Documenting the advance payment and delivery in the same billing period

Service-Tax

On the basis of VAT, tax liability arises both at the time of receipt of the advance payment in relation to the amount received and at the time of delivery of the goods. Both economic events must be properly documented with an invoice. Meanwhile, there may be situations where the advance payment and delivery of goods take place in the same billing period. Does this mean that documenting the advance payment and delivery in this case requires issuing two invoices? We explain in the article.

The moment when the tax obligation arises

Before we move on to the regulations governing the principles of documenting specific tax activities, it is worth analyzing the norms determining the moment when the tax obligation arises, because this will affect the date of issuing the invoice later.

First of all, let us point out that according to the general rule expressed in Art. 19a paragraph. 1 of the VAT Act, the tax obligation arises when the goods are delivered or the service is provided, subject to paragraph 1a, 5 and 7–11, art. 14 sec. 6, art. 20 and art. 21 sec. 1. However, pursuant to Art. 19a paragraph. 8 of the VAT Act, if before the delivery of the goods or the performance of the service, all or part of the payment was received, in particular: prepayment, advance payment, advance payment, installment, construction or housing contribution before the establishment of a cooperative right to a dwelling or premises for other purpose, the tax obligation arises from upon its receipt in relation to the received amount, subject to paragraph 5 point 4.

Therefore, the above regulations indicate two different moments of the tax obligation, which results from the fact that under the VAT Act, receiving an advance payment is an event that generates a tax obligation (unlike in the case of PIT tax).

Example 1.

The seller received an advance payment from his contractor for the delivery of goods in March. In April, there was a delivery and the rest of the payments were settled. In this case, the tax obligation arises both in March and April.

In terms of value added tax, the moment when the tax obligation arises is determined by both the supply of goods and the receipt of an advance payment.

Documenting the advance payment and delivery of goods - the basic principles of documentation

Receipt of an advance payment for the delivery of goods and the delivery of goods itself are events that must be documented by the taxpayer with an invoice.

Pursuant to Art. 106i paragraph. 1 of the VAT Act, the invoice shall be issued no later than on the 15th day of the month following the month in which the goods were delivered or the service was performed, subject to paragraph 2-9.

However, as stated in Art. 106i paragraph. 2 of the Act, if before the delivery of the goods or the performance of the service, all or part of the payment referred to in Art. 106b paragraph. 1 point 4, the invoice shall be issued no later than on the 15th day of the month following the month in which all or part of the payment was received from the buyer.

Let's analyze the above recipes with a specific example.

Example 2.

The seller received an advance payment from his contractor for the delivery of goods in March.In April, there was a delivery and the rest of the payments were settled. The seller should therefore issue an invoice no later than April 15 for the advance payment received in March and an invoice by May 15 for the delivery of goods made in April.

It is also worth recalling that pursuant to Art. 106i paragraph. 7 of the VAT Act, invoices cannot be issued earlier than the 30th day before:

  1. delivery of goods or performance of a service;

  2. receiving, prior to the delivery of goods or the performance of a service, all or part of the payment.

Let's also outline the relationship between the advance invoice and the final invoice. In this regard, reference should be made to the content of Art. 106f paragraph. 3 of the VAT Act, which states that if the advance invoice does not cover the entire payment, in the invoice issued after the goods or services have been delivered, the sum of the value of the goods or services is reduced by the value of the received parts of the payment, and the tax amount - by the sum of the tax amounts shown in the invoices documenting receiving part of the payment. The invoice referred to in the first sentence should also contain the numbers of invoices issued before the goods are delivered or the service is provided.

Consequently, if the advance payment and the delivery of goods take place in different settlement periods, the taxpayer first issues an invoice documenting the receipt of the advance payment. Then, after the goods have been delivered, they issue a final invoice, in which they indicate the number of the advance invoice and the amount of tax paid on the partially received payment.

The obligation to issue an invoice applies to both the received advance payment for the delivery and the delivery of the goods. The final invoice should include prior settlement of the advance payment.

Documenting the advance payment and delivery of goods in the same billing period

The case analyzed so far included a situation in which the receipt of the advance payment and the delivery of goods took place in two different settlement periods.

However, how can the above regulations be adapted to a situation where the receipt of the advance payment and the delivery of the goods take place in the same billing period?

In the context of the considerations carried out, it should be noted that it is unjustified to issue two invoices relating to the same accounting period. Such duplication of documents should be considered unreasonable.

The tax authorities present a similar position. For example, the Director of KIS in the interpretation of March 14, 2018 (No. the final invoice itself, which includes the entirety of the delivery (including the amount of any advance or advances received).

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In this case, it is appropriate to document the transaction by issuing one document - a settlement invoice, the content of which will be extended to the data indicated in art. 106f of the VAT Act, i.e. payment amount, tax amount, date and gross amount of the advance payment received.

This is also due to the fact that if the received advance payment for the delivery of goods and the performance of the delivery take place in the same settlement period, then the tax obligation for both the advance payment and the delivery of goods arises in the same month.

In relation to the above, the basic deadline for issuing an invoice applies, i.e. by the end of the 15th day of the month following the month in which the tax obligation arises at the latest.

However, it is necessary to point out what the Director of KIS also pointed out in the above-mentioned interpretation that it is not a mistake to issue two invoices, i.e. an advance and a final invoice. At the same time, there is no doubt that a much simpler solution is to issue one invoice.

Example 3.

On April 2, the taxpayer received an advance payment for the delivery of goods. Then, on April 27, he delivered the goods. In this case, it has the right to issue one invoice by May 15th.

It is lawful to document the down payment and delivery in the same billing period with one invoice. In light of the regulations, it is also not a mistake to issue two separate invoices.

The presented issue is an issue that cannot be directly answered in legal regulations. The linguistic and systemic interpretation, however, leads to the conclusion that due to the principle of economics of the taxpayer's conduct and the limitation of tax obligations, it is possible to issue only one invoice.