Bulgaria advance payment invoice: deadline, VAT, deduction

When you receive an advance before the supply, the VAT on it becomes chargeable on the day you receive it and you issue an invoice within 5 days of receipt (Art. 25, para. 7 and Art. 113, para. 4 of the Bulgarian VAT Act, ЗДДС). At delivery, the final invoice deducts the advance and charges VAT only on the difference. If the deal is rescinded and the advance refunded, you issue a credit note within 5 days of the refund (Art. 115, para. 2 of the VAT Act).

When does VAT become chargeable on an advance payment

VAT becomes chargeable when the advance payment is received, on the amount received, if the advance comes before the tax event of the supply (Art. 25, para. 7 of the VAT Act). The rule covers full and partial advances, for goods and for services. The law deems the tax to be included in the amount received.

This matters when the contract does not say whether the advance includes VAT. If the customer transfers €3,600.00 as an advance of €3,000.00 plus VAT, the taxable amount is €3,000.00 and the VAT is €600.00. If it transfers €3,000.00 with no agreement on VAT, the tax is extracted from the amount: a taxable amount of €2,500.00 and VAT of €500.00 (€3,000.00 × 20/120).

Not every advance makes the tax chargeable to the supplier. The main cases under the VAT Act and the regulation implementing it (ППЗДДС):

What is the deadline for an advance payment invoice

The invoice for an advance is issued no later than 5 days after the date the payment is received (Art. 113, para. 4 of the VAT Act). The deadline runs from the day the money arrives, not from the date of the contract. An advance received on 1 October 2026 is invoiced by 6 October 2026. Each further partial payment is invoiced the same way.

The document is titled "Фактура" (invoice) and carries every item in Art. 114, para. 1 of the VAT Act; "авансова фактура" (advance invoice) is a name used in practice, not a separate document type. The difference is item 10: instead of the date of the tax event, it shows the date on which the payment was received (Art. 114, para. 1, item 10). The full list is in Bulgarian invoice requirements.

A proforma invoice is not a tax document: the VAT Act knows only the invoice, the note to an invoice and the protocol (Art. 112, para. 1). A proforma can serve as a request for payment, but it does not replace the invoice for an advance received. If the invoice is not issued on time, the tax is due for the period in which it became chargeable (Art. 86, para. 2 of the VAT Act).

How does the final invoice deduct the advance

The final invoice is issued within 5 days of the tax event of the supply (Art. 113, para. 4 of the VAT Act) and charges VAT only on the part for which the tax is not yet chargeable. For the advance, the tax is already chargeable "for the amount of the payment" (Art. 25, para. 7), so at delivery what remains is the taxable amount of the supply less the advances received, net of VAT.

For ordinary supplies, neither the VAT Act nor ППЗДДС has a separate provision on deducting the advance or on how the deduction is shown on the invoice. The calculation follows from Art. 25, para. 7, and the layout is a matter of practice. Two layouts are used:

• 01The full value of the supply, a line "Advance deducted under invoice No. … of …" with a negative taxable amount, and VAT only on the difference.
• 02Only the rest of the supply, with a note that the other part was invoiced as an advance under the stated invoice.

The first layout shows the whole deal in one document and keeps the link to the advance invoice. In both, item 10 shows the date of the tax event, and the taxable amount and VAT on the invoice cover only the difference. The deduction reduces the taxable amount and the VAT, not just the amount payable.

When the advances cover the full value of the supply and invoices were already issued for them, no new invoice has to be issued at delivery (ППЗДДС Art. 79, para. 8). The exception is an advance received before VAT registration: at delivery, an invoice stating the full taxable amount is then issued (Art. 113, para. 10 of the VAT Act and ППЗДДС Art. 79, para. 9).

Example: a 30% advance on a €10,000.00 supply

Supplier EOOD, VAT-registered, sells goods to Client OOD for €10,000.00 excluding VAT. The contract provides for a 30% advance plus VAT. On 1 October 2026, €3,600.00 arrives in the bank account. On 20 October 2026, the goods are handed over and ownership passes, which is the tax event (Art. 25, para. 2 of the VAT Act). The balance is paid on 30 October 2026.

The lines of the final invoice in the first layout:

Both invoices go into the sales ledger (дневник за продажбите) and the VAT return (справка-декларация) for October 2026, the period in which they were issued (Art. 124, para. 2 and Art. 86, para. 2 of the VAT Act): a total taxable amount of €10,000.00 and VAT of €2,000.00. Had the delivery been on 5 November, the advance invoice would stay in October and the final invoice would go into November. The customer may deduct €600.00 of input tax on the advance invoice without waiting for the delivery (Art. 68, para. 1, item 2 and Art. 72, para. 1 of the VAT Act), and €1,400.00 on the final invoice.

The advance is not revenue for the supplier: revenue is recognised at delivery, under the accrual principle (Art. 26, para. 1, item 4 of the Accountancy Act, ЗСч). The account numbers below are the ones commonly used in practice; every business applies its own chart of accounts (Art. 11, para. 1, item 5 of the Accountancy Act).

