BASQUE COUNTRY AND NAVARRE: How is VAT reflected in an advance payment?

If you make a sale of goods or provide a service, VAT is accrued on the date the goods are made available or the service is provided.

However, if you receive all or part of the price in advance, the process is as follows:

• VAT is accrued at the time of payment (for the amount received).
• And you must include that VAT in the corresponding periodic return.

Let's see an example

If your company sells machinery and receives an order for 20, 000 euros (without VAT), and receives 5, 000 on the date of the order (for example, in March 2026):

• When collecting the 5, 000 euros, you must consider that a portion corresponds to VAT. In this case, 4, 132 euros will correspond to the tax base (5, 000 / 1. 21) and 868 euros to VAT.
• You must issue an invoice for that amount and include that VAT in the first quarter return of 2026.
• When delivering the machinery, you must charge 3, 332 euros in VAT (21% of the remaining 15, 868 euros) and include them in the return corresponding to the time of that delivery. And in this case, regardless of whether you collect at that time or later.

And remember...

In the case of advances, the decisive factor is the date of payment. If you are paid the advance with a promissory note, VAT will accrue on the due date (and as long as the payment is made), even if you discount said document at the bank beforehand.

 

We will inform you about how these operations work and how to include them in the VAT return and in the informative returns that must be submitted to the Tax Office.