Payment for services rendered to customers in other countries may be made on the condition of their prepayment (advance payment). In this case, the VAT tax liability arises from the moment of receiving such prepayment, which entails the obligation to issue an invoice for the advance payment. About some nuances in this article.

In accordance with the VAT Act (art. 19a ust. 8 Ustawa o podatku od towarów i usług), hereinafter referred to as the Act, the receipt of an advance payment (prepayment, initial contribution) upon the export of services (goods) entails a tax liability upon receipt of such an amount and requires the preparation of an advance payment invoice (faktury zaliczkowej).

In accordance with the law (art. 106b ust. 1 pkt 4), the taxpayer is obliged to issue an invoice upon receipt of part or all of the advance payment for the service. An invoice for an advance payment can be issued for a specific given amount of the advance payment or for the full amount of the service. In the first case, an invoice (final) is additionally issued, which indicates the numbers of previously issued invoices issued before the delivery of the goods or provision of the service. The issuance of such invoices with VAT accrual is among the duties of both current and exempt taxpayers.

How is the export of services taxed? The place of provision of the service and the place of taxation is the country of the recipient of the service (art. 28b), therefore the service is not subject to VAT in Poland. The recipient of the service, in turn, is obliged to pay the due VAT (art. 17 ust. 1 pkt 4). However, a foreign buyer of services is not a VAT payer in Poland (art. 17 ust. 2). As a result, the export of services is a tax-neutral event: the obligation to pay the due tax is assumed by the recipient of the service, and the amount of this tax is also an input tax subject to deduction. The invoice will contain the note "reverse charge" (art. 106e ust. 1 pkt 18). The invoice for the advance payment must be issued no later than the 15th day of the month following the day of receipt of the advance payment. The VAT Act gives the right to issue an advance invoice 60 days before receiving the advance payment. However, its issuance itself does not entail any consequences in terms of VAT or income tax. The tax liability arises only upon receipt of the advance payment or upon delivery of goods or provision of services – whichever occurs first.

A Polish entrepreneur providing services to a contractor from an EU country or a third country must register for EU VAT and provide summary information. A taxpayer exempt from VAT is also required to register as an EU VAT payer and issue advance and final invoices. However, the export of the service and the advance payment made for it do not increase the sales limit for VAT exemption to PLN 200,000.

Thus, in case of export of services, i.e. their receipt by the customer (recipient, buyer) outside of Poland, the reverse charge principle is applied, the received advance payment will be neutral from the tax point of view. Detailed articles on the preparation of invoice for an advance payment and invoice for an advance payment for the export of services are available at the links.

The conditions of delivery (WDT) and purchase (WNT) of goods within the Community are discussed in our article.