Advance invoice - when it is not necessary to issue it?

Pursuant to tax regulations, if all or part of the payment, in particular a prepayment, advance payment or down payment, has been received prior to the delivery of the goods or the service, the VAT obligation arises upon its receipt in relation to the received amount. An advance invoice is used to document such business transactions. Check when such an invoice is necessary. Answer in the article!

Advance invoice - what data should it contain?

The advance payment should be documented with an advance invoice. It should contain such elements as:

• date of issue,

• sequential number assigned within one or more series that uniquely identifies the invoice,

• names and surnames or names of the taxpayer and buyer of goods or services and their addresses,

• numbers by which the taxpayer and buyer are identified for tax purposes,

• the date of receipt of all or part of the payment prior to the release of the goods or the performance of the service, if such a date is specified and differs from the invoice issue date,

• the received payment amount,

• tax amount,

• data regarding the order or contract, in particular the name of the goods or services, the net unit price, the quantity of ordered goods, the net value of the ordered goods or services, tax rates, tax amounts and the gross value of the order or contracts.

Important! An advance invoice shall be issued by the 15th day of the month following that in which the advance payment was received. Additionally, it should be remembered that it can be issued up to 30 days before receiving the payment.

Pursuant to Art. 29a paragraph. 1 the taxable amount is everything that is the payment that the supplier of the goods or the service provider has received or is expected to receive for a sale from a buyer, recipient or third party, including received subsidies, subsidies and other payments of a similar nature which have a direct impact on the price of the goods supplied or services provided by the taxpayer.

When is an advance invoice not issued?

It should also be noted that the cases in which sellers do not issue advance invoices have been legally regulated. This applies to received advances received for:

• intra-community delivery of goods,

• supply of electricity, heat or cooling as well as line gas,

• providing telecommunications and radiocommunication services,

• provision of services related to the treatment and supply of water through water supply networks (services listed in items 140-153, 174 and 175 of Annex 3 to the Act on tax on goods and services),

• provision of rental, rental, leasing services or services of a similar nature,

• provision of personal security services as well as security, supervision and property storage services,

• provision of permanent legal and office services,

• provision of electricity, heat or cooling energy and line gas distribution services.

In other words, the receipt of an advance payment in the above situations will not result in a tax obligation and an obligation to issue an advance invoice.

Important! Receipt of the advance payment in the above-mentioned cases will not result in the necessity to tax it. An exception applies to services to which Art. 28b of the VAT Act, i.e. constituting the import of services.

Should I always issue a final invoice?

As indicated in art. 106f paragraph. 3 of the VAT Act, 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 is reduced by the sum of the tax amounts shown in the invoices documenting the receipt of the part payments. Such a document should also contain the numbers of invoices issued before the goods were released or the service was performed.

There are often situations where the seller issues several advance invoices prior to the delivery of goods or the performance of the service. Then it should be remembered that the taxpayer should include the numbers of all previous invoices documenting the receipt of the advance on the advance-final invoice. However, if the sum of the issued advances covers the entire payment, there is no obligation to issue an advance-final invoice, provided that the advances cover the entire payment.

Example 1.

Entrepreneur N in April 2015 received a 30% advance payment for the future delivery of goods. On this basis, an advance invoice was issued. In May, he received another part of the advance payment of 50% of the contract amount (which was also documented by an invoice), and in June, the remaining part was 20%. Thus, the invoice documenting the receipt of the last advance payment in June will be the last invoice documenting the delivery of the goods. Therefore, it should include all previously issued advance invoices.

If the advance invoice did not cover the entire transaction, the supplier is obliged to issue a final (settlement) invoice after the goods have been delivered or the service has been provided. The invoice should be issued no later than on the 15th day from the date of delivery of the goods or performance of the service.

Example 2.

Entrepreneur M. received on November 7, 2015 an advance payment of 60% of the amount due for the service that was to be performed in December. This service was performed in accordance with the contract on December 2, 2015. Therefore, by January 15, 2016, the supplier is obliged to issue a final-settlement invoice, in which he should indicate the amount of the advance payment.

Important! The tax authorities take a position on the basis of which it will not be necessary to issue an advance invoice (delivery of goods or performance of the service will take place in the same period) if the advance and final invoices are issued in the same month. An example of such a position is the individual interpretation of the director of the Tax Chamber in Warsaw of May 15, 2014, No.IPPP3 / 443-186 / 14-2 / ​​SM: Therefore, if in the same settlement period (month) the Company receives an advance payment for the delivery, as well as performs the delivery of the goods itself, there is no obligation to issue a separate invoice to document the advance payment (the deadline for issuing an advance and final invoice is the same). The company may issue one invoice containing the elements referred to in Art. 106e-106f of the Act, in which it taxes the entirety of the delivery (including the amount of the advance payment).

You should also consider a situation in which the seller receives an advance payment for the entire order. In such a case, the transaction should be settled on the basis of the advance invoice. Then the entrepreneur shows the received advance payment only in the VAT sales register, and then the revenue is recorded at the time of delivery of goods or performance of a service in column 7 of the KPiR. The basis for the operation will be an advance invoice.