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Invoice for VAT: What You Need To Know

invoice for vat, pen and documents on an office table

Creating an invoice for VAT has been a challenge and has left many wondering if an invoice just for VAT can be raised.

The answer is YES, an Invoice for VAT can be raised if you carefully follow the instructions in this article.

You can easily do this by creating the usual invoice, leaving the price or rate at zero, and manually entering the VAT amount.

It is also necessary to select a ledger account when creating an invoice for just VAT. 

What is an ”Invoice for VAT”? 

It is an accounting document that has information on products and services sold that carry value-added tasks.

The invoice carries details outlining taxable supply and any other related information as directed by VAT law.

A VAT invoice enables a company to charge clients value-added taxes and collect those taxes for later payment to the government.

It is majorly issued by an accountable person who deals with the supply of taxable goods or services.

Only VAT-registered businesses should issue it, and this is only required if your customer is also VAT-registered.

Non-VAT-registered businesses are not allowed to charge sales instead they should issue standard invoices.

We delved deeper into invoicing without VAT in another article. If you sell taxable goods or services to VAT-registered businesses, it is a must to provide a VAT invoice rather than a standard invoice.

Taxable goods and services are usually taxed at a standard rate of 20%, a reduced rate of 5%, or a 0% rate. If you sell both taxable and VAT-exempt products, you must also issue a VAT invoice. 

What are the Steps to creating an Invoice for VAT? 

Companies and contractors just starting, or even experienced contractors may be required to issue VAT-only invoices during their first few months of trading, as well as ensure the pre-VAT invoices they issue include the correct information.

Whether you are using an excel sheet or an automated process for creating this invoice, you must follow clearly outlined steps to get things right.

To create a VAT-only sales invoice, complete the following steps: 

  • Go to Sales, then click Sales Invoices, and then select New Invoice. 
  • Enter the Customer, Invoice Date, Due Date, and a Reference if required. 
  • In the Product/Service list, select the relevant option. 
  • Enter a Description, for example, VAT only or VAT adjustment. 
  • On the Ledger Account list, choose the needed nominal ledger account. 
  • Ensure the Qty/Hrs, Price, and Discount boxes are left at 0.00. 
  • Choose a relevant VAT Rate, then enter the value. 
  • Enter the Terms and Conditions in the section created for it. 
  • And Save. 

What are the Information required on it? 

It must contain certain key pieces of information to be considered legal, complete, and compliant. It must show: 

  • Issue Date 
  • A unique sequential number 
  • Full names of supplier, address, and registration number 
  • The full name of the customer and address 
  • For reverse charge, the customer’s VAT number and a note that a ‘reverse charge applies’ is required. Relevant Contracts Tax-exempt construction services are exempted from this. 
  • For intra-Community supply of goods, the customer’s VAT number and a comment indicating showing it is an intra-Community supply of goods are required. 
  • For triangulation, an explicit reference to EC triangulation simplification and an indication that the person receiving the goods is responsible for VAT due on the supply is required. 
  • The quantity and type of goods provided 
  • The scope and nature of the services provided 
  • The VAT-free unit price 
  • The amount received minus VAT 
  • The amount received minus VAT 
  • The price cuts or discounts 
  • The breakdown according to the VAT rate 
  • The total amount of VAT that must be paid on the supply 
  • The date on which the payment on account was made if made before the completion of the supply. This is applicable only when the date differs from the invoice’s issue date. 
  • The full name and address and the Member State’s VAT number of the tax representative. This is the situation in which a tax representative is required to pay VAT in another Member State. 

What you must know before issuing it 

When issuing a cash invoice, it is important to issue a full VAT invoice. This can be exempted for certain transactions where a simplified or modified VAT invoice may be issued instead of a full VAT invoice.

It is important to note that a VAT invoice must issue within fifteen days of the end of the month in which goods or services are supplied. 

Why are they important? 

It must be emphasized that they very important documents. This is because it contains information that forms the basis of establishing VAT liability on the supply of goods and services carried out.

This document allows your VAT-registered customers to lay claims of VAT charged to them.

Invoicing software presents several advantages, including allowing one to securely store invoice data in the cloud and limited manual entry, which reduces the possibility of errors.

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