Advance invoice and VAT and KPiR registers
The advance payment is a part of the amount due for the future delivery of goods or performance of services in order to secure the performance of the contract. Tax regulations do not refer directly to the recognition of advances in tax costs. In what period should the advance invoice be recognized in terms of income tax and VAT? We explain how the advance invoice should be included in the billing.
Down payment invoice - items
The information that should be included in the advance invoice is included in Art. 106f of the VAT Act. To a large extent, they coincide with the elements that a "normal" VAT invoice must have, and these are:
- date of issue,
- a sequential number that uniquely identifies the invoice,
- names and surnames or company name of the taxpayer and buyer of goods or services and their addresses,
- business addresses of both parties involved in the transaction,
- the number by which the taxpayer is identified for tax purposes,
- the number by which the buyer is identified for the purposes of tax or value added tax,
- the date of the delivery or completion of the delivery of goods or the performance of the service or the date of receipt of payment, if specified and different from the date of invoice,
- amount of payment received,
- the amount of tax,
- order or contract data: name (type) of goods or services, net unit price, quantity of ordered goods, net value of ordered goods or services, tax rate, tax amount, as well as the value of the order or contract, including the tax amount.
Recognition of the advance invoice in the KPiR
Advance invoices issued to confirm the receipt of an advance are not recognized in the KPiR as an expense or income. This is due to the fact that in the case of advance invoices, the moment of settlement in terms of VAT and income tax is different.
Income tax settlement takes place at the time of issuing / receiving the final invoice or completing the service or delivery of goods, while VAT is settled at the time of payment / receipt of the advance payment.
Advance invoice in the exhibitor's records
An entrepreneur who receives an advance payment for future deliveries or services is required to issue an advance invoice each time the advance payment is received.
Receiving an advance payment for the future delivery of goods or performance of a service gives rise to a tax liability in the scope of VAT, but it is not subject to income tax. The tax obligation in VAT arises when the advance payment is received, i.e. before the actual sale is made, and the fact of its receipt should be confirmed by issuing an advance invoice.
The advance invoice should be issued by the 15th day of the month following the month in which all or part of the payment was received from the buyer of the goods or services. At the same time, it should be remembered that the advance invoice may be issued not earlier than 30 days before receiving the payment.
How do I check in an advance invoice correctly?
Accepting an advance payment for future supplies of goods and services and issuing an advance invoice is not treated as income subject to income tax. Therefore, advance payments are not recognized in the tax book of revenues and expenses. In this case, the tax obligation regarding income tax will arise at the time of delivery of the goods or performance of the service, but not later than on the date of issuing the invoice (in this case, the final invoice or the last advance invoice, so that their total value amounts to 100% of the amount due for the goods / service) ) or settlement of receivables.
The seller enters the advance invoice only in the VAT sales register, and only records the final invoice in the KPiR. Only the part of VAT that was not included in the advance invoice is settled on the final invoice.
Advance invoice in the recipient's records
As in the case of the issuer, the advance invoice is not the basis for posting it as income at the time of receiving the advance, and in the case of the recipient, it will not be posted as tax deductible costs at the time of its payment. In the case of taxpayers who keep a tax book of revenues and expenses, only the final invoice will be the basis for recognizing the advance payment as costs.
However, when it comes to the input VAT in connection with an advance invoice, the taxpayer has the right to deduct it on general terms, i.e. at the time of its receipt. The buyer, and the seller, records the advance invoice in the VAT register, while in the KPiR, the settlement is only made on the basis of the final invoice received.
Return of the advance paid by the counterparty
If the sale did not take place, because the buyer, after paying the advance, resigned from the purchase of the goods or services, then a correcting invoice should be issued. By accepting the advance, this fact has been reflected in the VAT records, therefore the withdrawal of the advance payment must also be included in the VAT records. In this way, the previously entered advance payment will be “withdrawn” from the VAT register.
In summary, advance invoices are not recognized in the KPiR upon payment / receipt of the advance payment as an expense or as income. Posting takes place only after the contract is finalized - goods are released or services are provided, on the basis of the final invoice or all advance invoices.
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Issuing an advance invoice in the in-company system
The wfirma.pl system allows you to easily issue an advance invoice. To do this, go to the tab REVENUE »SALE» EXHIBITION »ISSUE AN INVOICE.
On the other hand, issuing the final advance invoice in the system is explained in the help article: Final invoice - how to issue?
If the advance invoices cover the entire payment for the delivery of the goods or the performance of the service, there is no need to issue a final invoice as the last advance invoice is of its nature. Then, the revenue in the KPiR or Revenue Registry should be recognized on the basis of issued advance invoices, under the transaction execution date via the tab: RECORDS »KPiR or REVENUE RECORDS» ADD ENTRY.
