Advance invoice - issuing obligations
When making a transaction, the seller may require the buyer to pay a sum of money towards the future delivery of goods or services. This payment is called an advance payment or a prepayment. In such a case, the question often arises as to how to document the receipt of the advance payment and what tax consequences it has. Check when an advance invoice is required and what elements it should contain!
When should an advance invoice be issued?
Receipt of the advance by the taxpayer gives rise to a tax obligation under VAT. In a situation where an advance payment is made by an economic entity, the entrepreneur, as a confirmation of its receipt, is generally obliged to issue an advance invoice by the 15th day of the month following receipt of the advance payment.
However, if the delivery of goods or the performance of a service takes place in the same billing period, the entrepreneur does not have to issue a separate advance invoice and a settlement (final) invoice. He may issue one document in which he taxes the entire transaction (including the received advance payment). It should contain elements of the basic VAT invoice and the amount of the payment, the amount of tax, the gross amount of the advance payment, as well as the date of its receipt.
If the advance payment is made by a natural person who does not conduct business activity, the advance invoice may be issued only at the request of the payer. In the case of entrepreneurs who are required to record sales on a cash register, receipt of an advance payment may be confirmed by a receipt from the cash register. If the buyer then requests an invoice, the entrepreneur is obliged to issue it. The original receipt should be attached to the copy of the invoice. More information about issuing an invoice for a receipt can be found in the article: Buyer's NIP number on the receipt and the invoice for the receipt - it's worth knowing!
Down payment invoice - items
Pursuant to Art. 106f of the VAT Act, the advance invoice should contain:
date of issue,
a sequence number that uniquely identifies the invoice,
name and surname or name of both the taxpayer and the buyer of the service or goods, and their addresses,
tax identification numbers,
the date of receipt of the advance payment, if such date is specified and differs from the invoice issue date,
order data, in particular the name of the goods sold or the service provided, the net unit price and the gross value of the ordered service or goods, the number of goods ordered,
tax value calculated according to the formula:
tax amount = (value of the advance payment received x tax rate) / (100 + tax rate)
If the advance payment does not cover the entire value of the contract, the entrepreneur is obliged to issue a final invoice after the completion of the contract. Such an invoice should contain all the numbers of advance invoices issued before the delivery of the goods or the performance of the service (Article 106f (3) of the Act).
The VAT Act gives the right to issue an advance invoice up to 30 days before receiving the prepayment. However, the mere issue of it does not have any consequences in terms of VAT and income tax. The tax obligation will arise only when the advance payment is received or the goods are delivered or the service is provided - whichever comes first.
When does an advance invoice not have to be issued?
As a rule, if the supplier receives the advance payment or the entire payment before the delivery of goods or services, then a tax obligation arises at the time of receipt of the payment. It is necessary to issue an advance invoice documenting each advance payment, unless the payment and execution of the order will be settled in the same settlement period.
Exceptions to this rule are listed in the VAT Act and include:
supply of heat, electricity or cooling energy as well as line gas,
services related to the supply and treatment of water via water supply networks,
lease, rental or leasing services,
personal security services as well as security, supervision and storage of property,
office and legal services,
intra-Community supply of goods.
In the event of receiving an advance payment for the above-mentioned activities, there is no obligation to issue an advance invoice, because in this case there is no tax obligation under VAT.
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How to issue an advance invoice?
In the wfirma.pl system, it is possible to issue multiple advance invoices for one order and one final invoice closing the entire transaction. First, a pro forma, i.e. order document, which is the basis for issuing an advance and final invoice, should be issued. To do this, go to the tab: REVENUE »PRO FORMS» ADD »ORDER.
In the next step, an advance invoice should be issued on the day of receiving the prepayment. To do this, go to the tab: REVENUE »SALE» EXHIBITION »PRE-FINANCING INVOICE, and then selecting the order (pro forma invoice or offer), on the basis of which the advance invoice is to be generated.
The issued advance invoice will be included only in the sales VAT register.