Invoice Issuance for Deposit or Advance Payments

Businesses often receive deposits or advance payments from buyers to secure the contract value. In such cases, if the amounts are large, does the accounting department need to issue an invoice to record the revenue?

1. Legal Regulations

According to Circular No. 39/2014/TT-BTC dated March 31, 2014, by the Ministry of Finance, guiding the implementation of Decree No. 51/2010/NĐ-CP dated May 14, 2010, and Decree No. 04/2014/NĐ-CP dated January 17, 2014, by the Government on invoices for goods and services, it is stipulated:

• Article 16 on issuing invoices:

“2. How to fill in some specific fields on the invoice:

a) Date of issue on the invoice:

• For goods, the date of issue is the time of transferring ownership or the right to use the goods to the buyer, regardless of whether the payment has been received or not.

• For services, the date of issue is the time when the service provision is completed, regardless of whether the payment has been received or not. If the service provider collects money before or during the service provision, the date of issue is the date of payment collection...”

• Article 20 on handling issued invoices.

According to Clause 2, Article 8 of Circular No. 219/2013/TT-BTC dated December 31, 2013, by the Ministry of Finance, guiding the implementation of the Value-Added Tax Law and Decree No. 209/2013/NĐ-CP dated December 18, 2013, by the Government detailing and guiding the implementation of certain provisions of the VAT Law, it specifies the timing for determining VAT:

“Article 8. Time of VAT determination

• For services, the time of service provision completion or the time of issuing the service invoice is when the service is completed, regardless of whether the payment has been received or not….”

According to Circular No. 96/2015/TT-BTC dated June 22, 2015, by the Ministry of Finance, guiding corporate income tax as per Decree No. 12/2015/NĐ-CP dated February 12, 2015, by the Government detailing the implementation of the amended Law on Tax and some related decrees, it is stipulated:

• Clause 2, Article 3, amending Clause 2, Article 5 of Circular No. 78/2014/TT-BTC as follows:

“2. The time to determine revenue for tax calculation is as follows:

…b) For services, the time of service completion or the time of completing each part of the service provision to the buyer, except as specified in Clause 3, Article 5 of Circular No. 78/2014/TT-BTC, Clause 1, Article 6 of Circular No. 119/2014/TT-BTC…”

2. Conclusion

• If the company collects money before or during the provision of services, the company must issue an invoice as prescribed, and the date of issue will be the date of payment collection.

• If the company receives a deposit or advance payment to secure the contract (but has not provided the service or performed the contract at the time of receiving the money), the company is not required to issue an invoice for VAT on the deposit or advance payment to guarantee the contract execution.

• If the company has already issued an invoice for the advance payment, the handling of the issued invoice should be done according to the guidelines in Article 20 of Circular No. 39/2014/TT-BTC dated March 31, 2014, by the Ministry of Finance.

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