Reverse Charge VAT
Reverse Charge in Purchase Transactions
Under Polish legal regulations, intra-community acquisition of goods and services and import of services are subject to the VAT obligation, which means that it is required to record all transactions with a VAT amount calculated in the VAT register. The standard Reverse Charge VAT feature is used to calculate sales and purchase (input and output) VAT amounts for such transactions. To customize this functionality to Polish legal requirements, Polish Localization has been enhanced with the following elements:
The Reverse Charge VAT feature enables the creation of the VAT sales entries. Owing to this, intra-community goods acquisition and service purchase transactions including sales VAT are included both in the VAT sales and purchase registers.
With Polish Localization for Microsoft Dynamics 365 Business Central, it is also possible to calculate a VAT amount in a local currency using the currency exchange rate as of a date different from the conversion date of purchase and payables values for the accounting books.
Setup
Setup Required to Calculate and Post VAT as the Reverse Charge
To define settings required to calculate and post VAT as the reverse charge:
Choose the
icon, enter VAT Posting Setup, and then select a related link.On the VAT Posting Setup page , select the line taht contains a combination of values in the Bus. VAT Posting Setup and Prod. VAT Posting Group fields that is used for the intra-community acquisition of goods and services or service import, and then select Edit.
On the VAT Posting Setup select relevant setup values in the obligatory fields.
In the VAT Calculation Type on the General FastTab, select the Reverse Charge VAT option.
In the Reverse Chrg. VAT Acc. field on the Purchases FastTab select the drop-down arrow to select the G/L account where you want to post a purchase VAT amount calculated for all transactions involving intra-community acquisition of goods and services or import of services.
In the Reverse Chrg. VAT Acc. field on the Purchases FastTab select the drop-down arrow to select the G/L account where you want to post a purchase VAT amount calculated for all transactions involving intra-community acquisition of goods and services or import of services.
Important
The Reverse Chrg. VAT Unreal. Acc. field will be displayed on the VAT Posting Setup Card page, if the Unrealized VAT field was not selected on the General Ledger Setup page.
In the Reverse Chrg. VAT Postp. Acc. field on the Purchases FastTab select the drop-down arrow to select the G/L account where you want to post a postponed purchase VAT amount calculated for all transactions involving intra-community acquisition of goods and services or import of services.
In the Rev. Charge Curr. Adjmt. Acc. field on the Purchases FastTab select the drop-down arrow in this field to select the G/L account on which the difference resulting from the calculation of VAT based on the exchange rate different from the exchange rate used for the amount payable will be posted. However, it applies only to non-deductible VAT amounts.
Setup for Posting the VAT Difference due to the Currency Exchange Rate Differences with the Reverse Charge
If the currency exchange rate used for VAT calculation is different from the currency exchange rate used for the posted purchase invoice (with the VAT reverse charge calculated), the amount of the VAT difference has to be posted additionally. The difference can be posted:
- manually, after posting the purchase invoice (recommended), or
- automatically (not recommended due to the possibility of reduced system performance).
To define the setup which enables you to properly post the difference in VAT amounts that result from different currency exchange rates used when calculating the reverse charge VAT:
Choose the
icon, enter Purchases & Payables Setup, and then select a related link.On the Purchases & Payables Setup page on the General FastTab, select the Auto Rev. Char. Diff. Posting field, if the difference based on different currency exchange rates used in VAT calculation is to be posted automatically. If this field is empty, the difference has to be posted manually after the purchase invoice is posted (the method for posting the invoice manually has been described in the following section).
Note
As it is possible that tables are blocked while the posting process is run, the Auto Rev. Char. Diff. Posting field should not contain Yes, if the Use Legacy G/L Entry Locking field in the General Ledger Setup the No option was selected.
Posting a Purchase Transaction with the Reverse Charge VAT Calculation Type
If a purchase invoice for goods and services acquired in the European Union or a purchase invoice for services acquired outside European Union is posted, a VAT amount is calculated and posted without any impact on the value of the purchase transaction and vendor payables. To post a purchase transaction with the Reverse Charge VAT calculation type:
Create a new purchase invoice in the standard way, and make sure that the correct combinations of VAT Bus. Posting Group and VAT Prod. Posting Group codes have been selected properly according to the setup described in previous section.
