Non-Deductible VAT
In some cases, it is not possible to deduct the 100% sales (input) VAT amount, which means that only a part of the VAT amount can be included in the VAT register and the remaining part should be added to the purchase amount and posted as costs.
The latest Polish Localization version does not allow to post the non-deductible VAT for a purchased item.
Note
When you purchase a fixed asset, the non-deductible part of the VAT amount is not added to the purchase value of the fixed asset and is not posted as part of the acquisition cost. The solution in this area will be prepared using the standard VAT functionality. For more information on non-deductible VAT in Business Central, see Set up Non-deductible VAT.
Setting up Non-Deductible VAT
To enable the automatic calculation of non-deductible VAT, you should define the proper settings for calculating the purchase VAT amount.
To define required settings
Choose icon, enter VAT Posting Setup, and then select a related link.
On the VAT Posting Setup select the lines with a specific code combination in VAT Bus. Posting Group and VAT Prod. Posting Group fields and then select Non-Deductible VAT.
On the Non-Deductible VAT Setup page select New on the ribbon and fill in the following fields:
- Valid From – Specify a date which starts the period in which the non-deductible VAT amount is not to be applied based on the value defined in the Non Deductible VAT % field.
- Non-Deductible VAT % – Specify the VAT amount percentage not to be deducted in the period with the starting date set in the Valid From field.
Settings for Specific Calculation Types
The non-deductible VAT functionality requires additional setup for purchase transactions where the VAT Calculation Type field is either Reverse Charge or Full VAT.
To define the settings for Reverse Charge
On the VAT Posting Setup page, select the line with a combination of groups used to register purchases with reverse charge. Then, choose the Edit button.
On the VAT Posting Setup Card page, on the Purchases FastTab, fill in the Rev. Charge Curr. Adjmt. Acc. field.
Important
The account selected in the Rev. Charge Curr. Adjmt. Acc. field will be used to post the non-deductible purchase VAT amount. However, only the part of the amount resulting from the difference of exchange rates used for calculating nett and VAT amounts. A part of the non-deductible purchase VAT amount that results from the calculation of the VAT amount with the exchange rate for the net amount will be posted in a standard way, meaning it will be added to the net value.
To define the settings for Full VAT:
On the VAT Posting Setup page, select the line with a combination of the posting groups used to register purchases with VAT only (full VAT) (e.g. SAD documents). Then, select the Edit on the ribbon.
On the VAT Posting Setup Card page, on the Purchases FastTab, fill in the VAT Non-Ded. VAT Cost Account field.
Important
The system uses the VAT Non-Ded. VAT Cost Account field to post non-deductible purchase VAT. In this type of transaction, a non-deductible VAT amount cannot be added to the net value, because the costs in documents with the Full VAT type are not posted at all (only the VAT and payable amounts).
The VAT Non-Ded. VAT Cost Account field is mandatory, if the Full VAT* type has been set up. For other calculation types, the field can be filled in optionally. If the field is filled in, the non-deductible VAT amount is posted on the account selected in the field.
Posting VAT Transactions with Non-deductible VAT
To post a purchase document with a VAT amount that is partially deductible, enter a purchase order or a purchase invoice in a standard way, by using the VAT posting groups for the combination of which the non-deductible VAT setup was defined. Using the previously defined settings, the system splits the calculated VAT amount accordingly. This is displayed on the Statistics page window of the purchase document.
Note
Based on the VAT Settlement Date in the purchase invoice/order line, the program determines whether the vat amount from a given line is to be the non-deductible one, according to the setup, that is whether it is within the period specified by the dates in the Valid From on the Non-Deductible VAT Setup page.
Posting a Document with a VAT Posting Group Combination with Normal in the VAT Calculation Type Field
To post the purchase invoice with a non-deductible VAT amount
Create a purchase invoice in a standard way, by using the VAT posting groups for the combination of which you have set the non-deductible VAT settings, and the VAT date is within the period that starts from the date set in the From Date on the Non-deductible VAT Setup page for a selected combination of VAT posting groups.
In the purchase invoice, you have created, on the ribbon, select Invoice, Statistics.
The program opens the Purchase Statistics page on the Lines FastTab, you can view details of calculated amounts.
The fields such as: VAT %, Line Amount, VAT Base, VAT Amount, Amount incl. VAT show total amounts for the whole purchase invoice, which include both the deductible VAT and non-deductible VAT amounts.
The fields such as: Non-Deductible VAT %, Non Deductible VAT Base, Non-Deductible VAT Amount show values of a calculated non-deductible VAT.
Tip
To check the base and non-deductible VAT amount on the Statistics page. on the General FastTab select, a value in the No. of VAT Lines.
Checking the Non-Deductible VAT Amount on a Posted Invoice
To check the non-deductible VAT amount on the posted purchase invoice:
Choose icon, enter Posted Posted Purchase Invoice, and then select a related link.
On the Posted Purchase Invoice page, select Invoice, and then the Find Entries action.
On the Find Entries page, choose the G/L Entry table and select Show Related Entries.
Select Back to close the General Ledger Entries window.
On the Find Entries page, select the VAT Entry line or Detailed VAT Entry and choose Show Related Entries.
Posting a Document with a VAT Posting Group Combination with Reverse Charge VAT in the VAT Calculation Type Field
A non-deductible VAT amount in the purchase transaction with the reverse charge VAT is usually posted in a standard way. The only exception is when the currency exchange rate to calculate the purchase net value is other than the currency exchange rate used to calculate VAT amount. In such a case, the program uses the G/L account specified in the Rev. Charge Curr. Adjmt. Acc. field on the VAT Posting Setup page to post the non-deductible VAT amount into costs (only the difference resulting from applying various exchange rates.
Example:
A purchase for EUR 100
VAT 23% (reverse charge) 50% non-deductible.
Net Value EUR 100 * currency exchange rate 4,00 = PLN 400
Sales VAT 23% * net value of EUR 100 = EUR 23 exchange rate 4,00 = PLN 92
Sales VAT 50% * (23% * net value of EUR 100 = EUR 23 exchange rate 4,00 = PLN 46
Cost Amount = net value (PLN) + non deductible part of the purchase VAT amount = = PLN 446
Calculation of the VAT amount based on a different exchange rate ( EUR 1 = 5 PLN)
Difference in the sales VAT amount = (EUR 23 * 5,00) – (EUR 23 * 4,00) = (PLN 23 * 4,00) = PLN 23
Difference in the calculated purchase non-deductible VAT = 50% * ((EUR 23 * 5,00) – (EUR 23 * 4,00)) = PLN 11,50
Difference in the deductible purchase VAT amount = 23% * ((EUR 5,00 * 5,00) – (EUR 23 * 4,00)) – purchase non-deductible VAT = PLN 11,50
Posting a Document with a VAT Posting Group Combination with Full VAT in the VAT Calculation Type Field
If only the (full) VAT amount is registered, the non-deductible VAT amount only (e.g. based on a CCD document) is posted to the cost account that was selected on the VAT Posting Setup page. In this type of transaction, a non-deductible VAT amount cannot be added to the net value, because the cost amount in documents with full VAT are not posted at all (only the VAT and payable amounts are posted).