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VAT code with base amount different from invoice amount

Legislators are very creative in some countries when it comes to implementation of new VAT guidelines.

In some exceptional cases, the base amount for VAT calculation is not 100% of the invoice amount, but another percentage.

In this blog I explain two approaches how to configure such a VAT code.

  1. Specific VAT code with modified percentage
  2. Specific VAT code with new conditions in tax procedure

In this blog post we use an example VAT code for input tax for which the base amount is 120% of the total invoice amount excluding VAT, i.e. an increased taxable amount, and a VAT percentage of 21%

 

1. Specific VAT code with modified percentage

In the first approach, we configure a modified percentage in the VAT code. The modified percentage can be calculated by multiplying the base amount percentage and the VAT percentage.

Calculated percentage in our example: 120 % * 21 % = 25,2 %

 

Configuration of new VAT code

A specific VAT code is configured.

IMG path to configure a new VAT code: Financial Accounting (New) > Financial Accounting Global Settings (New) > Tax on Sales/Purchases > Basic Settings > Calculation > Define Tax Codes for Sales and Purchases

In the VAT code, the calculated percentage is entered. In our example this is under input tax as it’s for vendor invoices.

 

Additionally the general ledger account should be configured for account key VST.

 

Example of vendor invoice

In the example a vendor invoice is posted with total amount excluding VAT of € 1 000.

 

A VAT amount of € 252 is calculated by the system.

 

 

2. Specific VAT code with new conditions in tax procedure

In the second approach, a new condition type is created for the base amount and a new condition type for the input tax. These new condition types are afterwards assigned in the tax procedure and used in the new VAT code.

 

Configuration of new condition types

Two new condition types are created in this approach.

IMG path for creating condition types: Financial Accounting (New) > Financial Accounting Global Settings (New) > Tax on Sales/Purchases > Basic Settings > Check Calculation Procedure > Define Condition Types

A new condition type is configured for tax base amount.

 

And also a new condition type is created for input tax.

 

 

Assignment of new condition type in tax procedure

IMG path to define tax procedures: Financial Accounting (New) > Financial Accounting Global Settings (New) > Tax on Sales/Purchases > Basic Settings > Check Calculation Procedure > Define Procedures

The new condition types are assigned in the tax procedure.

The new condition type for input tax has the new condition type of base as a basis for calculation.

 

 

Configuration of new VAT code

A new specific VAT code is configured.

IMG path to configure a new VAT code: Financial Accounting (New) > Financial Accounting Global Settings (New) > Tax on Sales/Purchases > Basic Settings > Calculation > Define Tax Codes for Sales and Purchases

The new condition type for base amount, is used to set basis as 120 %. And the new condition type, which has the new condition type for base amount as a base, is used to calculate 21 % on the increased tax base amount.

 

Additionally the general ledger account should be configured for account key VST.

 

Example of vendor invoice

In the example a vendor invoice is posted with total amount excluding VAT of € 1 000.

 

A VAT amount of € 252 is calculated by the system.

 

Conclusion

Both approaches can be used to setup a VAT code with the base amount for VAT calculation not equal to 100% of the invoice amount.

The first approach with the calculated amount is easier to setup. It works, but it’s an less logical way of setting up such a VAT code.

The second approach is more work to setup and the standard determination procedure is customized by adding additional condition types. In the end, it’s a more logical way of setting up such a VAT code.

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