Enter a date in the Rev. Charge Purchase Delivery Date field, if it is different from the date when the document was issued. This date is shown in the JPK_VAT with declaration file on the sales date for purchase VAT.
Note
The currency exchange rate to be used to calculate the amount of a purchase transaction and the amount payable on the purchase invoice in a local currency is retrieved from the currency exchange rate table according to the date set in the Posting Date field, while the currency exchange rate to be used to calculate the VAT amount in a local currency is retrieved from the currency exchange rate table in the VAT Settlement Date field.
Check the summary of the values in the purchase invoice by choosing the Invoice, Statistics action.
On the Purchase Invoice Statistics page that opens, check the values in the following fields on the Reverse Charge VAT FastTab:
Rev. Charge VAT Curr. Code - Specifies the currency code that is copied from the purchase invoice setup.
VAT Settlement Date - Specifies a VAT settlement date copied from the purchase invoice setup; it is also the date which is used to set the currency exchange rate for the a VAT amount.
Rev. Charge VAT Amount - Specifies the amount of the purchase and sales VAT in the invoice currency.
Rev. Charge VAT Amount (LCY) - Specifies the equivalent amount in a local currency of the calculated purchase and sales VAT.
- If one purchase invoice contains lines with multiple VAT rates, the total reverse charge VAT value for each VAT rate can be displayed on the Lines FastTab on the Purchase Invoice Statistics page in two fields:
Rev. Charge VAT Amount - Specifies the amount of the purchase and sales VAT in the invoice currency.
Rev. Charge VAT Amount (LCY) - Specifies the equivalent amount in a local currency of the calculated purchase and sales VAT.
Make a change, if the exchange the exchange currency rate to be used to calculate the reverse charge VAT amount and retrieved from a currency exchange rate table according to the date set in the VAT Settlement Date field, is not correct.
To change incorrect exchange rate, on the Purchase Invoice Statistics page in the Reverse Change FastTab select the AssistButton in the Rev. Charge VAT Curr. Code field. On the Change Exchange Rate page, change the default value in the Relational Exch. Rate Amount field into a correct exchange rate.
Post a purchase invoice in a standard way.
You can verify the effects of posting G/L and VAT entries by using the Find Entries action on the posted purchase invoice page.
Posting the Difference in the VAT Amount by using Different Currency Exchange Rates for Balance Sheet and VAT Calculation Purposes on a Posted Purchase Invoice
Note
It is possible that a posted purchase invoice uses different exchange rates: one for the purchase amount and payable amounts, and another one for the reverse charge amount (regardless of whether they were entered from the table based on the values of the Posting Date and VAT Settlement Date fields or whether they were manually changed before they were posted). If, after the purchase invoice is posted, the Auto Rev. Char. Diff. Posting field on the Purchase and Payables Setup page is not selected, you must make an additional VAT adjustment posting.
To post the difference in the VAT amount that results from the different exchange rates used for posting a purchase invoice:
Choose the
icon, enter VAT Application Worksheet, and then select a related link.The program opens the VAT Application Worksheet page. In this window, set filters to display the required VAT entries. The VAT Application Worksheet lines which contain VAT amount differences, the Rev. Charge Curr. Difference.
Select a line with the Purchase type with a reverse charge amount to be adjusted.
Choose the Adjust Reverse Charge VAT Exch. Rate action on the ribbon.
The summary window with information on reverse charge VAT amounts calculated in each line will open. If currency exchange rates are different (i.e. one rate used for a purchase and payable amounts and another one for a reverse charge amount), the Amount Difference field value is different from 0.
Check the values in the following date fields:
Posting Date - Specifies the date on which the exchange rate adjustment will be posted. By default, the work date is inserted, but it can be changed manually if needed.
VAT Settlement Date - Specifies the date used to register an adjusted VAT amount for a VAT settlement period. By default, the application enters a work date from the adjusted VAT entry, and this date can be changed manually, if needed.
Choose the Post action.
