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Process documentation Calculation of Provisional Value-Added Tax Locate the document in its SAP Library structure

Purpose

In Colombia, there is a special procedure for calculating input value-added tax (VAT) where it is not clear what the purchased goods (or services) will be used for exempt or excluded goods or not. This procedure is known in Colombia as transitorio.

Process Flow

  1. If, when you purchase goods (or services), it is not clear whether they will be used to produce goods that are liable to VAT or not, you post them using the appropriate tax codes for provisional VAT.

    2. With these tax codes, the system posts the net cost of the goods to an inventory account and the tax to a special account for provisional VAT. All provisional VAT is recorded in a single account.

  2. At the end of the reporting period, you determine what percentage of your sales were liable to tax (this includes zero-rated exports), as distinct from exempt or excluded sales.

    3. To do this, you use the Additional List for Advance Return for Tax on Sales/Purchases report to look up what percentage of your sales amounts were posted using the appropriate tax codes (A1, A3, and A4).

  3. You determine how much provisional VAT you have posted during the reporting period.

    4. To do this, you use the Structure link Advance Return for Tax on Sales and Purchases report, entering the appropriate tax codes for provisional VAT.

  4. You calculate manually how much of the provisional VAT is due to be paid by multiplying the total provisional VAT posted (the amount from step 3) by the percentage of sales that were liable for tax (from step 2).
  5. You post this amount to your VAT liability account, and the remainder to an expense account.
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