Current Qonto Implementation
We currently handle VAT in deposit and balance invoices as follows:
Deposit Invoice:
- Total before tax: €100
- VAT (20%): €20
- Total after tax: €120
Balance Invoice:
- Total before tax: €1,000
- VAT (20%): €200
- Total after VAT: €1,200
- Deposit (deducted after VAT): €120
- Amount due: €1,080
What problems does this create for my accounting?
Accounting Impact: Our current method can create issues in accounting systems like Regate, where VAT appears to be charged twice (once on the deposit, once on the balance), requiring manual corrections.
Compliance Considerations: While our current approach maintains the full transaction value for revenue recognition (which is legally required), the VAT calculation method is causing practical problems for accountants.
Is Qonto collecting too much VAT from my customers?
While it's true that more VAT is initially collected, this is automatically corrected at the accounting level:
- Deposit Invoice: VAT collected on deposit amount
- Balance Invoice: VAT collected on full transaction amount
- Your Accountant's Role: Deducts previously collected VAT from the balance invoice VAT
Can you show me an example of how this works?
Example with Qonto's Method:
- Deposit: €100 + €10 VAT = €110
- Balance Invoice Total: €1,000 + €100 VAT = €1,100
- Deposit Deduction: -€110 (after tax)
- Amount Due: €990
- VAT Correction: Your accountant reduces VAT collected by €10 (already collected on deposit)
Why is this VAT collection temporary?
The higher VAT collection is temporary because your accounting system will automatically balance the amounts. The total VAT you actually collect across both invoices remains correct - it's just distributed differently between the deposit and balance invoices.
What is Qonto doing to fix this issue?
This is a known issue that we're actively working to resolve. The challenge is balancing:
- Legal compliance requirements for revenue recognition
- Practical accounting needs for VAT handling
- Integration with accounting systems like Regate
We're developing a solution that will address the VAT calculation while maintaining compliance with French accounting standards.
Why would deducting the deposit before tax be incorrect?
What accounting problems would this create?
Deducting the deposit before tax calculation would create serious issues:
Incorrect Method (Before Tax):
- Balance Invoice: €900 + €90 VAT = €990
- Problem: Transaction appears as €900 instead of €1,000
- Result: Understated revenue and incorrect financial statements
How does Qonto's method keep your accounting accurate?
Qonto's Method (After Tax):
- Balance Invoice: €1,000 + €100 VAT - €110 deposit = €990
- Result: True transaction value (€1,000) properly recorded with compliant VAT treatment
This ensures your revenue isn't artificially reduced while maintaining legal compliance with French accounting standards.
Why must my balance invoice include the complete service value?
Accounting Principle - Revenue Recognition
French accounting standards require that deposit invoices are not recorded as revenue in the balance sheet. Only the final balance invoice represents the complete transaction and is recorded in your company's revenue.
Here's what matters: Your balance invoice must include:
- Complete service/product description
- Total transaction value (before deposit deduction)
- Full VAT calculation on the entire transaction
Why this is important: If your balance invoice only showed the remaining amount without the full transaction value, it would artificially reduce your company's recorded revenue, creating incorrect financial statements.
Does French VAT law support Qonto's approach?
What does French tax law say about VAT on deposits?
French tax code requires VAT to be charged on all deposits for services. Since January 1, 2023, VAT becomes due upon receipt of the deposit payment for both goods and services.
What's the critical point for my business?
The VAT on deposits is immediately recoverable by your client if they are VAT-registered, creating a neutral cash flow effect for B2B transactions.
Article 289 of the French Tax Code (CGI) makes VAT on deposits mandatory, which means:
- You must charge VAT when you receive a deposit payment
- This VAT becomes due immediately upon payment receipt
- Your VAT-registered clients can recover this VAT, balancing their cash flow
- This legal requirement supports our current approach to VAT calculation
How do Expert Comptables handle deposit invoices?
French accounting professionals consistently apply this method because:
- Deposit invoices don't generate revenue entries - only cash flow entries
- Balance invoices must show complete transaction value for accurate financial reporting
- VAT corrections happen during monthly/quarterly VAT declarations
How does this align with EU VAT directives?
France's 2023 VAT changes aligned with EU VAT Directive requirements, ensuring consistency across member states. This approach is standard across European accounting systems.
The method of:
- Charging VAT on deposits
- Deducting deposits after tax calculation
- Correcting VAT at declaration level
This ensures your invoicing practices are not only compliant in France, but also consistent with European standards, giving you confidence when working with international clients or expanding across EU markets.