When the adjusted exchange rate is posted, the program creates G/L entries and detailed VAT entries.
Changing a Currency Exchange Rate for a Posted Reverse Charge Amount
If the same exchange rates are used for a purchase transaction and payable amounts as well as for a reverse charge amount, it may turn out that they should be different.
To change a currency exchange rate for a posted reverse charge amount:
Choose the
icon, enter VAT Application Worksheet, and then select a related link.On the VAT Application Worksheet page, set filters to display all required VAT entries and select the line with a reverse charge amount to be adjusted.
Choose the Adjust Reverse Charge VAT Exch. Rate action on the ribbon.
On the Adjust Reverse Charge VAT Exch. Rate page you can see a summary of the reverse charge calculated on the line. In the Rev. Charge VAT Curr. Code field, select the AssistButton. On the Change Exchange Rate page in the Relational Exch. Rate Amount field, enter a new exchange rate.
Confirm the changed exchange rate by selecting the OK button.
On the Adjust Reverse Charge VAT Exch. Rate field page, you can see that the VAT Amount Difference field contains zero. Post the reverse charge amount by selecting the Post button.
The posted reverse charge amount is included in a selected VAT period in sales and purchase VAT registers.
Note
The reverse charge VAT feature has also been added to the Purchase Order document.
Reverse Charge in Sales Transactions
In sales transactions with a reverse charge, other VAT rates are used than the ones used in purchase transactions. The sales VAT register contains entries related to both to purchase and sales VAT transactions for which the reverse charge VAT was calculated and therefore Polish Localization provides features that help to distinguish between these two transaction types.
Setting up IDs for Purchase VAT with the Reverse Charge Type
To set up the identifier that indicates the source of the purchase VAT:
Choose the
icon, enter VAT Posting Setup, and then select a related link.On the VAT Posting Setup page, select the line with a combination of values in the Bus. VAT Posting Setup and Prod. VAT Posting Group fields which refers to a intra-community transaction and then choose Edit.
On the VAT Posting Setup select relevant setup values in the following obligatory fields.
In the VAT Calculation Type field on the General FastTab, select the Reverse Charge VAT option.
In the VAT Identifier field, enter the identifier that is to be displayed in the sales VAT register and purchase VAT register entries related to purchase transactions with the reverse charge VAT.
In the Reverse Charge Sales VAT Identifier field, enter the identifier to be displayed in the sales VAT register entries related to sales transactions with the reverse charge VAT. The identifier may be shown in sales documents printouts in the VAT Rate field.
Posting a Sales Transaction with the Reverse Charge VAT Calculation Type
To verify the use of the reverse charge sales VAT identifier:
Choose the
icon, enter Sales Invoice, and then select a related link.Enter a new sales invoice for the customer by selecting the combination of the VAT Business Posting Group code and VAT Product Posting Group code in the invoice line, as specified for reverse charge VAT in the sales VAT posting setup. Enter the missing data in the standard way.
Choose the Invoice, Statistics actions.
On the Sales Statistics page, you can see that the VAT amount has not been calculated on this invoice. The reason is that on the VAT Posting Setup page for the combination of the VAT Business Posting Group and VAT Product Posting Group codes that are used in this sales invoice, the Calculation Type contains Reverse Charge VAT option.
Choose the Post action to post the invoice.
Select Yes when the following message window is displayed: “The invoice has been posted and moved to the Posted Sales Invoice window. Do you want to open the posted invoice?”.
On the Posted Sales Invoice page, choose Actions, Find Entries.
On the Find Entries page, choose the VAT Entry line and Show Related Entries.
On the VAT Entries page, the VAT Amount field contains 0.
Choose the
icon, enter Sales/Purchase VAT Reg., and then select a related link.On the report settings page, fill in the fields as needed.
In the VAT Register Type select the Sales option.
In the VAT Settlement Date field, enter the period during which a sales invoice is to be settled.
- Choose the Preview button to display the report on the screen.
Note that in one entry and in the report summary, for a sales invoice that was previously posted, the identifier specified in the Reverse Charge Sales VAT Identifier field from the VAT Posting Setup page was used for VAT postings groups that were used in the invoice.