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VAT from 24% to 20%: How will it be invoiced? Practical advices

The standard VAT rate decreases from 24% to 20% starting January 1^st 2016. This is a good news, but, we must not lose sight of the practical aspects. How do we bill, for example, the advances, rents or utilities? What is the general rule and what are the exceptions? Can we benefit from the reduced 20% rate  for the invoices issued in 2015?

Contexpert presents you the general rules, but also some individual cases to understand what obligations occur with the transition from the current rate of VAT to the one of 20%. How will this be advantageous for us?

First of all, we must remember: the general rule is that all invoices issued in 2015 have 24% VAT. However, depending on the situation, some invoices issued in 2015 can be canceled and reissued in 2016, with 20% VAT. Let’s see some examples:

Advance invoices

The advance invoices issued in 2015 for goods deliveries or services provisions to be performed in 2016 are issued with 24% VAT. These will be reversed in 2016 and issued with 20% VAT. Specifically, if you invoice in 2015 repair services, and these will be completed in 2016, you will invoice 24% VAT in december. In 2016, you wil reverse the invoiced amount and issue an invoice for the total amount of the repair services with 20% VAT rate.

Rent invoices

The rents invoices issued in 2015 for January or even for the whole year 2016 will be issued with 24% VAT. Three situations may appear depending on the contractual provisions:

• If the date provided in the contract for the rent payment is January 2016 or a later date, then in the next year you should reverse these bills and issue others with 20% VAT rate.
• Instead, if the date provided in the contract for the rent payment is 2015, then the invoices remain with 24% VAT even if correspond to the year 2016.
• If the payment date is of x days after the invoice date, then you should see if the x days calculated are in 2015 or in 2016 and, depending on the year the invoice should be paid, the rent will be with 24 % or 20% VAT.

Invoices for the maintenance services (which means for electricity, gas, maintenance, cleaning etc.) if there are issued in 2015, even if the maintenance is related to the year 2016, will be issued with 24% VAT and don’t need to be settled in 2016.

Let’s return to the general rule

According to the Fiscal Code, the VAT rate applicable is the one in force when the operative event for VAT interferes.

The operative event usually interferes at the delivery date of the goods or at the service provision date. However, there are some exceptions for:

• the goods supplied under a consignment contract when it is considered that the goods are delivered from the consignor to the consignee at the time the goods are delivered by the consignee to his clients;
• the goods sent for testing or verification of conformity when it is considered that the delivery of goods takes place at the date the goods are accepted by the beneficiary;
• the stocks at the customer‘s disposal when it is considered that the delivery of goods takes place at the date the client removes the goods from the stock in order to be used mainly for the production activity.
• the deliveries of tangible goods, including real estate when the delivery date in terms of VAT is the date when interferes the transfer of the right to dispose of goods as owner, except for contracts in installments, for which the delivery of the asset is made in the end;
• the provisions of services that cause successive settlements or payments such as construction-installation, consulting, research, expertise and other support services that are considered as being performed when are issued some work situations, work reports, similar documents on which are established the services performed, or, as appropriate, depending on the contractual provisions at the time of their acceptance by the beneficiaries;
• the goods deliveries and provisions of services which are performed continuously, other than those provided in the preceding paragraph, such as: deliveries of gas, water, telephone services, electricity and others similar to that, for which is considered that the delivery / provision it’s made at the dates specified in the contract for the payment of the delivered goods or provided services or upon the date of issuing of an invoice, without the settlement period to exceed one year;
• rent operations, leasing operations, concession or lease of goods, granting of real rights with payment for a certain period of time, such as the right of usufruct and superficies on an immovable property for which the service is considered as beeing performed at each date specified in the contract for the payment

What is the exception?

 By exception from the above general rule, when an invoice is issued before a goods delivery or a services provision or an advance invoice, the rate applicable is the one from the date the invoice was issued.

However, if the VAT rate changes and at the date of the operative event there is a new VAT rate, the invoices issued before the delivery date / provision date or the advance invoices should be reversed in order to issue the invoices with the new VAT rate.