Transitional rules apply when a contract or supply spans across the implementation date of VAT (or a change in VAT rate).
Supply of Goods/Services spanning VAT Implementation
If a supply takes place after the implementation of VAT, tax must be charged even if payment was received before the implementation date.
Key Scenarios:
- Payment before, Supply after: If you received payment in 2017 but supplied the goods in 2018, VAT applies. You must issue an additional invoice for the VAT amount.
- Continuous Supplies: For services supplied continuously (e.g., annual maintenance contracts), the portion of the service performed after the VAT implementation date is taxable.
Contracts
If a contract was signed before VAT implementation but the supply continues after, the contract is treated as inclusive of VAT unless legally agreed otherwise. This means the agreed price typically includes VAT, reducing the supplier's net revenue unless they can recover it from the customer.