The down payment invoice and the input tax deduction
When it comes to down payment and input tax deduction, there are also important things to consider. Your customer, who receives a down payment invoice from you and also pays this down payment, can claim the included input tax from the moment of payment . The following also applies to input tax deduction for down payments:
- You are required to send your customer a down payment invoice if the customer is a commercial and taxable customer and is entitled to input tax deduction.
- For a correct billing, the customer has to prove from you that he has paid the deposit. For this he needs your down payment invoice.
Down payment invoice with discount
There will certainly be customers who insist that you give them a discount on the down payment invoice. However, this means that you have to make sure that the amount paid is taken into account in the final invoice instead of the invoice value . If you do not do this, the discount will be taken into account twice. So pay attention to how the discount is calculated .
Deposit invoice sample
According to WHICHEVERHEALTH.COM, there are a few things you have to consider when writing a down payment invoice. In addition to the mandatory information, it is also important to ensure that sales tax is shown. So there are some possible sources of error that can lurk here. It is therefore highly recommended to use a free deposit invoice sample for this task . With the use of such a sample calculation, errors can be automatically avoided.
Taxation & booking of down payments and down payment invoices
In your accounting, the down payment invoice not only has to be booked correctly, but also correctly taxed . If you use the principle of simple bookkeeping, it takes on the status of an outgoing invoice. But what do you have to do when you ask yourself the question, how do I book down payments correctly? When booking a down payment, you must always note that the amounts of a down payment invoice must always be booked as liabilities, as long as you have not yet made the payment for this down payment.
In addition, when booking a deposit, you have to distinguish whether it is a received deposit or a deposit that has been paid.
The deposit paid
This is a down payment you made, for example to your supplier, before he even delivered the goods to you. Once the delivery has been made and completed, this down payment will be added to either expenses or assets. In the case of a down payment, the following bookings must be made:
- Deposit
- Posting the final invoice
- Offsetting with the final invoice
- Booking the remaining payment
The deposit received
You always have to pay tax on advance payments received at the time they are received. The tax for the down payment always arises when the pre-registration period in which the service was carried out has expired . The booking of a received deposit always happens when the payment by your customer is booked as a credit on your account. It doesn’t matter if you created the down payment invoice. If you receive a deposit, the following bookings are necessary:
- Down payment by customer
- Posting the final invoice to the customer
- Cancellation of the down payment (takes place by rebooking)
- Booking the remaining payment
Post down payment invoice without payment
If a down payment is made because you did not complete the entire service, but at least part of it, the booking will always be made when you have billed an invoice for this part of the work. The corresponding posting record would then be as follows:
Trade receivables for revenue and sales tax
Down payment taxation for barter transactions
It is entirely possible that you will not be rewarded with cash for a delivery or service. There can also be an exchange in a deal. An exchange-like turnover is of course also possible, in which you receive something in return earlier than you carry out the required service. But what about the down payment taxation in exchange transactions in this case ? You have to pay sales tax on this exchange service received in advance for this period . However, the market value of the property to be exchanged serves as the basis for the assessment minus the sales tax contained therein. Your business partner, on the other hand, who is waiting for your service to be provided, can only claim his input tax deduction with your down payment invoice when it is received. You then have to pay the remaining sales tax at this point. You have to pay close attention to these points when it comes to down payments for exchanges.
Conclusion
There are a few things to consider when calculating the down payment. Especially when it comes to down payment invoices and sales tax and down payment invoices and input tax deduction, you have to pay attention to the correct procedure in your accounting when posting and taxing this invoice. When posting down payments, a distinction must also be made between down payments made and received . Otherwise, the down payment invoice is a completely normal, conventional invoice and the usual features of an invoice apply here. This also means that you have to pay attention to the mandatory information when writing the down payment invoice.
