Rita is about to start a big project and asks for a 50% deposit before beginning. Good call - it reduces her risk if the client pulls out halfway. But a question comes up: how do you invoice money you receive before doing the work? And the VAT - is it due now or only at the end? Let’s take it step by step.
The rule: if you’re paid, you invoice (and the VAT becomes due)
The principle is simple: whenever you receive a payment - even an advance for work not yet done - you must issue an invoice for that amount on the date of receipt. And the VAT becomes due at that moment (art. 8.º of the CIVA), not when you deliver the work.
So the advance isn’t “money on the side”: for the State, it’s a taxable, invoiceable operation the moment it comes in.
Example: Rita’s 50% deposit
Notice: you invoice the deposit when you receive it. At the end, the settlement invoice states the full value of the operation, deducts the advance already invoiced (referencing the deposit invoice), and the VAT applies only to the difference (art. 36.º of the CIVA). Only if, by mistake, you issue the final invoice for the full amount without deducting the deposit do you have to correct it with a credit note (a rectifying document - art. 29.º(7) and 36.º of the CIVA - with the VAT adjustment under art. 78.º).
Careful: an advance isn’t an “informal” deposit you keep outside your accounts - the moment it comes in, it’s invoiceable and the VAT is due. Counting on it without invoicing is a common, costly mistake. And if the project falls through and you have to return the deposit, there’s a proper procedure (a credit note, with the VAT adjustment under art. 78.º of the CIVA) - talk to your accountant in that case.
✅ In summary
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If you’re paid, you invoice. A deposit or advance is invoiced on the date of receipt, and the VAT becomes due at that moment (art. 8.º of the CIVA) - not at the end of the work.
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The final invoice settles up: it states the full value and deducts the deposit already invoiced, with VAT applying only to the difference. You only need a credit note if you issue the final invoice without deducting the advance.
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Asking for a deposit reduces your exposure to a client who won’t pay - and, with FIZ, you invoice the advance and the final settlement without getting tangled up in the VAT on each part. See the plans.
