What Companies Often Forget About VAT on Deposits ?
The 28th of April, 2025
📝 1. Deposits Trigger VAT Liability
When you receive a deposit, VAT becomes due immediately, even if the service has not yet been performed or the goods have not yet been delivered.
This means that the VAT must be declared at the time of receipt of the deposit, not when the final service or delivery takes place.
Key point:
The payment itself triggers VAT exigibility — not the completion of the work.
2. What Changed in 2022
Before 2022, this rule primarily applied to services.
However, a reform that came into effect in 2022 extended this treatment to the supply of goods as well.
Now, when a deposit is received for goods, VAT is also immediately due, just as it is for services.
Practical impact:
Whether it’s a deposit for a consulting project or a prepayment for a machine, you must account for VAT upfront.
3. Invoicing Requirements: Watch Out!
A deposit invoice must mention VAT clearly.
An invoice without a VAT mention — even for a deposit — is considered non-compliant.
This can lead to administrative penalties and issues during a tax audit.
Your deposit invoice should include:
- The amount excluding VAT (net)
- The VAT rate applied
- The amount of VAT
- The total amount including VAT (gross)
4. Summary: Key Things to Remember
✔️ VAT is due when the deposit is received
✔️ Applies to both goods and services
✔️ Always issue a proper invoice showing VAT
✔️ Declare the VAT collected in your next VAT return
Final Tip
Managing deposits properly under VAT rules is essential to avoid unexpected adjustments and penalties.
Make sure your invoicing and accounting teams are fully trained on these requirements — and review your deposit processes regularly!
Drop a comment or reach out — We’d love to hear your perspective.
✉️ Need Help?
If you need a VAT review, a team training, or help optimizing your processes, feel free to reach out. We help businesses turn VAT from a liability into a strength.
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