As of 1.9.2024, the new general VAT rate will be 25.5%. The new VAT will be applied to all goods and services for which the current VAT rate is 24%. The increase in the VAT rate will especially impact sales invoicing and there are a few things to consider when choosing the right VAT rate. The regulations are different when selling goods or services already produced and when invoicing in advance.
Talenom Online has been updated with a new value added tax rate (VAT rate) of 25.5%. In this guide, we explain how to create sales invoices with the new VAT rate and what should be taken into account in invoicing. In addition, we will tell you about receiving purchase invoices with the new VAT rate and what you should pay attention to when processing purchase invoices.
General principle in VAT
At the time of the VAT rate change, the general principle of VAT is applied. The supply of goods and services is subject to the accrual principle, i.e. the moment when the goods or services are supplied to the purchaser. Services and goods supplied before 1 September 2024 will be invoiced with 24% VAT, while services and goods supplied after 1 September will be invoiced with 25.5% VAT.
Examples:
- Company sells the goods on 25.8.2024 and sends the invoice on 1.9.2024. The company applies a VAT rate of 24% to the sale, because the goods were delivered to the buyer before 1.9.2024.
- Company has provided a service to its customer in August and will invoice this on 2.9.2024. The company applies a VAT rate of 24% to the sales, because the service was provided before the VAT rate increase on 1.9.2024.
- Company has received the order for goods on 28.8.2024 and delivers the goods on 10.9.2024. The company must apply the new VAT rate of 25.5%, because the goods have been delivered after the VAT change on 1.9.2024.
- On 31.8.2024, the company sends goods to its customer. The customer receives the goods in their own warehouse on 2.9.2024. Depending on the terms of the contract on whether the vendor or the customer is responsible for the transport, the VAT rate applicable to the sale is determined. If the transport is the vendor’s responsibility and the receival of the goods took place on 2.9.2024, the applicable VAT rate is 25.5%. If the transport is the responsibility of the customer, the moment of delivery of the goods is 31.8. when the goods were shipped, and the applicable VAT rate is 24%.
Advance payments and invoicing
In the case of advance payments, cash principle is applied in VAT. This means that the applicable VAT rate is determined by the actual time of payment and not by the accrual principle.
Example: In July, the company invoices in advance for goods that are due to be delivered in September. The due date of the advance invoice is 15.8.2024 and the customer pays the invoice on the due date. The VAT rate applicable to the advance payment is 24% because the payment was received before 1.9.2024. If the customer paid the invoice only on 1.9.2024, the applicable VAT rate would be 25.5%. The company should issue a credit note for the invoice issued in July and issue a new sales invoice with the new increased VAT rate.
Discounts and credit notes
The company may receive or give annual, seasonal or other discounts. The VAT rate applicable to discounts and credit notes issued is the VAT rate in force when the goods or services were supplied. In the case of an annual discount, for example, the discount granted may be allocated to different VAT rates according to the time elapsed or, alternatively, according to the actual distribution of purchases.
Example: A company sells goods during the year 2024. The company gives the customer an annual discount based on purchases made in 2024. The annual rebate is allocated on a pro rata basis over time, i.e. 8/12 (January-August) is allocated to 24% of purchases and 4/12 (September-December) is allocated to 25.5% of purchases.
Recurring supply of services or sale of goods
An example of a recurring service is a rental service, where VAT is based on the passage of time. Such goods or service is considered to be supplied when the accounting period for it ends.
Example: If the rental period is from 1 March 2024 to 28 February 2025, the service is deemed to be supplied on 28 February 2025, in which case the service is subject to a VAT rate of 25.5% for the whole period. If the tenant pays the rent for the whole period in advance by 31.8.2024 at the latest, the VAT rate applicable to the sale is 24%. If the rent is charged monthly, the accounting period is one month and the VAT rate is always determined by the end of the accounting period. In this case, a VAT rate of 24% will apply to the rent until August 2024 and 25.5% to the rent from September 2024 onwards.
