Advances with WDT and issuing a VAT invoice
Entrepreneurs should take into account the fact that receiving a prepayment is associated with the emergence of a tax obligation on the basis of VAT and the need to properly document it. However, what is the issue of obligations in the case of an advance payment for intra-Community supplies? In the article below, we will dispel all doubts.
WDT and tax obligation
In the case of an intra-Community supply of goods, the tax obligation arises when the invoice is issued by the taxpayer, by the 15th day of the month following the delivery - this is determined by the rule expressed in art. 20 paragraph 1 of the VAT Act. In this situation, the date of the invoice by the EU supplier will be binding. The date when the VAT obligation arises will only change if the seller issues an invoice with a considerable delay or fails to do so at all - then the intra-Community supply should be shown on the 15th day of the month following the sale transaction.
Advances with WDT
In a situation where before the delivery of the goods or the performance of the service, part of the payment or its entirety (installment, advance, down payment, prepayment) has been received, the tax obligation will arise at the time of its receipt - it is stated in Art. 19a paragraph. 8 of the VAT Act. This means that the entrepreneur is obliged to settle VAT on the date of receipt of payment. In turn, by the 15th day of the following month after the delivery of the goods or the performance of the service, an invoice documenting the payment should be issued.
The taxpayer obliged to record sales with a cash register is obliged to register the advance payment with this device, taking into account the date of receipt of the prepayment. These rules apply to domestic trade.
The tax obligation on account of the advance payment received will not arise with the intra-Community supply of goods (intra-Community supply of goods), which means that the taxpayer is not required to issue an advance invoice - it results from the repeal of paragraph 3 in Art. 20 of the VAT Act. To this day, however, not all entrepreneurs are aware of this difference and document foreign transactions on the same terms as domestic transactions.
Issuing an advance invoice may have undesirable consequences, such as incorrect interpretation of the invoice by the buyer or the company's accountant who will show it in the VAT return and VAT-EU summary information. At this point, it should be emphasized that the settlement of intra-Community transactions should be carried out on both sides in a parallel manner (in the case of goods, the buyer has intra-Community goods and intra-Community supplies). As a result of showing the advance payment as an intra-Community supply of goods, an incorrect settlement may occur, as a result of which it will be necessary to correct the declaration, which may cause additional problems.
It should be remembered that the receipt of an advance payment for intra-Community supplies does not result in a VAT obligation. For this reason, a taxpayer settling accounts in Poland should not document the inflow of money through an advance invoice - the more so as there is no such obligation.