DPH (Czech VAT) on advance payments trips up experienced business owners. When exactly does the tax become due? Is a proforma invoice a tax document? Which date counts for a prepayment? And how does the advance carry into the final invoice? This article works through all of it, with the section references and worked figures.
The basic rule: tax arises when the payment is received (Section 20a of the VAT Act)
The governing provision is Section 20a of Act No. 235/2004 Coll., on Value Added Tax (Section 21 only defines the DUZP itself). For a VAT-registered supplier, the duty to declare tax arises on:
- the date of the taxable supply (DUZP — datum uskutečnění zdanitelného plnění), or
- the date the payment is received, if that falls earlier than the DUZP
In other words: the moment you accept a payment in advance, you must declare VAT on it — whether or not you have delivered anything yet.
Worked example 1
You are a plumber, registered for VAT. On 15 April the customer pays an advance of 24 200 CZK (20 000 CZK base + 4 200 CZK VAT at 21 %). You finish the work on 10 May.
- Decisive date for the advance = 15 April, the date the payment arrived
- The 4 200 CZK of VAT goes in the return for April (or Q2 if you file quarterly)
- DUZP of the final supply = 10 May
Which date counts on an advance
Receiving an advance is not a DUZP — the date of taxable supply remains the day the service is performed or the goods delivered. What matters for an advance is the day the duty to declare tax on the payment received arises (Section 20a):
Decisive date for an advance = the date the money reaches your bank account or is received in cash
That date decides which tax period the VAT belongs to. The tax document for the advance may be issued later — the law allows 15 days from receipt of the payment — but the VAT is always declared in the period in which the advance arrived.
Proforma invoice versus tax document for an advance
This is one of the most common mistakes in practice. A supplier sends the customer a proforma invoice, the customer pays, and the supplier assumes the proforma serves as the tax document. It does not.
Proforma invoice (a request for payment)
- Not a tax document
- Creates no tax liability of its own
- The customer cannot claim a VAT deduction from it
- It only tells the customer how much is being asked for
Tax document for a payment received
- Must be issued within 15 days of receiving the advance (Section 28 of the VAT Act)
- Carries every particular required by Section 29: the DIČ (tax ID) of both parties, the tax base, the rate and amount of VAT, the DUZP and the rest
- A VAT-registered customer can claim a deduction from it
- It establishes the supplier's tax liability
In Taxorio you raise the proforma and, when you confirm that the advance has been paid, the tax document for the payment received is issued for you — with the required particulars and the right date of receipt. Where the tax is not declared on a prepayment at all — under the domestic reverse charge, or if you are not registered for VAT — no such document is created, and the proforma stays as it is.
Which VAT rate applies to an advance
An advance is taxed at the rate that applies to the supply it relates to. If the advance covers construction work at 12 % (where the conditions of Section 48 of the VAT Act are met; 15 % applied up to the end of 2023), or goods at the reduced rate, you use that reduced rate. If the supply carries the standard 21 %, the advance is taxed at 21 %.
Careful: at the moment you accept the advance you have to know what it is for. If you do not — an advance on an unspecified "future supply" where the goods or service, the rate or the place of supply are not known with sufficient certainty — the duty to declare tax on the payment does not arise at all (Section 20a(2)); you declare the tax only on the DUZP.
The final invoice and deducting the advance
When you actually carry out the supply, you issue a final (settlement) invoice. It has to:
- State the full price of the supply — the tax base and VAT in full
- Deduct the advance already received, both its base and its VAT
- Show the remaining balance to pay
- Refer back to the original tax document for the advance
Worked example 2 — the whole sequence
The job: installing air conditioning, total price 60 500 CZK including VAT (50 000 CZK + 21 % VAT = 10 500 CZK)
Step 1 — the advance (1 April):
The customer pays an advance of 24 200 CZK (20 000 CZK base + 4 200 CZK VAT).
Decisive date = 1 April (the day the payment is received). The 4 200 CZK goes in the April / Q2 return.
Step 2 — the work is finished (20 April):
DUZP of the final supply = 20 April.
Step 3 — the final invoice:
- Full price: 50 000 CZK base + 10 500 CZK VAT = 60 500 CZK
- Already paid by advance: 20 000 CZK base + 4 200 CZK VAT = 24 200 CZK
- Balance to pay: 30 000 CZK base + 6 300 CZK VAT = 36 300 CZK
The VAT on the balance (6 300 CZK) goes in the April / Q2 return as well, since both events fell in April.
The customer's side: deducting VAT on an advance
If you are the customer:
- You can claim the deduction from the tax document for the advance in the period in which you receive the document and pay the advance
- When the final invoice arrives, you claim the deduction on the remaining VAT
- The total deduction equals the VAT on the full price of the supply — it is simply split across two returns
The key points
- VAT on an advance received is declared in the period the payment arrived, whatever the date of supply (Section 20a of the VAT Act)
- Decisive date for an advance = the date the money reached the account or was received in cash; receiving an advance is not a DUZP
- A proforma invoice is NOT a tax document — once the advance is paid, you must issue a tax document for it within 15 days
- The final invoice has to refer to the advance and deduct it
- Taxorio carries the sequence through: proforma, tax document for the payment received, final invoice with the advance deducted
Taxorio scope: Taxorio provides invoicing and income/expense records for Czech sole traders. It is not full accounting or personalised tax advice. For an unsupported or unusual case, verify the treatment with a Czech accountant or tax adviser before filing.