Set Up Tax Codes to Properly Report Deferred VAT

  • by Kees van Westerop, Senior SAP Consultant, Kwest Consulting
  • February 15, 2008
Deferred Value Added Tax (VAT) is a special VAT that you only need when reporting to the tax authorities after the related invoice has been paid. See how to do this in the SAP system by linking a special target VAT code to a deferred VAT code.
Key Concept

Value Added Tax (VAT) is a common tax system in the European Union. Most of the time, you can reclaim the VAT from the tax authorities as soon as the purchase invoice has been received; at the same time, as soon as a sales invoice has been created, you must pay the VAT to the tax authorities.

Within the entire European Union (EU), during the whole supply chain for each purchase or sale, companies have to pay or recharge Value Added Tax (VAT) to or from tax authorities. Companies can then reclaim the VAT from the tax authorities as soon as they receive the purchase invoice. In terms of sales, when a sales voice is created, companies have to pay VAT to the tax authorities. However, in some EU countries, such as France, Italy, and Slovakia, under special circumstances companies can only reclaim VAT after paying the purchase invoice, and they only have to pay sales VAT when the customer has paid the invoice. This requires an additional step in the VAT return process and a specific setup of the tax codes, which I’ll show you how to do.

Kees van Westerop

Kees van Westerop has been working as an SAP consultant for more than 25 years. He has an MBA degree in mathematics and a degree in finance. Kees has been concentrating on the financial modules, especially in general ledger accounting, cost center accounting, and consolidation. He also has a great deal of experience with rollouts of kernel systems and integrating finance and logistics.

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