What is a QR Code and How is it Used in Invoicing?
The QR code has become a popular tool with use cases in almost every area of daily life. In recent years, it has also developed into a technological solution for declaring electronic invoices to tax authorities and improving tax control.
The QR code is the two-dimensional graphical representation of text-based data. Its acronym stands for Quick Response code. QR codes are read by a special scanner, software, or mobile application. They allow you to immediately access the desired information, like links to web pages, documents, etc.
They were initially created for use in the automotive industry to register spare parts and have since been adapted for inventory management purposes in sectors as diverse as storage, logistics, retail, and transportation. The proliferation of cell phone applications for reading QR has made these codes part of everyday life and provided access to additional information about all types of products and services.
One of their increasingly widespread use cases is tax monitoring. QR codes are used in tax processes to prohibit taxpayers from issuing fake invoices to falsify income declarations or deduction claims.
The incorporation of QR codes into invoices and sales receipts, whether electronic or printed, allows recipients to quickly verify the validity of those documents.
In Europe, the tax administrations of Portugal, Austria, Germany, Sweden, and Poland have implemented or plan to implement this type of system. In Spain’s Basque Country, mandatory use of the QR code will come into effect beginning in 2021. Outside of Europe similar systems are in place. In India, Quebec, and some Latin American countries like Colombia, Guatemala, Peru, Bolivia, QR codes are already in use for tax purposes.
The incorporation of QR codes in invoicing processes came out of a recommendation from the Organization for Economic Cooperation and Development (OECD) that urges tax administrations to implement “effective technological solutions to detect and prevent tax evasion and fraud.”
In general, these systems call for the immediate reporting of invoices or fiscal documents associated with the sale of a product or service by a taxpayer to the tax administration. Upon reception, a QR code is generated and must be incorporated into the invoice or fiscal document.
Therefore, obtaining the QR code requires prior validation of the invoice by the tax authority. The end recipient can scan the code to verify the validity of the invoice.
Some Examples of Invoicing with QR Codes
In Spain, the regional tax authorities and the autonomous government of the Basque Country will require mandatory adoption of the Ticket Bai-TBAI system beginning in 2021. Each time a sale is made, an XML-TBAI file will be generated. It must then be signed and sent automatically to the corresponding regional tax authority. The company is required to generate an invoice that includes the TicketBAI ID and a QR code, which includes all the information necessary for the recipient to verify the invoice’s validity.
This system is similar to Spain’s Immediate Supply of Information (SII) model for electronic VAT bookkeeping. It requires that the details of all invoices sent and received be electronically generated and declared within four calendar days, including simplified invoices (tickets). The SII affects large companies, while the TBAI system includes SMEs and the self-employed.
In India, taxpayers issue invoices and send them to the Invoice Registration Portal (IRP). The IRP generates a unique identifier called an Invoice Reference Number (IRN) for each invoice, digitally signs it, and adds a QR code. The IRP then sends the electronic invoices both to the GST Network and to its recipient, the latter by email.
In Latin America, the QR code is required to appear on the standardized print format. This is the case in Bolivia, which allows for quick and easy access to the tax portal through a QR link. Users can validate the tax document this way if it has been registered.
In Colombia, a graphic representation of the electronic invoice must be provided for those purchasers who do not receive it in standard electronic format. This document incorporates various graphic elements, including QR codes.
In Mexico there is a standardized format for printing receipts. Among other things, this format includes a QR code linked to important tax information.
In Uruguay, the printed electronic invoice must include a digital seal, a two-dimensional code with tax information that allows for invoice verification.
The main advantage of implementing this type of verification model is improved tax collection and deterrence of tax evasion or fraud.