The new regulations concerning fixed-period settlements under Section 58 of the VAT Act are applicable as of 1 July 2015. Within the meaning of this legislation, from the second half of 2015 the delivery date, which formerly depended on the payment date, will be the last day of the settlement period as a general rule.
This change will affect the accounting of tax consulting, bookkeeping and audit services in the first place, but from 1 January 2016 it will be generally extended to all transactions settled on a periodic basis.
The date of entry into force of the new legislation is approaching, therefore, it is advisable to review the basic rules pertaining to the invoicing of these transactions as well as the agreements and contracts made between the parties concerned.
In the case of tax consulting, bookkeeping and audit services the new delivery date rule will first have to be applied to settlement periods whereby
- the first day of the period and
- the due date of payment are after 30 June 2015.
If the above criteria are met, invoices falling within this scope must be issued in accordance with the new rule and the date of delivery must be specified in consideration of the VAT accounting standard.
Regarding the fact that under the new law the settlement period will determine the delivery date from July 1, it is important to clarify what a settlement period means.
The settlement period always refers to the physical performance of the transaction which the parties have agreed on. Thus if a lease contract stipulates that the landlord is to invoice public utility costs once every two months, in the month following the period that it refers to, the settlement period of public utility costs incurred in May and June will be July. This rule equally applies to services affected by the modification. A tax consultant will be required to prepare and submit returns for the second quarter (April-June) in July so July is regarded as the settlement period as this is the month when the work is actually performed.
When determining the delivery date it is also necessary to check the exact date of payment and the date when the invoice referring to the relevant period is to be issued under the agreement. The reason for this is that in addition to the general rule there are three special rules in effect that must be given priority when specifying the delivery date. Only in the event that the invoice to be issued does not fall under any of the exception rules is it mandatory to apply the general rule.
Pursuant to the special rules, the delivery date is
- the date of issue of the invoice or receipt: if both the due date of payment relating to the period in which the settlement or payment of the transaction takes place and the last day of the relevant period precede the date of issue;
- the due date of payment of the consideration relating to the period in which the settlement or payment of the transaction takes place;
- but no later than the thirtieth day following the last day of the period, if the due date of payment falls on a date following the last day of the period which the invoice to be issued relates to.