Time of supply
Time of supply under the general rule
Supply has arisen (except for intra-Community supply or an intra-Community purchase of goods) or a service has been received on the date when any of the actions below was completed first (subsection 11 (1) of the Value-Added Tax Act):
- shipping or making goods available to a buyer or providing a service;
- receipt of a partial or full payment for goods or services, partial or full payment a service is received;
- in the case of use for self-consumption, the sale of goods or the provision of a service or the taking of the goods of a company into use by the taxable person itself, its employee, public servant or a member of its management or control body or for some other purpose unrelated to business.
Therefore, time of supply is not defined based on the issuing of an invoice. This, however, does not mean that the issuing of an invoice may in fact be omitted. For the buyer, an invoice remains relevant for the deduction of input value-added tax.
Under the above general rule, the time of supply is determined for the following transactions:
- national sale of goods and provision of services
- provision of services for a party in a foreign state or the receipt of services from a party in a foreign state
- export of goods
Based on a general rule, the time of supply is defined also in the conditions of a financial leasing contract or when goods or services are sold. Hence, an obligation to impose value-added tax under financial leasing contracts is created on the sale price of goods at the time of the delivery of the goods not on periodic payments.
Where under subsection 11 (1) supply arises is when goods or services are paid for, supply has arisen to the extent of the portion paid. The receipt of targeted support for the sale of goods or services at a price below their normal value is not treated as the receipt of payment for the goods or services.
Value-added tax is calculated on the amount received, with the value-added tax amount in the case of a transaction taxed at a 20% value-added tax rate established by dividing the amount received by 1.20 and by multiplying the product obtained by 0.20. In the case of a transaction taxed at a 9% value-added tax rate, the amount received is divided by 1.09 and the product obtained is multiplied by 0.09.
Supply overall is considered to have arisen on the date when goods are shipped or made available or a service is provided to the buyer. In this case, the amount established as the difference between the value-added tax amount calculated on the taxable value of the goods or service and the value-added tax amount calculated upon receipt of funds is declared as value-added tax.
Timing of the provision and receipt of long-term and regular services
A service whose provision lasts longer than the period of taxation is considered to have been provided and received during the period of taxation when the provision of the service ends. The time of the provision of a service provided regularly (for example, operational leasing) is determined based on the period for which an invoice is presented or concerning which payment has been agreed. A service is considered to have been provided in the last month of the period stated on an invoice or an agreed payment period. This means that if an invoice is presented for a quarter, the service is considered to have been provided in the last month of the quarter.
The same principles apply also to the regular sale of goods – goods are considered to have been sold during the period for which an invoice is presented or concerning which payment has been agreed.
The same principles are applied also to the taxation of the receipt of long-term and regular services with a reverse charge, since the receipt of a service is taxed with a reverse charge at the same time that supply arises for the service provider.
Intra-Community supply of goods and time of purchase thereof
Both the intra-Community supply and purchase of goods are considered to have arisen on the 15th day of the month following the shipment of the goods or their being made available or on the date of the issuing of an invoice if it predates the above 15th day.
It is also important to note that in the case of intra-Community supply of goods, supply is not created by payment. Therefore, whereas supply is also created by prepayment in the case of national supply, supply arises only once goods have been actually shipped or an invoice has been issued in the case of intra-Community supply.
Exceptional provisions in the case of new taxable persons
If a party registers as a taxable person and effects transactions also before its registration as a taxable person, as a rule it incurs tax liability from registration and has no tax liability with respect to any supply that arises before its registration. From the above principles, there should be distinguished the definition of the time of supply in the case of parties registered as taxable persons during the occurrence of a transaction initiated before their registration as taxable persons.
Thus, if prepayment is made before registration and goods are shipped or a service is provided on the date on which it had been registered as a taxable person already, the taxable person nevertheless incurs the liability to pay value-added tax. If, however, goods have been shipped or a service has been provided before registration, no taxable supply arises even if payment occurs after registration as a taxable person.
Section 16 of the Value-Added Tax Act sets out the goods and services whose supply is tax-exempt. The treatment of a transaction as tax-exempt supply means that no value-added tax is added to the price of the goods or services and that the taxable person is not entitled to deduct the input value-added tax linked to tax-exempt supply. Therefore, the cost of the transaction treated as tax-exempt supply also includes concealed undeducted input value-added tax. A party whose entire supply is tax-exempt does not have to register has a taxable person and is also not required to file a value-added tax return or perform any other obligations of a taxable person. A party which is registered as a taxable person and whose supply is (partially) tax-exempt has to declare its tax-exempt supply also on a value-added tax return.