Deduction of VAT from the invoice received before delivery

In business practice, it happens that invoices are issued before the service is provided or the goods are delivered. So when to deduct VAT from the invoice received before delivery?

Pursuant to the provisions of the VAT Act, the taxpayer is entitled to deduct the input tax for the period in which he received the invoice. However, this rule does not apply where the taxpayer has received the invoice prior to the provision of the service or the acquisition of the right to dispose of the goods as the owner.

Pursuant to Art. 86 sec. 12, the right to reduce the amount of tax due arises at the time of acquiring the right to dispose of the goods or when the service is provided.

Therefore, the date of receipt of the invoice does not always determine the moment of acquiring the right to deduct VAT. So if, for example, the invoice was issued and received by the buyer in January, and the goods were delivered in April, the taxpayer is entitled to a tax deduction in the settlement for April.

However, the above provisions do not apply in all situations where the invoice is issued prior to the delivery of the goods.

The deduction of input VAT based on the invoice received before the delivery is due if:

1) the taxpayer receives the goods before the deadline for submitting the declaration for the period in which he received the invoice,
2) the invoice documents the activities from which the tax obligation arose in accordance with art. 19 paragraph 11, i.e. making a prepayment, payment of a part of receivables or an advance payment. Then, the tax obligation on the part of the seller arises when the payment is received, and thus the buyer has the right to deduct the input tax from the amount of the prepayment / advance payment.

Therefore, if a taxpayer settling VAT, e.g. quarterly, receives an invoice in January, and the delivery of goods in February, he is entitled to deduct the input tax from the invoice received in the current settlement period (Q1). However, if the delivery takes place in the month of May - after the deadline for submitting the declaration for the period in which the entrepreneur received the invoice, the right to deduct the tax arises upon acquiring the right to dispose of the goods as the owner (i.e. in the second quarter).