Scenario: Input Tax Processing 

Purpose

In accordance with German law, this scenario calculates the input tax revision using the rates that are obtained in the framework of the rental process; the legal requirements of §9 German law (input tax opting for rental and leasing of Real Estate objects that are subject to commercial law).

If you exercise this preemptive right, you can then carry out input tax processing in RE for

An input tax deduction and a reduction of the tax burden can be made using the input tax processing; this takes into consideration the changing financial conditions - i.e. the transaction between private and commercial usage of rental properties.

Prerequisites

Settings in Real Estate Customizing

Affected company codes are selected for the input tax opting and, when the fixed assets have been taken into account (costs to be capitalized), the indicator for active asset accounting must be set.

Process Flow

  1. Determining the output tax

    2. Output tax due within the framework of rental and leasing turnover is automatically kept separate during posting procedures via tax codes that also have to be maintained. You can decide here whether the output tax is to be posted at the time of the debit position or at the time when the incoming payment is to be booked.

  2. Recording the costs

    3. The costs due are posted as documents with the deductible input tax: the accountant can define the target account assignment:

    1. that also lists in correction items in the component asset accounting (FI-AA) the costs to be capitalized that affect the fixed asset; the value flow is guaranteed via the allocation of the asset to the real estate object.
    2. which lists the costs that can be apportioned to the tenant on the settlement unit.
    3. non-apportionable and costs that do not have to be capitalized can be listed under the objects concerned.
  3. Determining the deductible input tax

    4. The distribution of the input tax into a deductible and non-deductible part is made taking into account the changing financial conditions (commercial/residential lease-outs) of the current account assignment objects. Whereas deductible input tax can be balanced against output tax, non-deductible input tax is:

    1. distributed between private usages for apportionable operating and service costs. This is done automatically via the service charge settlement.
    2. activated, in the case of expenses subject to activation in Asset Accounting (FI-AA).

Changes in the usage of the asset lead to corrections in Asset Accounting. The system takes (in this scenario, German) legal requirements into account.

Deductible and non-deductible input tax are posted to accounts set in Real Estate Customizing.
  1. Displaying the tax burden

The tax burden is displayed in the advance return on tax in the Financial Accounting. This balances the posted output tax with the deductible input tax in periods that can be freely defined.