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The advance invoice in Bulgaria: What do you need to know?

02.10.2023
The advance invoice in Bulgaria: What do you need to know?

Every businessman who steps onto the Bulgarian business scene is faced with various administrative and accounting tasks. One of the key practices in this respect is the issuance of advance invoices. What is its role and why is it so important to get it right? And what are the specific features of the advance invoice in the context of Bulgarian legislation?

In this article, we will look at the main aspects of advance invoices in Bulgaria, as well as some of the most common mistakes entrepreneurs make when issuing them

What is an advance invoice?

An advance invoice is a document that confirms the advance amount received for goods or services to be provided in the future. It serves as proof of the financial transaction between two parties, thus ensuring that the seller has received part of the total amount in advance before fulfilling its obligations. The advance invoice is the main document that protects the interests of both parties – the seller, as a guarantee of having received part of the payment, and the buyer, as proof of having made payment.

When is an advance invoice issued?

An advance invoice is issued when the customer decides to pay part of the value of the agreed goods or services in advance. This is usually done to guarantee the performance of an order or service. Once the advance has been received, the supplier is obliged to issue an invoice confirming receipt of these funds. This type of invoice is often used in cases where the good or service has a high value or where the production of the order requires special materials or resources.

What should we be careful about when issuing an invoice for an advance?

When issuing an advance invoice, it is important to comply with all legal requirements and norms of Bulgarian legislation. This includes the correct indication of details such as the names of the buyer and seller, tax numbers, date of issue, the specific details of the goods or services provided, the advance amount and other necessary details. In addition, the details mentioned in the invoice must comply with the terms agreed between the parties to avoid future disputes or misunderstandings.

Other important aspects related to the advance invoice

The advance invoice should be kept in the company’s books as it is part of the company’s financial history. In addition, if the goods or services are not provided, the advance amount may be returned to the customer, which should also be recorded in the books. Finally, it is important to remember that advance invoices are regulated by Bulgarian tax laws and non-compliance may result in penalties.

Procedures and steps when issuing an advance invoice:

Issuing an advance invoice requires preparation and attention to detail. First, the exact amount of the advance that the customer has paid must be determined. Then, all the details of the customer, product or service to which the advance relates must be entered on the invoice. This includes the customer’s tax number if applicable. In addition, the date of issue and the payment term (if any) must also be indicated. Finally, it is important to check that the invoice complies with all legal requirements of Bulgarian law.

Comparison between ordinary and advance invoices:

While standard invoices are issued after a sale or provision of a service, advance invoices are issued in advance, before the actual service or sale takes place. The main difference is in the timing and purpose – an advance invoice confirms payment made in advance, whereas a standard invoice requires payment after the goods or services have been provided.

Example situations for using an advance invoice:

One common scenario is when ordering specially prepared products. Imagine a company that orders customized apparel for its employees. Before work begins on the order, the manufacturer may request an advance payment to cover initial costs. In such a case, issuing an invoice for the advance would be the appropriate procedure.

Typical problems and how to avoid them:

One of the common mistakes when issuing advance invoices is incorrect or incomplete information. For example, omitting details such as the customer’s tax identification number can create audit problems. To avoid such situations, always consult an accountant or legal advisor before issuing the invoice.

Tax and legal consequences of incorrect issuance:

Failure to comply with invoicing requirements can result in serious tax and legal consequences. This can include fines, tax audits or even legal disputes with clients. In addition, an incorrect invoice can cause distrust among customers and negatively affect a company’s reputation.

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