Entering content frame

Function documentation VAT Pro-Rata Adjustment Locate the document in its SAP Library structure

Use

Companies or institutions with ‘mixed businesses’ (that is, companies that carry out both operations that are subject to VAT and deductible, as well as operations that are tax exempted and/or not deductible) can only deduct VAT at a percentage corresponding to the volume of deductible operations. These companies therefore have to apply the pro-rata VAT method in order to determine tax deduction.

The pro-rata VAT method consists in applying a coefficient to the legal deductible VAT rates for acquisitions. This coefficient is updated periodically and the one to be applied in the current period is the actual rate calculated at the end of the previous period. At the end of the current period, a new pro-rata coefficient is calculated, which may be different to the one applied. In this case, an adjustment correction document has to be posted with the difference between the two coefficients.

Furthermore, for asset acquisitions, it may also be necessary to calculate the difference between the pro-rata coefficient of the acquisition year and the coefficient of the following years. In this case, an adjustment variation document has to be posted for assets with the difference between the coefficients divided by the number of years for which this variation has to be calculated, as defined by local legislation.

The VAT Pro-Rata Adjustment solution enables companies to meet these requirements, by providing functions to:

·        Register the VAT pro-rata coefficient

·        Apply the VAT pro-rata coefficient when posting an invoice acquisition

·        Calculate the difference between the applied coefficient on the posted invoice and the periodic or annual pro-rata execution coefficient, and post an adjustment correction document

·        Calculate the difference for asset acquisitions between the DPR (definitive pro-rata percentage) of the acquisition year and that of the current year, and post an adjustment variation document

 

For more information, see Pro-Rata Adjustment due to PR Calculation and Pro-Rata Adjustment due to PR Variation.

Leaving content frame