How will the advance payment be settled after the changes?


Changes are coming that make it easier to run a business. One of such modifications is the settlement of the advance payment for the future delivery of goods or performance of a service. The legislator has announced that the moment of recognition of revenue for value added tax and income tax when receiving advance payments will be made equal. This is to apply when taxpayers register the sale at the cash register. Will the mentioned change bring benefits for entrepreneurs?

Settlement of the advance payment and the tax obligation

Currently, receipt of an advance payment for the future delivery of goods or performance of a service, the entrepreneur is obliged to prove only for the purposes of the tax on goods and services, in the settlement for the period in which the money was paid by the buyer. This rule results from Art. 19a paragraph. 8 of the VAT Act.

In the case of income tax, the settlement of the advance payment is different. As it results from the provisions of the Personal Income Tax Act, income from activity is the amounts due, even if they have not been received. When transferring this principle to the settlement of the advance payment, it should be emphasized that the money received does not constitute a receivable in this case, because the delivery or service has not yet been made. This means that the advance payment does not constitute operating income.

Such income will arise only when the delivery or service is performed, but not later than on the date of the invoice or the payment of the amount due by the buyer.

Importantly, this rule also applies to entrepreneurs who record sales at the cash register. Therefore, after the end of the billing period, they are obliged to adjust the income for the received advances, for which the contract is to be performed in subsequent periods.

Such a solution is very inconvenient, causes many additional obligations (such as keeping additional records) and may lead to numerous accounting errors. That is why the legislator decided to introduce changes in the settlement of the advance payment at the cash register.

Settlement of the advance payment - a new moment of income generation in PIT

There is an assumption in the draft Act on facilitating business activity that simplifies tax settlements if the advance payments received by entrepreneurs are recorded at the cash register. Such a situation often occurs, for example, in the case of the provision of construction, renovation or photography services.

In order to facilitate the settlement of advances at the cash desk, the legislator plans to align the moment of tax liability in PIT and VAT. From the moment of entry into force of the discussed changes, showing the received prepayment will be tantamount to obtaining income for both income tax and value added tax purposes.



It should be noted that the principle of advance payment settlement described above will not apply to all taxpayers. Entrepreneurs who decide to show advance payments at the same time for both income tax and VAT will be required to notify the tax office of this fact by January 20 of the tax year.


The above-mentioned draft Act on facilitating business activity was adopted by the Council of Ministers on June 10, 2014.