Advance invoice: putting an end to confusion in the field thanks to dematerialization

Advance invoice: the impact of new regulations on building and real estate players

VAT chargeability: advance invoices on the supply of goods in the line of sight of the Tax Administration

Until recently, only advance payments on the provision of services were subject to VAT. But the Finance Act for 2022 has extended this obligation to advance payments made before the delivery of goods. From now on, since January 1, 2023, they must be the subject of an advance invoice with VAT, which must be declared and paid in the month of its receipt. This VAT is then deductible by the customer from the time of payment , whereas before, it was only deductible at the time of delivery.

Obligation to invoice: the advance payment is also in line with compliance

Another major legal advance is that as soon as a deposit is paid by a customer for the delivery of goods, a dedicated invoice must be issued, either by its beneficiary (supplier, co-contractor, subcontractor) or by the beneficiary (by a self-invoicing system, for example).

As a reminder, a deposit may be requested from a customer before the start of the work or the provision of services. This is a first payment on the final invoice that will be issued later.

Thus, the deposit allows the supplier to finance the advance of costs, in particular for the purchase of raw materials or goods necessary to carry out the work ordered by the customer. But what makes it powerful is the fact that it materializes the customer's commitment to a signed quote, while committing the supplier or service provider to carry out the order as agreed. In the event of withdrawal by either party, damages may be claimed.

It is to be distinguished from a deposit or an advance. While the latter two both consist of paying a sum for a project before it is carried out – such as the deposit – they do not have the same power of commitment of the parties on the sale.

In accordance with Article 289 of the General Tax Code (CGI), this invoice must be issued as soon as the advance payment is paid. It is an essential accounting document to certify the payment of the requested amount and to ensure the transparency and tax compliance of the transaction. Thus, the issuance of an advance invoice has become a formal obligation, replacing the simple handing over of a sum of money.

What are the mandatory information that must be included in an advance invoice?

The advance invoice must include:

• the mention of the advance invoice,
• the reference to the initial quote or signed purchase order or, where possible, the designation of the products (items, quantities, unit price excluding VAT, etc.),
• contact details of both parties (customer and supplier),
• the VAT identification number for a taxable person or the appropriate legal notice in the case of VAT exemption (basic exemption regime for example),
• the number of the advance invoice (invoice numbering is mandatory),
• the date,
• the VAT rate and the related VAT,
• the total amount owed by the customer,
• the due date for payment or the statement indicating the payment of the amount and the terms of payment.

How does the dematerialization of invoices clarify accounting exchanges in the real estate and construction ecosystem?

Today, many companies in the real estate and construction sectors encounter difficulties in issuing and distinguishing advance invoices from work situations in particular. This confusion is particularly problematic for social landlords, who must make the construction professionals with whom they work aware of the need to differentiate between these two types of bills.

Unlike deposits and advances, which do not involve a formal commitment, advance payments are firmly binding on the parties and are paid before the performance of the service or the delivery of the goods. Social landlords must therefore ensure that their suppliers understand and respect this distinction. When purchasing, it becomes especially important to ensure that suppliers adhere to the billing rules to avoid any misunderstandings.

This is where the Freedz platform comes in, which offers innovative solutions to support companies in their compliance. Freedz offers social landlords and other real estate players a feature dedicated to the work situation that facilitates communication between them. Thanks to this module and a Partner Dematerialization Platform dedicated to the real estate sector, clients will have at their disposal a service that will offer them various innovative solutions for the compliance of the process. For example, to meet the obligation to have a dematerialized work situation invoice that meets current and future regulatory requirements on electronic invoicing, self-invoicing may be a suitable solution. It thus makes it possible to generate invoices on behalf of suppliers.

If you want to know more about these legal obligations or simply discover our solution, contact our experts now!