VAT invoice and invoice for a receipt

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Invoices are the documents used in every business. The report E-Invoicing/E-billing. Digitization and Automation states that over a billion invoices are being issued every day. Most of them are VAT invoices, but many of them are invoices for a receipt. Do you know what the difference is between these two types of invoices? You may not be aware that there is a distinction between them and issue an inappropriate type of invoice to your client. In such a scenario, your mistake may result in additional tax consequences for your client.

It is worth finding out who is the recipient of the VAT invoice and who should receive an invoice for a receipt. Read the article to find out more.

VAT invoice and invoice for a receipt – index:
Invoice for a receipt – who can receive one?
VAT invoice – who needs one?
What are the consequences of the wrong type of invoice?
How is VAT calculated?
Invoice elements
Summary
Invoice for a receipt – who can receive one?
An invoice for receipt can be issued to the end purchaser, or the end consumer of the product or service, who is using the purchased goods for his or her own personal use. This means that the goods or services are not being sold to another entity. Typically, the end purchaser is an individual, who is not running a business. These individuals are bahamas whatsapp number database for their own personal use – they do not need to provide their tax identification number during the purchase process, and they are not entitled to a tax credit – they cannot deduct VAT. In their case, the invoice has only one purpose, which is to request payment for a product or service delivered.

VAT invoice – who needs one?
A VAT invoice is required by anyone who plans to resell the purchased products. This applies to semi-finished products and raw materials, which are used to produce other products for sale. Similarly, this type of invoice is required for services that are essential to running a business, such as advertising services, maintaining a business account on Facebook, copywriting, or other marketing activities. Most modern businesses need such services, but in order to be able to deduct the tax, they need VAT invoices from their contractors.

In addition to all other information that must be entered on the invoice for a receipt, the most important element of a VAT invoice is an accurate specification of the tax amount. The correctly issued document must also contain the contractor's tax identification number .

What are the consequences of the wrong type of invoice?
Issuing the wrong type of invoice, from the issuer's point of view, has no major consequences. After all, the invoice proves the fact of the sale, and both types of invoices fulfill this function.

From the customer's point of view, the difference between the two types of invoices is huge. If the customer purchased the product for future resale and received an invoice for a receipt, he will not be able to deduct VAT tax upon resale.

What factors should you base your decision on the type of invoice for your customer? There is a simple way to establish the right type of invoice efficiently. Every customer with a national identification number should receive VAT invoices, while individuals who do not have the number should receive invoices for a receipt.

How is VAT calculated?
VAT (value added tax), known in some countries by the acronym GST (goods and services tax) , is a tax that, due to its construction, is neutral for all companies. This means that, from a business point of view, VAT is not economically visible. Although companies pay VAT tax to the tax office, the real taxpayers are the final consumers. The amount that is paid by customers, who pay for goods or services, contains VAT tax, which cannot be deducted.

Sellers who pay VAT tax must add the VAT tax amount to each product and service they sell. In their case, the amount of VAT to be paid to the tax office appears on invoices and receipts. An entrepreneur who has a VAT invoice for products (services) purchased can deduct the calculated tax (output tax) from the tax due (input tax). The difference between the two must be paid to the tax office.

VAT invoice and invoice for a receipt
Invoice elements
Both types of invoices contain the same information relating to the customer and the seller, types and prices of products or services, payment methods and dates, and date of issue and sale. The VAT invoice, due to its purpose, contains a precise specification of the VAT tax that was paid for each of the products or services.

Although the invoice for a receipt may contain the tax amount – in the transaction summary, for example – it is not a sufficient specification of the VAT tax that can be presented to the tax office, because each item on the invoice must contain the exact tax amount and the correct VAT rate.

Summary
You can handle VAT tax easily using Free Invoicing App . The app will show you the necessary tips and suggestions about the VAT rates that are used in the country of your business operation. All you need to do is choose the right rate and the app will calculate the tax automatically and display its amount next to the correct product and in the invoice summary.