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Working with non-deductible VAT

When you are only allowed to deduct a certain portion of the VAT, you can use non-deductible VAT. This document explains how you can apply this in your company.

Settings

To be able to work with non-deductible VAT this needs to be defined in the general ledger settings. In the VAT section you have to enable Non-deductible VAT. Next you have to restart the software to apply the changed setting.

Master data

The next setup is setting up the master data. For the non-deductible VAT you can define the settings at the maintenance of the tax codes and the maintenance of the general ledger accounts. When working with non-deductible VAT multiple scenario's are possible. You can define the percentage of non-deductible VAT in the tax code, but it is also to define the percentage at the used cost GL account. Besides this it is also possible to link a separate GL account for the non-deductible vat to the used cost GL account, but you can also leave the field empty. When the non-deductible VAT settings for both for the tax code and GL account are configured, the settings of the cost GL account always take precedence.

Tax codes

In the maintenance of the tax codes, the following two fields apply to non-deductible VAT:

• Percentage non-deductible VAT: define the percentage non-deductible VAT that will be used when creating an entry on this tax code
• Non-deductible VAT account: define the GL on which the non-deductible VAT will be booked. It is only allowed to link a P&L account or a neutral balance account.

For instance when creating an entry where the VAT is EUR 6,-, than in case of the above example, EUR 0,60 (10% of EUR 6,-) will be booked on GL account 1517.

Important: You also have to create a new tax code 'N' for 0% that will be used for the VAT line of the non-deductible VAT.

Example of the tax code you have to create.

GL accounts

In the maintenance of the GL accounts there are two fields available that are used for non-deductible VAT.

• Non-ded. VAT: define the percentage non-deductible VAT that will be used when creating an entry on this GL account
• Non-ded. VAT account: define the GL on which the non-deductible VAT will be booked.

For instance when creating an entry where the VAT is EUR 6,-, than in case of the above example, EUR 0,60 (10% of EUR 6,-) will be booked on GL account 1517.
When you use a tax code that is also configured for non-deductible VAT, the configuration of the GL account takes precedence over the configuration of the used tax code.

In case the Percentage non-deductible VAT of the tax code is defined, but you do not link a Non-deductible VAT account to the tax code, and do not link a Non-ded. VAT account to the GL account, the non-deductible VAT will be booked on the cost GL account that is used in the entry.

Related document

• Instruction document VAT Control Statement