Process documentationClosing for VAT on Assets

 

When you carry out your closing activities at the end of each month, for statutory reporting and tax reporting, you must ensure that your VAT accounts are up to date.

There are certain conditions that you must fulfill before you can offset VAT on purchases of assets:

  • You can only offset the VAT on the purchase of an asset after you pay the vendor’s invoice and capitalize the asset.

  • You can also offset the VAT on materials and services that go into the construction of assets for your own use. Again, you can only offset the VAT when you have paid the vendors’ invoices and capitalized the asset.

In both cases, if you capitalize an asset but only pay part of an invoice, you can offset the VAT in proportion to the amount of the invoice that you have paid.

In order to verify in the system that you have fulfilled these conditions, you proceed as described in the following.

Prerequisites

You have posted asset acquisitions as described in Purchase of Fixed Assets and Construction of Fixed Assets.

Process

  1. You execute the Deferred Tax Transfer program.

    The program transfers the VAT on all invoices that have been paid from the deferred VAT accounts to accounts for VAT on assets that you have paid for, but not capitalized. It posts the VAT under a new tax code, as follows:

  2. If necessary, you run the Redetermination of Invoices for APC report.

    You need to run this report if you have:

    • Changed an asset’s asset type in the IMG activity Maintain Asset Types

    • Changed the tax codes in the IMG activity Define Tax Codes for Input VAT on Assets

    For more information about both IMG activities, see Customizing for Automatic Tracking of Invoices for APC.

    This report updates the entries made for invoice items for assets, or materials and services used in the construction of your own assets, according to the new Customizing settings.

  3. If necessary, you run the Verification of Additional Costs for Assets report.

    You need to run this report if you posted any costs originally to a WBS element, network, or CO order without assignment to an asset under construction, and then transferred these costs to another WBS element, network, or CO order that is assigned to an asset under construction.

  4. You check whether the materials that you have purchased for use in the construction of assets have actually been used for these purposes.

    To do so, you run the Validation of Goods Issues report. The report checks the intended and actual usage of all material issues, to enable the Secondary Events program to change the tax postings if necessary (see step 6).

  5. You verify which invoice items were used in assets, using the Verification of Invoice Items Related to Capitalized Assets report. The report sets each asset’s secondary event date.

    Note Note

    If you have acquired any assets that you need to register with the state, this report blocks the VAT on these invoices pending registration. You then register the assets as described in Registering Assets. After that, run the Verification of Asset Registration report to verify that you have done so. This report releases the VAT again.

    End of the note.

Result

You can now run the Secondary Events program to transfer the tax from the accounts for VAT on assets that you have paid for, but not capitalized, to accounts for VAT on assets that you have paid for and capitalized. It creates the following document:

You can then prepare your VAT return (see Preparation of VAT Returns).