When the advance payment does not give rise to a tax obligation under VAT


Advance payment - general accounting rules

Many entrepreneurs have a problem with the correct settlement of the advance payment received for future sales. As a rule, the accepted advance payment obliges to settle VAT on its receipt, but it does not constitute income that should be settled against income tax. At this stage, it only requires an advance invoice and is entered only in the sales VAT register.

The situation is slightly different if the advance payment amounts to 100% of the contract value. Then, if it is defined as a complete sale (payment), and not an advance payment - it is settled as a standard invoice.


The advance invoice cannot be issued earlier than 30 days before the delivery or service is performed.

No tax obligation

Exceptionally, in the case of certain types of activities, the advance payment does not require taxation, and thus - it does not have to be documented with an invoice. They are described in Article 19a para. 5 point 4 of the VAT Act and these are:

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

  • services:

  • telecommunications and radiocommunication,

  • listed in item 140-153, 174 and 175 of Annex 3 to the Act,

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

  • protection of people and services of security, supervision and storage of property,

  • permanent legal and office services,

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


This exception does not apply to the aforementioned services pursuant to Art. 28b of the VAT Act, i.e. the import of services.