After the last entry, accounts 411 and 412 are at zero, 702 holds €10,000.00 of revenue and 4532 holds €2,000.00 of VAT charged.

What happens if the deal is rescinded or the advance refunded

When the advance is refunded, set off or otherwise settled for consideration, the supplier issues a credit note to the advance invoice within 5 days of the refund and for the amount refunded (Art. 115, paras. 2 and 3 of the VAT Act). The note states the number and date of the advance invoice and the reason for issuing it (Art. 115, para. 4), and takes the next number in the sequence shared with invoices (ППЗДДС Art. 78, para. 2). If the advance is refunded in parts, the note for each part is issued within 5 days of that part being refunded.

The customer does not wait for the note. It corrects the input tax credit it used in the period in which the supply is cancelled, whether or not the advance has been refunded and whether or not it has received a credit note (Art. 78, para. 4 of the VAT Act). The correction is made with a protocol within 5 days of the rescission, recorded with a minus sign in the purchase ledger (дневник за покупките); the supplier's credit note is then not recorded in the purchase ledger (ППЗДДС Art. 66, paras. 1 and 2).

Example: the deal above is rescinded on 12 October 2026, and on 15 October the supplier refunds €3,600.00. The supplier issues a credit note by 20 October with a taxable amount of -€3,000.00 and VAT of -€600.00. The customer issues a protocol by 17 October and reduces its input tax credit for October by €600.00.

Advances in a foreign currency

The taxable amount of an advance in a foreign currency is set in euro at the last exchange rate published by the European Central Bank (ECB) at the time the tax becomes chargeable (Art. 26, para. 6 of the VAT Act). For the advance, that is the time the payment is received (Art. 25, para. 7); for the rest, it is the date of the tax event. The amounts on the invoice may be in dollars, but the taxable amount and the VAT are also stated in euro (Art. 114, para. 5).

An example with assumed rates, for illustration only: a contract for USD 10,000.00 excluding VAT, with an advance of USD 3,000.00 plus VAT. At a rate of €1 = USD 1.2000 when the advance is received, the taxable amount is €2,500.00 and the VAT €500.00. At €1 = USD 1.2500 on the date of delivery, the remaining USD 7,000.00 is a taxable amount of €5,600.00 with VAT of €1,120.00. The advance is not recalculated at the new rate, because the rate is taken at the time the tax on it became chargeable (Art. 26, para. 6 and Art. 25, para. 7). The law does not say expressly how the rest is determined when the advance was in a foreign currency, so confirm the method with your accountant.

Advances from private individuals

An advance from a private individual who is not a taxable person does not have to be invoiced, but an invoice is issued if the customer or the supplier wants one (Art. 113, para. 3, item 1 and para. 6 of the VAT Act). VAT becomes chargeable on receipt of the advance under the general rule of Art. 25, para. 7. A VAT-registered supplier includes the advances it has not invoiced in the sales report (отчет за извършените продажби) for the month in which it received them, drawn up no later than the last day of that month (Art. 119, paras. 1 and 2 of the VAT Act), and records the report in the sales ledger (ППЗДДС Art. 112, para. 4). The guidance of the National Revenue Agency (НАП, the NRA) says the same: a report is drawn up for every tax period in which supplies without an invoice were made or payments for them were received. At delivery, tax is charged only on the rest. How the report looks for online sales is covered in Stripe and the Bulgarian invoice.

Common mistakes

• 01Invoicing the advance only at delivery. The deadline is 5 days after the payment is received (Art. 113, para. 4 of the VAT Act), and the tax is due for the period in which it became chargeable (Art. 86, para. 2).
• 02Adding VAT on top of the amount received. If the advance was paid with no agreement on VAT, the tax is included in it (Art. 25, para. 7): from €3,000.00, the taxable amount is €2,500.00 and the VAT €500.00.
• 03Putting the date of issue in item 10 of the advance invoice. It shows the date on which the payment was received (Art. 114, para. 1, item 10).
• 04Charging VAT on the full value in the final invoice and deducting the advance only from the amount payable. The €600.00 of VAT is then charged twice; the deduction must reduce the taxable amount and the tax.
• 05Issuing a proforma instead of an invoice for the advance received. A proforma is not a tax document (Art. 112, para. 1 of the VAT Act).
• 06Issuing a credit note on rescission before the advance is refunded or set off. The note to an advance invoice is issued for the amount refunded, set off or otherwise settled (Art. 115, para. 2).
• 07Recording an advance invoice for an intra-EU supply of goods in the ledger for the month of payment. It belongs to the period in which the tax on the supply is chargeable (Art. 124, para. 3 of the VAT Act).
• 08Booking the advance as revenue. Revenue is recognised at delivery (Art. 26, para. 1, item 4 of the Accountancy Act).

In smetni.app

In the Bank module (Business and Enterprise plans), an incoming payment from an uploaded bank statement can be placed as an advance from a client during reconciliation. Invoices (for the advance and the final one) and credit notes are issued in the Sales module, with gapless numbering. The steps are in the Bank and Sales guides, and the plans are on the pricing page.