The deposit is when VAT is due

The deposit is the happiest moment in any job, and it has a VAT question hiding in it.

A story we hear a lot

A builder takes half the price up front in March, starts the job, and sends the invoice when it is finished, in June. It feels natural: the job is not done, so why invoice? But the VAT on that deposit belonged in the return for the period the money came in. By June, it is late.

What the law says

Section 8 of the VAT Act deems a supply to take place when the invoice is issued, or when any payment is received, whichever comes first. So the deposit fixes the VAT period, even if no invoice has gone out yet. That is why the deposit is the moment to issue the fiscal tax invoice.

Building work has its own rule. Construction, repairs and similar work paid in stages as the job goes on may be treated as supplied part by part, each part when its payment is due, is received or is invoiced, whichever is earliest. It is an option the Act allows, not something you must do. Which way suits your jobs is a question for your accountant.

A quotation that gets paid

• Your business exactly as it appears on your invoices: the name, the TIN and the VAT number.
• VAT at 15.5%, shown line by line. Ten months after the rate changed, we still see quotes at 15%.
• How long the prices hold, the lead time, the deposit you are asking for and your banking details.
• Clearly marked: this is not a tax invoice.

When the balance never comes

You paid VAT on the whole job when the deposit came in. Section 22 lets a registered business claim back the VAT in the part written off as irrecoverable, once the return with the original VAT has been furnished. If the customer pays after all, that VAT is due again.

How Decima POS handles it

An estimate is written from your own price list, with your banking details and terms printed on it. Nothing is sold yet: no stock moves, no VAT is declared, no fiscal invoice. When the customer accepts, the estimate becomes a project, the deposit is taken at the till, and one fiscal tax invoice is issued for the whole job, with the rest left on the customer's account. Every later payment goes against that same invoice, with its own receipt. With Decima Launcher, the estimate can even be written on the owner's phone at the customer's door.

The deposit routine

• Quote in writing, with VAT and how long the prices hold.
• Take the deposit through the till and issue the fiscal invoice.
• Record every later payment against that invoice.
• Chase what is owed, and write off only what truly will not come.

Decima Technologies (Pvt) Ltd. General information, not tax advice for your business.