Taxes

Advance payment (tax prepayment)

Instalments of income or corporate tax paid during the year based on the previous year's tax, settled against the final liability in the annual return.

What Advance payment (tax prepayment) means

Tax authorities do not wait for the annual return to collect income tax. Businesses and the self-employed pay advances during the year, usually quarterly or monthly, calculated from the tax assessed for the previous year or from a forecast of the current year. The advances are credited against the tax finally due, and the difference is paid or refunded after the return is filed.

New businesses often pay no advances in the first year, and most countries allow a reduction on request when profit is expected to drop. Underpaying advances that were due attracts interest. In the invoicing context, the same term describes a payment received before delivery; in many countries receiving such an advance triggers a VAT obligation and an advance payment invoice. Kontevia keeps the schedule of tax advances in the deadline calendar and issues advance invoices on request.

Related terms

Tax returnThe periodic declaration a business files with the tax authority to report its tax base and the tax due. VAT returns are monthly or quarterly; income tax returns are annual.Corporate income taxThe tax companies pay on their annual profit. Rates and bases are national; the EU coordinates only anti-avoidance rules and the minimum tax for large groups.Personal income taxThe tax individuals, including sole traders, pay on their income. Business profit is taxed together with other income under national progressive or flat rates.Proforma invoiceA preliminary document that states what will be invoiced. It is not a tax document and does not create a VAT liability.Penalty interest (late payment interest)Interest charged by the tax authority on tax paid late, and the statutory interest a business may claim from a customer who pays an invoice late.

This entry is general information, not tax advice. Rules change; check the current position with your adviser or the tax authority of your country.

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Kontevia applies these rules for you

Rates, thresholds and e-invoicing formats come from the jurisdiction data of your country. You send the document, Kontevia books it and keeps the VAT summary ready.

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