Therefore, this is very important, globally, for SOVOS. Portugal is very important. And in Portugal, tax regulations and compliance are in a very mature state. Some European countries are only now considering a regulated world. See my point? You are at a very advanced point compared to other European countries. Portugal is one of the top3 or top2 countries in EMEA (Europe, Middle East and Africa) that were pioneers. This is why the experience we acquire in Portugal as a company is very important. And the customer experience with us is very important. Therefore, Portugal has been a leading country from a tax regulation perspective across EMEA.

He then says that Portugal has been very competent in creating regulations to collect taxes. And that?
(Laughter). We acquired PetaPilot and Saphety in 2021. And we currently have 18,000 customers in Portugal. Some are national, others are global multinationals. We have SMEs and micro companies too. The government in Portugal itself, as well as companies, are benefiting from a B2G (Business to Government) mandate. This is very important. Private companies are benefiting from a solution, digital compliance services. This is very important and, as I said, the same is happening globally. And you are one of the pioneers in EMEA. This is good not only for the government but also for all companies to be compliant [com as regras], to mitigate the risk of, at any time, not being in compliance. And what we are waiting for – and have been waiting for for a long time – is the new mandate: electronic invoicing. It was supposed to be mandatory a few years ago, especially for B2G and SMB (small and medium-sized companies). Because big companies are already obliged to do so. In recent years, we have had several postponements.

What reasons were given for these postponements?
We believe that the government thinks PDF invoices are sufficient in the first place. Can be it. One of the reasons may be that the government thinks that PDF images are sufficient for the digital transformation of companies’ invoicing systems or processes. And they may also find that the cost of invoicing for some small businesses may be a factor to take into account. This may be a second reason, especially for SMEs and micro companies.

What does SOVOS think about this?
What we believe is that electronic invoicing is not a technical change. It is more than that. It is an opportunity to optimize operational efficiency in companies. And postpone… Well, honestly, we think that its adoption could avoid mistakes and problems for companies and the government. They will not be able to avoid some mistakes. Once again: simplifying processes for companies and the government, simplifying transactions, is very important. And we believe that these problems are negatively impacting business processes.

In this regard, is Portugal falling behind? We are late?
Yes, they are falling behind.

In relation to which countries in Europe? Which EU Member States have already adopted this mandatory digital invoicing measure?
So, we already have Italy, the United Kingdom, Turkey, Romania. Poland is currently on its way. France, I repeat, is an immature State [nesta matéria].

Does SOVOS have any idea what Portuguese companies are saying about the introduction of mandatory digital invoicing?
A global survey we commissioned indicates that 82% of companies are afraid that they will not be able to comply with regulations in the near future. They’re afraid of it. And 90% fear an increase in costs associated with complying with regulations. Most likely, if we carry out the same investigation in Portugal, the result will be very similar. Because the research that was done for us relies on reliable sources, such as Bloomberg and Accenture. They are concerned. We’re in a digital age and, honestly, uh, no company has time to fall behind the competition. Competition in every country, in every sector, is super high and companies are trying to sustain their growth rates and remain profitable. The main way to achieve this is to use your resources, your budgets very efficiently and reduce costs through digital transformation.

We all have an idea of ​​what a PDF invoice is. What are the advantages and characteristics of this electronic invoicing?
The big advantage is the exchange of data between government entities, companies and the rest of the ecosystem. Therefore, it is not just the visual aspect of the invoice. The real data is there. This is why companies can analyze their data, invoices they receive, accounts payable and accounts receivable transactions. And also the government will be able to audit them through their real transactions. And it will save them from paper, from any risks, including sudden audits etc. So it’s real data flowing, securely, between government systems and enterprise systems, through a trusted solution provider, through a trusted platform. They are servers talking to servers and this is what is already happening in Portugal, and in several markets, with large companies and with companies that are suppliers to the State. It already works like that with the big ones.

What is changing in this area in 2024?
We serve more than 100,000 customers; companies in more than 100 countries. And that includes half of the companies in the Fortune500. We are happy with that in 2024, but we would like to change the rules of the game, for the market and for our competitors. That’s why we launched SOVOS Tax Cloud on February 20th. And this was very important, because it is the first and only solution in the sector that globally unifies Tax Compliance. It’s very interesting and it’s very important. It’s not just tax compliance… under the same umbrella there is also reporting to regulators.

Did SOVOS think it was losing market share because it was targeting companies with large capitalization? Big companies?
No no. The point is that over the last eight years, SOVOS has spent roughly two hundred million dollars to build this Sovos Tax Cloud. This didn’t happen because we wanted to reach different customer segments. This happened because we wanted to change the rules of the game when it comes to tax solutions and service providers. This investment integrated almost all ERP solutions (Enterprise resource planning) of companies using e-commerce technology. Therefore, we have become an ecosystem.

So what was the reason?
The reason for joining was that 82% of companies believe they are more exposed to tax-related compliance risks. That’s 82%, according to a Bloomberg survey. And 90% of companies expect a big increase, a big increase in their costs to ensure tax compliance. And this is research from Accenture. The industry, buyers, companies are very concerned about the growing need for compliance. And more compliance. That’s why we invested a few hundred million dollars to build this SOVOS Tax Cloud.

What does this service allow?
It varies from country to country, from regulation to regulation. We have 19 thousand jurisdictions, 19 thousand different areas or regions of tax regulation. So, for all companies in all segments there is a need in your jurisdiction, in your country. Some need to be integrated into the public Cloud; some are more “embedded” in their ERP systems, in their purchasing systems, in integration with e-commerce, to guarantee tax compliance. It’s not just for one type of companies. It’s a solution that fits all sizes of companies across all sectors, in 19,000 jurisdictions and in more than 100 countries.