Advance Payment Invoicing: A 5-Step Guide for Our Clients

When requesting advance payments from customers, it's crucial to issue an "Advance Payment Invoice" that meets all standard invoice requirements. This includes applying the IGIC and any necessary withholding tax, and clearly marking the invoice with "Anticipo" (advance payment). Additionally, the final invoice should reflect the advance and calculate taxes on the remaining balance. Learn more about ensuring compliance and proper tax declaration in our latest blog post.

Advance Payment Invoicing: A Simple Guide for Our Clients

When you request an advance payment from a customer for goods or services, you must issue an invoice for this payment. Here’s what you need to know:

  1. Issuing the Invoice:
  • If a supplier asks you for money in advance, you can request an “Advance Payment Invoice.”
  • This invoice must follow the standard requirements for any invoice.
  1. Tax and Withholding:
  • The IGIC (local tax) and any withholding tax the supplier usually applies must be included.
  • The invoice description should include the word “Anticipo” (advance payment).
  1. Separate Invoice Series (Optional):
  • You can create a series of separate invoices for advance payments, but this is not mandatory.
  1. Final Invoice:
  • A final invoice must be issued when the goods are delivered or the service is performed.
  • This final invoice should show the remaining amount after deducting the advance payment.
  • It must also reflect the advance received, and IGIC and withholding tax will be calculated on the remaining balance.
  1. Tax Declarations:
  • For forms 347 and 415 (annual declaration of transactions with third parties): If the advance payment and the final transaction occur in different quarters, declare the advance payment in the quarter it is received or paid.
  • For form 420 (IGIC): Declare the advance payment in the quarter it is made.
  • For form 111 (withholdings and payments on account): If the supplier invoices with withholdings, you must pay on the date of the advance payment.

By following these steps, you can ensure that your advance payment invoices are compliant and properly accounted for in your tax declarations. If you have any questions or need further assistance, feel free to contact us at Rosenov & Quintero Accountants.

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