What is an invoice and why it is necessary?An invoice is a document, issued by a seller of goods or a service provider.
An invoice is addressed to the buyer or the recipient of services.
Issuing an invoice, a seller / service provider may require a payment from a buyer / service receiver (an invoice may be also the request of payment).
In accounting (bookkeeping) an invoice is the source document, basis for an accountant to make records, calculate taxes (for example, VAT and corporate income tax).
An invoice also is one of documents that proves transaction.
Basic details of an invoice.According to Latvian legislation an invoice must contain at least following information:
- Information about a seller / service provider:
- The name (for example, the name of the merchant) or the name, surname (if the seller / service provider is an individual / natural person).
- Registration number or personal code (if the author of the document is an individual / natural person).
- Legal address or place of residence of the seller / service provider.
- Information about the buyer / recipient of services:
- Name of a merchant (or name, surname).
- Registration number, if according to legislation it is required to register the buyer / recipient of services (for example, the limited liability company, sole trader, joint stock company). For natural persons must specify a personal code (if assigned).
- Address / legal address. For individuals / natural persons must write the address of the declared place of residence.
- General information about an invoice:
- Name of the document (for example, invoice, bill).
- Date of the document.
- Registration number of an invoice. Must specify at least the sequence number within a calendar year (for VAT invoice there are additional requirements). Before registration number need to write abbreviation "Nr.".
- General details about transaction:
- Description of transaction. For example, in the notes you can specify "supply (sale) of goods" or "provision of services".
- Basis for the business transaction (for example, information about the contract on the basis of which the invoice is issued).
- If an invoice is issued for the sale of goods, then must specify the address of the place of issue (give out) and delivery of goods.
- Information about goods / services:
- Name of goods / services.
- Unit of measure and quantity (amount). For example, in sale of goods unit of measure can be "items" and quantity (amount) is quantity of sold items. Regarding to services, unit of measure could be "service", "hour".
- Price for one unit. For example, price for one item, kilogram or meter, or price for one hour.
- Оценка хозяйственной сделки в денежном выражении. Сумма цен всех товаров и услуг, указанных в счете. Обычно указывается как "Сумма до налогов".
- Granted discounts, if any.
- In transactions with excise goods (for example, fuel, alcohol, tobacco) need to specify additional details. The requirements for the details are stipulated in the normative acts, applicable to the corresponding type of goods.
- Calculated taxes (taxes that applies to transactions indicated in the invoice). The amount of taxes must calculate from the sum of all goods / services indicated in the invoice. To transactions may be applied: the value-added tax, the tax to natural resources, the excise tax.
- Valuation of a transaction together with taxes. This is the amount that the buyer / recipient of services pays to the seller / service provider.
- Signature. The document must personally sign a person who has such rights (for example, a member of board of a limited liability company or an authorized person, on the basis of a power of attorney).
Regarding to electronically signed invoice legislation provides exceptions.
In an invoice also must write position and name, surname of a person, who signed the invoice.
An invoice must be in Latvian (more than one language can be used, but an invoice must contain information in the Latvian language).
A seller / service provider can specify accounting entries (account numbers and amounts).
An electronic invoice.It is an invoice, prepared using a computer and stored electronically. For example, a seller of goods or a service provider, using a computer prepares an invoice and sends it to e-mail of a buyer / recipient of services. The invoice is not of a printed form. After sending, the invoice is stored in a computer, in electronic form. Both parties must be able to print such invoice.
An electronic invoice must comply with the above mentioned requirements, except the signature.
If an invoice is prepared in electronic form (with computer), then the invoice must sign with the electronic signature (for example, using eparaksts.lv).
A person, issuing invoice and a recipient of the invoice can agree on signing electronic documents with such electronic signature, which is not a secure electronic signature. Both parties can create electronic data and agree that the electronic data will be used as an electronic signature. But such an agreement must be in written form and personally signed, or in electronic form and signed with the secure electronic signature.
According to article 7.1 of the Accounting Law, an invoice (without signature), received from other persons, can be used as source document in following cases:
- If a transaction, specified in particular invoice, is confirmed by another external document (received from other persons) and this external document has legal force.
For example, parties enter into a contract for a sale of goods, a seller issues an invoice, a buyer pays the invoice.
In such case, additionally to the invoice, exists bank document (proof of payment) and also sale - purchase agreement.
- If it is impossible to fulfill the above requirement (it is impossible to obtain another external document confirming the transaction), then the responsible person of the enterprise can confirm the transaction in accordance with the procedure established by a head of the enterprise.
A head of an enterprise approves the procedure (instruction), according to which the transactions are confirmed, also a head of an enterprise appoints (approves) persons who have the right to confirm the transactions.
For example, an enterprise downloaded (purchased) a program on the Internet, received an invoice, but the invoice is not yet paid (the payment will be during the next month). In this case, the only document is an invoice, and the responsible person of the enterprise confirms that the transaction was made.
Additional details for the value-added tax (VAT) invoice.The details are listed in 125 and the following articles of the Law on Value Added Tax.
In most cases, additional details are as follows:
- Order number of one or more series. Order number uniquely identifies an invoice. The head of an enterprise in the accounting organizational documents provides the conditions for the creation of order number.
- VAT number of a seller of goods / service provider.
- VAT number (if any) of a buyer / recipient of services.
- The date of delivery of goods / services or the date when payment is received in advance, if the date differs from invoicing date.
- VAT rate (for example, 21%, 12%, 0%).
- If for the transaction must apply non standard VAT rate (not 21%), then must write basis for application non standard rate (reference to the article of the law).
- Additional information in relation to certain types of transactions. For example, in case if the goods are delivered / services are provided to a person with the VAT number of another country of the European Union. Also, in case of construction services, the supply of mobile phones, tablet computers, etc.
Legislation, related with invoices.Requirements regarding details for invoices are written in several points (for example, point 7.1, 7.2) of the regulation of the Cabinet of ministers "Regulation Regarding the Conduct and Organisation of Accounting", as well as in article 7 and 7.1 of the Law on accounting.
Also, must comply with the requirements that are stipulated in the Law on the Legal Force of Documents (Article 4), the regulation of the Cabinet of ministers "Regulation Regarding the Conduct and Organisation of Accounting" (for example, chapter 3) and in Electronic Documents Law (for example, part 2 or article 3).
Article 125 and other articles of the Value Added Tax Law contains requirements for VAT invoice (invoice, issued by a person, that is recorded in the register of VAT taxable persons).
More common types of invoices.
- Invoice for sold goods and rendered services. A seller of goods or provider of services issues such invoice. A buyer / receiver of services, according to the invoice and agreement with a seller / service provider, must pay amount, specified in the invoice.
- A proforma invoice is a document, where a seller specifies goods, which the seller is able (agrees) to sell a buyer for certain price and according to certain conditions.
Proforma is commonly used in cross-border trade.
In some cases proforma is used also as advance invoice.
Also, a proforma invoice can be used to inform the customs authorities about the value of the goods.
A proforma must contain name of goods, volume / amount, price, total sum, as well as the sum of taxes.
Proforma does not prove delivery (sale) of goods. So an accountant does not need to record proforma in accounting registers.
- A credit note. Issued by a seller / service provider, for example, in cases when decreases price of goods / services. Also in cases when a buyer returns goods (part of goods) to a seller.