Example: Posting Non-Deductible Input Tax
You have to post an incoming invoice to the sum of USD 1,200. The tax amount of USD 200 (20 percent) comprises 12 percent input tax (USD 120) and a non-deductible portion of eight percent (USD 80). You can now post the non-deductible portion to a separate account (see the following figure, example A) or distribute it to the G/L account and asset line items (see the following figure, example B).
If the whole input tax amount is non-deductible, no input tax posting is made; the non-deductible input tax can be posted to a separate account (see the following figure, example C) or be distributed between the G/L account and asset line items.