ᐅ Reduced value-added tax until the end of 2020. How to proceed with invoices?
Created on: 4 Jun 2020 10:23
A
annab377
Hello everyone,
The coalition government reduced the VAT from 19% to 16% from July 1, 2020, to December 31, 2020. This should also be interesting for homeowners.
However, I have some questions about how this works in practice. Does this only apply to invoices issued by the end of the year? Or do the payments also have to be made by then?
Is it possible to arrange with contractors to issue the invoice in December 2020, but I pay only in February after the work is completed? In that case, do I still pay the reduced VAT rate, or is the invoice amount 3% too low and I have to pay the difference in February?
What do you think?
Best regards
The coalition government reduced the VAT from 19% to 16% from July 1, 2020, to December 31, 2020. This should also be interesting for homeowners.
However, I have some questions about how this works in practice. Does this only apply to invoices issued by the end of the year? Or do the payments also have to be made by then?
Is it possible to arrange with contractors to issue the invoice in December 2020, but I pay only in February after the work is completed? In that case, do I still pay the reduced VAT rate, or is the invoice amount 3% too low and I have to pay the difference in February?
What do you think?
Best regards
H
hampshire7 Jun 2020 13:02It is very simple.
The applicable VAT depends on the invoice date and is independent of the payment date.
The initial idea still does not work for (at least) two reasons:
1. The invoicing company must pay the calculated VAT immediately. This means that with a very long payment term, the VAT amount is financed in advance. Interest and liquidity costs are so high that companies are unlikely to broadly agree to this.
2. As a client, accepting an invoice without objection before the service has been provided carries a risk. Taking that risk for just a few percent is not advisable. Not only because the contracting party might delay, but also because the money can still be claimed if the contracting party becomes insolvent.
The kitchen example of ordering in the second half of the year and delivery later is also simple: the immediate down payment is subject to the temporarily reduced tax rate, while the final invoice one or two years later applies the VAT rate valid at that time. Here as well: paying for the entire kitchen without having it is a foolish way to save.
The applicable VAT depends on the invoice date and is independent of the payment date.
The initial idea still does not work for (at least) two reasons:
1. The invoicing company must pay the calculated VAT immediately. This means that with a very long payment term, the VAT amount is financed in advance. Interest and liquidity costs are so high that companies are unlikely to broadly agree to this.
2. As a client, accepting an invoice without objection before the service has been provided carries a risk. Taking that risk for just a few percent is not advisable. Not only because the contracting party might delay, but also because the money can still be claimed if the contracting party becomes insolvent.
The kitchen example of ordering in the second half of the year and delivery later is also simple: the immediate down payment is subject to the temporarily reduced tax rate, while the final invoice one or two years later applies the VAT rate valid at that time. Here as well: paying for the entire kitchen without having it is a foolish way to save.
S
saralina877 Jun 2020 13:32hampshire schrieb:
The example of ordering a kitchen in the second half of the year and delivery later is straightforward as well: the immediate deposit is subject to the temporarily reduced tax rate, while the final invoice, issued one or two years later, applies the VAT rate valid at that time. Again, paying the full amount for a kitchen without having received it is a waste of money. You don’t save anything this way.
On the final invoice, the deposits already paid including VAT are deducted, which results in paying the difference and thus the full 19% VAT overall at the end. This is exactly the peculiarity of partial payments or deposits.
H
hampshire7 Jun 2020 13:46That applies if gross prices have been negotiated. So, agree on net prices instead.
S
saralina877 Jun 2020 13:50hampshire schrieb:
That is true if you have negotiated gross prices. So agree on net prices.No, that is entirely true regardless of that.