Down payment invoice: What must be included?

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Down payment invoicing is often used for extensive and/or longer-term projects.
What is meant by a down payment invoice, we explain here.

  • What is the definition of down payment invoice?

    If you are thinking of requesting such an advance payment from your customer, there are certain things to bear in mind. Because in some respects the advance payment invoice is similar to a conventional invoice, in others it differs from it. No service, no invoice – this does not apply to the down payment invoice. After all, the point of this type of invoice is to receive an advance payment for future services. Especially for large deliveries or new customers, the down payment invoice can be a veritable way. After all, as an entrepreneur you protect yourself at least partially from payment defaults and get a little planning security.

  • Strictly speaking, it is not a down payment at all, but a loan or credit. This is because you issue the down payment invoice to your customer even before you have delivered the goods or performed the service. If your customer settles the down payment invoice, it will be deducted from the final invoice after the completion of the project or the complete delivery of the goods.

The mandatory data

Since the down payment invoice is not only to be considered as a normal invoice, but your customer becomes your creditor to a certain extent through his advance payment, it must meet certain formal requirements.

Mandatory information includes:

  • 1

    Title of the document: The invoice should be referred to as a prepayment or (down payment invoice)

  • 2

    Tax number or the Value added tax identification number (VAT ID)

  • 3

    Your name and full address

  • 4

    Full name and address of the customer

  • 5

    Date of issue and Invoice Number: Make sure that the invoices are numbered consecutively

  • 6

    Description of the service: If it is a down payment for a good, it should be described as precisely as possible. Also in the case of a Service, it is important to specify the exact scope in the down payment invoice

  • 7

    Delivery date: Expected or planned date of delivery. If no date has been fixed yet, this is “not yet agreed” or a comparable formulation.

  • 8

    Net amount

  • 9

    Gross amount including applicable tax rate and tax amount

Make sure that all mandatory information is noted on the invoice, because only then the down payment invoice is considered a proper invoice and your customer can claim the input tax deduction.

This is even more important if you are arranging the down payment with a new customer. Surely you don’t want to start the new business relationship with a faux pas.

Actual taxation for down payment invoices

In most cases, companies are subject to the so-called imputed taxation. This means that sales tax must be reported to the tax office and paid for the respective billing period. This applies regardless of whether the customer has already paid the invoice and thus the sales tax.

For companies, this means that they advance their customers’ sales tax for a few days if they already transfer the tax to the tax office before the customer’s invoice amount is received in the account.

However, this is not the case with a down payment invoice, which is subject to the so-called actual taxation. This means that the sales tax is not paid to the tax office until the customer has transferred the invoice and the money has been credited to the business account.

Payment amount less than invoice amount

Actual taxation has another advantage. This is in the event that your customer does not pay the entire down payment invoice, but only transfers part of it.

Thanks to actual taxation, even in this case you do not owe the tax office the entire sales tax that you have shown on the invoice. You only have to pay the VAT that you have received through the payment.

Legally compliant down payment invoice with easybill

easybill Datensicherheit

Mandatory information, sales tax, actual taxation – there is a lot to consider for a down payment invoice. In addition, you certainly don’t want to embarrass yourself with your first invoice to your new customer.

And you don’t have to, if you trust easybill’s offer. Our invoice program ensures that you do not forget any information and that the down payment invoice is as it should be.

With easybill, you keep track of the current status of the project, because all other invoices can also be quickly prepared with our software and sent to the customer.

It really couldn’t be simpler – just typical easybill.

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