Understanding how Macedonian VAT on advance payments works is essential for businesses dealing with prepayments for goods or services. An advance payment is considered a payment by the buyer before the delivery of the goods or the performance of the service. The tax authorities treat this advance payment as a payment for the purpose of calculating VAT.
According to the Macedonian VAT Law, the obligation to pay VAT arises at the moment of receipt of the advance payment. This means that even though the supplier has not yet delivered the goods or performed the service, they must calculate and pay VAT on the amount of the advance payment when they receive it. The recipient of the advance payment Invoice has the right to deduct the calculated tax if he meets the conditions under the VAT Law.
When the company collects the advance payment and delivers the goods or performs the service, it calculates and pays the difference in VAT, if necessary. In this case, the company makes an additional VAT calculation if the amount of the advance payment does not cover the entire VAT for the delivery.
Reverse charge and Macedonian VAT on advance payments
In cases where the reverse charge mechanism applies, the recipient of the goods or services assumes the obligation to pay VAT.
Example:
Company A (supplier) performs a service for Company B (user), and the reverse charge mechanism applies. In that case, Company B, as the recipient of the service, calculates and pays VAT on the amount of the advance payment, not Company A. In such a situation, Company A includes a note in the issued advance payment invoice stating that the obligation to calculate VAT is transferred to the recipient of the goods or services, in accordance with Article 32-a of the VAT Law.
Conclusion
Handling VAT on advance payments in North Macedonia requires a clear understanding of legal obligations. This is especially important when reverse charge mechanisms come into play. Timely and accurate VAT calculation ensures compliance and prevents financial risks for businesses of all sizes.
At Unija ETL Consulting, we provide expert support in:
- VAT compliance,
- legal advice, and
- international tax matters.
Whether you’re dealing with complex advance payments or need help aligning your financial operations with Macedonian VAT law, our experienced team is here to guide you every step of the way.
