The rules for settling the advance payment in VAT

According to the Polish (PL) VAT law, generally, the tax point arises upon the delivery of the goods or the performance of the service. However, there are exceptions to this rule. In situation when before the delivery of the goods or the performance of the services, full or part of the payment is received, in particular advance payment, the tax obligation arises upon its receipt in relation to up to the amount received, except for the p.5 p.4. In accordance with art. 19a p.5 p.4 PL VAT Act, the tax point arises upon the date of issue the invoice for the performance the services, among others: telecommunications, rental, lease, leasing, protection of the people and services of security, supervision and storage of property, permanent legal and office services, distribution of electricity, line gas, etc.

It is also worth mentioning about the advance payment in case of intra-Community delivery (ICD) as well as export. If the taxpayer receives the advance payment for the future intra-Community delivery, the tax point does not arise. In accordance with art. 20 PL VAT Act, for the ICD transaction, the tax obligation arises when the invoice is issued by the taxpayer, but not later than on the 15th day of the month following the month in which the delivery was made.
 In case of advance payment for export, the tax obligation arises on the day when the payment is received. Additionally, in accordance with art. 41 p. 9a, if the taxpayer has received the advance payment before the delivery of the goods, he is eligible to apply 0% VAT rate to the payment received, provided that the goods are exported within 6 months from the end of the month in which the taxpayer received the payment and taxpayer within this period received the documents entitling to apply 0% VAT rate.

Generally, if the taxpayer received the advance payment, he is required to issue the invoice documenting this fact. The exception is the advance payment for the future ICD transaction. In this situation, the taxpayer is not obligated to issue the invoice.

According to the art. 106i PL VAT Act, the invoice should be issued no later than on the 15th day of the month following the month in which full or part of the payment was received. However, it can also be issued before receiving the advance payment, but not earlier than on the 30th day before receiving the full or part payment. Given the foregoing, in this case, the invoice date is irrelevant for the tax point that arises in the advance payment date.

As mentioned above, the rules of arising the tax obligation in the date of receiving the advance payment do not apply to the activities listed in art. 19a p.5 p.4 PL VAT Act. It is worth to write, that the invoice for the mentioned activities should be issued no later than till the payment deadline. For example, receiving the advance payment for the rent in case of rental agreement does not create the tax obligation in VAT. In this case, the tax obligation arises in the invoice date but no later than the term of payment agreed between the parties.

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