Receiving an advance payment may trigger a VAT obligation
Companies frequently request advance payments before delivering goods or providing services.
This approach can reduce the risk of non-payment and improve cash flow.
However, receiving an advance payment may also have VAT consequences.
For taxable supplies, VAT may become chargeable when an advance payment is received, even if the goods have not yet been delivered or the services have not yet been performed.
When does VAT become chargeable?
Under the general rules of the Slovenian Value Added Tax Act (ZDDV-1), VAT on an advance payment generally becomes chargeable on the date the payment is received.
VAT is calculated on the amount received.
This applies to transactions covered by the rules on the taxation of advance payments.
It is also important that the future supply of goods or services is sufficiently identified.
Special rules or exceptions may apply to certain cross-border transactions.
Is an advance invoice required?
The obligation to issue an advance invoice depends on the type of transaction and the status of the customer.
For domestic transactions between taxable persons, the rules concerning invoices for advance payments generally need to be considered.
Businesses must ensure that both the advance payment and the corresponding VAT are correctly recorded.
What happens when the final supply takes place?
Once the goods are delivered or the services are performed, the company issues a final invoice.
The final invoice must properly account for advance payments already received and VAT previously calculated.
This prevents VAT from being charged twice on the same amount.
What if the advance payment is refunded?
If the transaction is cancelled and the advance payment is refunded, the company should review the conditions for adjusting the VAT previously calculated.
The refund and any corresponding VAT adjustments must be properly documented.
K2A advises
👉 Do not treat advance payments merely as incoming cash. Check whether receiving the payment has already triggered a VAT obligation and whether an appropriate invoice must be issued.