VATupdate

Issuance of invoice when emptying sludge

  • Published: 29.10.2021
  • Released 29.10.2021

As a general rule, municipalities shall issue a sales document for a fee for emptying sludge from a sludge separator as soon as possible and no later than one month after the emptying has been completed. However, the Directorate of Taxes has no objections to municipalities treating the emptying of sludge as a service that is provided on an ongoing basis. The sales document must then be issued continuously, no later than one month after the expiry of the normal tax return for VAT.

1. Background

Most households are connected to a drainage network for wastewater. Pursuant to the Pollution Control Regulations § 12-2, cf. § 12-1, the municipality is the pollution authority and shall supervise the discharge of sanitary wastewater from residential houses, cottages, etc. Households that are not connected to a sewer system use their own sludge separators and collection bins. The municipality shall also ensure the emptying of these, cf. the Pollution Control Act § 26.

Emptying of sludge separators shall take place when needed and at least every other year with the exception of holiday homes, where the minimum frequency is every four years, cf. the Pollution Control Regulations §§ 12-13 and 13-11. It follows from the Pollution Control Act § 34 that the municipality shall determine a fee to cover costs associated with the waste sector. The provision on fees also applies to the emptying of sludge separators, private homes, etc., cf. section 26, fourth paragraph.
The municipality thus has a statutory duty to handle sludge from households with sludge separators and collection troughs, in addition to sludge from households that is connected to a sewer network.

According to the Norwegian Directorate of Taxes’ experience, municipalities have different practices for invoicing sludge emptying. Some municipalities issue sales documents (invoices) after emptying. Other municipalities treat sludge emptying as a service that is delivered on an ongoing basis, and invoice on an ongoing basis, ie both before and after emptying. Furthermore, the municipalities also have different practices for how often an invoice is issued for the ongoing service. In addition, the Directorate of Taxes is aware that many municipalities have a long-standing practice of invoicing fees for emptying sludge together with other municipal fees.

Questions have been raised about the time at which a sales document (invoice) will be issued for emptying sludge from a sludge separator. Specifically, the question is whether the service is to be invoiced after actual emptying, or whether the emptying can be regarded as a service that is delivered on an ongoing basis, and thus can be invoiced continuously distributed over the period between each emptying.

2. Applicable law

Everyone who has a duty to submit a tax return for value added tax pursuant to section 8-3 of the Tax Administration Act has a bookkeeping obligation for the business being conducted, cf. section 2, second paragraph, of the Accounting Act.

It follows from the Accounting Regulations § 5-2-2 that a sales document shall be issued as soon as possible and no later than one month after delivery of the service unless otherwise provided in the regulations.

Pursuant to section 5-2-4 of the Accounting Regulations, services that are delivered on an ongoing basis shall be invoiced no later than one month after the expiry of the general reporting period, cf. section 8-3-1 of the Tax Administration Regulations.

3. The Directorate of Taxes’ assessment

Sewage emptying is a taxable service and the municipalities thus have an accounting obligation pursuant to the Accounting Act § 2 second paragraph for this activity. This means that the municipality i.a. is obliged to follow the rules for issuing a sales document in the Accounting Regulations, subchapter 5-2.

Municipalities have a statutory duty to handle sludge, regardless of whether the household is connected to a drainage network or uses a sludge separator, and issues a fee for this. Fees are often invoiced for handling sludge together with other municipal fees.

The vast majority of households are connected to a drainage network for wastewater. This is a service that is delivered on an ongoing basis, and which must also be invoiced on an ongoing basis within the deadlines that follow from the Accounting Regulations § 5-2-4. For households that are not connected to a drainage network, emptying of sludge separators shall take place when needed and at least every other year with the exception of holiday homes, where the minimum frequency is every four years. The question is whether regular emptying of a sludge separator can be equated with being connected to a drainage network.

Sludge emptying consists of several elements, in addition to the actual emptying and handling of the sludge. The elements are i.a. administration of the emptying service and control of the condition of the sewage systems. The Directorate of Taxes has assessed whether these elements constitute services that are delivered on an ongoing basis, or whether this only constitutes costs that are necessary to be able to deliver the taxable emptying service.

The Directorate of Taxes assumes that both the type of services and the scope of the elements included in the service indicate that the essential and main element of the service is the actual emptying and handling of the sludge. The starting point will then be that emptying of sludge shall follow the main rule for invoicing, cf. the Accounting Regulations § 5-2-2. This means that the sales document must be issued as soon as possible and no later than one month after the emptying of the sludge.

Nevertheless, the Directorate of Taxes sees that there are factors that suggest that emptying sludge can be considered a service that is delivered on an ongoing basis, almost the same as for households that are connected to a sewer network. The services the households receive will in principle be the same, regardless of whether the property is connected to a drainage network or not. If this is taken as a basis, the households will be treated equally with regard to invoicing of fee, regardless of the frequency of the actual emptying. As previously mentioned, the Directorate of Taxes is also aware that many municipalities have a long practice of invoicing municipal fees, including fees for emptying sludge, on an ongoing basis. The Directorate of Taxes thus agrees that it may be an advantage for both the municipalities and their customers that emptying of sludge is invoiced together with other municipal fees.

Based on the assessment above, the Directorate of Taxes has no objections to municipalities treating the emptying of sludge as an ongoing service according to the Accounting Regulations § 5-2-4. It is emphasized that if emptying of sludge is regarded as a service that is delivered on an ongoing basis, the emptying must be invoiced no later than one month after the end of the normal assignment deadline, ie no later than every other month. The municipalities thus have a freedom of choice between issuing a sales document upon delivery of the emptying service, or invoicing on an ongoing basis in the period between each emptying.

4. Conclusion

Emptying of sludge from a sludge separator shall, as a general rule, be invoiced as soon as possible and no later than one month after the emptying, cf. the Accounting Regulations § 5-2-2.

The Directorate of Taxes nevertheless has no objections to municipalities treating the emptying of sludge as an ongoing service in accordance with the Accounting Regulations § 5-2-4. The service shall then be invoiced no later than one month after the expiry of the general statement of tasks, cf. the Tax Administration Regulations § 8-3-1.

More about invoicing

Source: skatteetaten.no

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