VAT Instalments

VAT instalments allow businesses to spread their VAT payments over several periods, which makes cash management easier. The businesses concerned must pay monthly or quarterly instalments depending on their tax regime and turnover.

Businesses Concerned

1. Standard real regime:

   • This regime applies to businesses whose turnover exceeds €789,000 excluding VAT for sales activities and €238,000 excluding VAT for services.

   • Businesses under this regime must file monthly VAT returns (CA3).

2. Simplified real regime:

   • This regime applies to businesses whose turnover is below the thresholds mentioned above.

   • Businesses under this regime file an annual VAT return (CA12) and pay quarterly instalments.

Calculating and Paying Instalments

Simplified Real Regime

• Quarterly instalments:

  • Businesses must pay two VAT instalments, calculated on the basis of the VAT due for the previous year.

  • The first instalment is due on 15 July and the second on 15 December.

  • Amount of the instalments: Each instalment is equal to 55% of the VAT due for the previous year (output VAT minus input VAT).

• Adjustment:

  • An adjustment is made on the annual return (CA12), filed no later than the 2nd working day after 1 May. If the instalments paid exceed the VAT due, the surplus is refunded or carried forward to the next period. If the instalments are lower, the business must pay the balance.

Standard Real Regime

• Monthly returns:

  • Businesses must file a monthly VAT return (CA3) before the 24th of the following month.

  • The amount of VAT to pay is the difference between output VAT and input VAT for the past month.

Advantages and Disadvantages

Advantages

1. Cash flow:

   • Instalments smooth out VAT payments, improving the business's cash management.

2. Simplicity:

   • For small businesses under the simplified regime, paying instalments and filing a single annual return simplifies administrative obligations.

Disadvantages

1. Calculating instalments:

   • Calculating instalments on the basis of the previous year may not reflect the business's current activity, especially when turnover fluctuates significantly.

2. Paying in advance:

   • Instalments represent a cash advance for businesses, which can cause problems in times of financial difficulty.

VAT instalments are a method of paying in advance, designed to spread the tax burden over time. Businesses must choose the tax regime suited to their situation and meet payment deadlines to avoid penalties. Managing VAT instalments well helps optimise cash flow and simplify tax obligations. For advice tailored to your specific situation, we recommend consulting a chartered accountant or tax adviser.