Definition
A tax point, or time of supply, is the date on which a sale is treated as taking place for VAT or GST purposes. It decides which tax return period the transaction belongs to and which tax rate applies. It is usually the earlier of the delivery date, the invoice date, or the date payment is received.
Also called: Time of supply, Date of supply
Tax point in practice
Rules differ by country. In the UK, for example, issuing a VAT invoice within 14 days of delivery can move the tax point to the invoice date. If you receive a deposit before delivery, the deposit can create its own tax point, so VAT may be due on it in an earlier return.
Frequently Asked Questions
Why does the tax point matter on an invoice?
It determines when you must pay the VAT or GST over to the tax authority and which rate applies if rates change. Show the tax point on the invoice when it differs from the invoice date.
Which VAT rate applies if the rate changes during a job?
Generally the rate in force at the tax point, not the date you quoted or started the work. Long projects or deposits that span a rate change may need to be split between the old and new rates, and countries often publish special transition rules, so check with your local tax authority.
Related terms
- VAT VAT (value added tax) is a consumption tax charged at each stage of the supply chain on the value added, used in the EU, UK, and more than 160 other countries.
- GST GST (goods and services tax) is a broad consumption tax applied to most goods and services, functioning like VAT.
- Invoice date The invoice date is the date an invoice is issued.
- Tax invoice A tax invoice is an invoice that meets the legal requirements for the buyer to claim a tax credit, typically under a VAT or GST system.
- Deposit A deposit is a partial payment made before work begins or goods are delivered, typically 25 to 50 percent of the total.
This page is for general information only and is not legal, tax, or financial advice. Rules change and vary by location, so consult a qualified lawyer or accountant about your situation.