SLIM VAT 3 until recently provided for changes in the area of advance invoices. In the course of subsequent drafts, unfortunately to the disadvantage of taxpayers, this idea was abandoned. However, as it turned out, the idea was only decided to be transferred – in analogous wording – to another draft law, namely the draft law on the National e-Invoice System.
Current legal status
Currently, in accordance with Article 106b para. 1 item. 4 of the Value Added Tax Act (hereinafter: the VAT Act), the Taxpayer is, as a rule, obliged to issue an invoice documenting the receipt by him of all or part of the payment before the sale or performance of the service. It shall be issued no later than on the 15th day of the month following the month in which all or part of the payment was received from the purchaser (Article 106i(2) of the VAT Act).
However the tax obligation arises, as a rule, upon receipt – if the taxpayer receives all or part of the payment before the supply of goods or performance of services (according to Art. 19a para. 8 of the VAT Act).
On the other hand, Art. 106f of the VAT Act stipulates that if an invoice does not include the entire payment, in an invoice issued after the supply of goods or the performance of a service, the sum of the value of the goods or services is reduced by the value of the parts of the payment received, and the amount of tax is reduced by the sum of the amounts of tax shown in invoices documenting the receipt of part of the payment. In addition, the last invoice should also include the numbers of invoices issued before the goods or services were issued.
In summary – the taxpayer is obliged to document the advance payment through an advance invoice, but if it covers the entire amount of the payment for goods/services, he is not required to issue a final invoice.
In practice, in some cases, this has meant issuing two invoices – an advance and a final invoice – in one accounting period, and therefore unnecessary formalism, which taxpayers have all too much of anyway. It also often caused verification problems on the part of the purchaser, and consequently could even lead to the risk of double deduction of input tax.
According to the currently proposed amendments, the taxpayer will have the option of not issuing advance invoices in case they are issued in the same month as settlement invoices.
In such a case, the Taxpayer will therefore be obliged to issue a settlement invoice showing the entire supply of goods or services made (including the amount of the advance payments received).
However, this simplification will apply only in the case of the general rules regarding invoice timing, i.e. in accordance with Article 106i(1) of the VAT Act.
Thus, in the case of special deadlines (e.g., issuing an advance invoice even before receiving payment), the taxpayer will still be required to issue advance invoices as well (Article 106i, paragraphs 3-8).
Consequences of the changes
Due to the change in the regulations, it is worth noting that vendors will only have the option to abandon issuing advance invoices, but will still be able to do so.
On the other hand, on the part of those purchasing goods/services, the issue of deductibility of input VAT with respect to the amount of the advance payment may become problematic.
After the amendment of the VAT Act, it will be a frequent case that the buyer (despite the partial payment already made) will not receive an advance invoice from the seller – so he will have to wait for the final invoice before deducting VAT.
Consequently, a serious problem arises in the event that the offset will already constitute another accounting period, and the advance invoice has not been issued. According to the regulations, the taxpayer will be obliged to monitor his advance payments and, in the event of a shift, issue both – an advance and final invoice – after all.
What’s more – this change will apply only to the case when advance invoices are issued in the same month as settlement invoices, thus somewhat excluding small VAT taxpayers accounting quarterly.
Although the explanatory memorandum to the draft amendments to SLIM VAT 3 indicates that the change refers to the settlement period (month/quarter), the regulations clearly indicate that it is to be the same month, not the settlement period.
Thus, the change itself, on the surface, should be evaluated positively – it is an opportunity to simplify the way of documentation and reduce the number of documents. However, the aforementioned problematic consequences should not be forgotten.
As a result of moving the proposed changes from one bill to another, however, the effective date will change. If the change had remained in the SLIM VAT, it would have been scheduled to come into effect on April 1, 2023, while according to the KSeF draft it will be January 1, 2024, or maybe even as late as July 1, 2024. – according to the latest, but unofficial reports.