Input Tax Correction

Purpose

If the basic factors for an input tax deduction change after the deduction was already made, then German tax law requires that you correct the originally deducted input tax within a set time period. This is regulated by paragraph 15a of German sales tax law .

This component assists you in correcting the input tax by helping you to:

  • Decide if a posting is relevant for input tax correction

  • Determine the documents and line items that are relevant for the correction

  • Calculate and post the correction

Integration

You can execute input tax correction only for postings, for which input tax was distributed .

Features

If the actual use of an asset differs from the planned use that was the basis for the input tax deduction, then you are required to correct the input tax. The length of the correction is dependent on the type of asset, with ten years as the maximum.

The system proceeds as follows to correct the input tax records:

  • Input Tax Distribution

    The input tax distribution is made based on the planned use. The determining factor is the option rate at the time of service.

  • Input Tax Correction

    Input tax correction takes place for the first time after the start of actual use of the asset. The input tax is corrected dependent on the change in the option rate. This means that over a time period of up to ten years, the system posts the proportional difference between the actually deducted input tax and the input tax that is really deductible based on the current option rate.

    Note Note

    For more information on the procedure, see Executing Input Tax Corrections .

    End of the note.

Overview of Input Tax Correction:

The Information System also offers various reports for analyzing data relevant for input tax correction.

Constraints

The system automatically records the relevant line items for the input tax correction, along with their tax amounts. However, for some posting activities relevant for input tax correction, the system cannot determine the tax amounts automatically. Therefore the user has to make the decision. These activities include asset transactions (such as transfers and asset retirements), as well as CO settlements. In such cases, you sometimes need to enter manual input tax correction basis records, or you might need to make additional entries for values recorded by the system (see Executing Input Tax Correction for Assets ).

Postings to settlement units are always excluded from input tax correction.

The system is not able to reflect partial purchase price payments.

Example

For a sample calculation, see Example: Input Tax Correction .