Show TOC

 Deferred Taxes in Business Transactions Locate this document in the navigation structure

Purpose

Deferred taxes are not recognized immediately you issue an invoice to a customer. They are only recognized when the customer pays. The same applies to invoices that you receive from vendors: Deferred taxes are only recognized when you pay.

If a payment is made for part of the invoice amount, the deferred tax is recognized in proportion to the amount paid. For example, if you pay a third of the gross invoice amount, a third of the tax is recognized.

When you post documents with deferred tax items, follow the procedures described in Document Posting .

The process in Accounts Receivable (FI-AR) is illustrated below. The same principles apply to Accounts Payable (FI-AP).

Process Flow

  1. An accounts clerk enters a customer invoice, using a deferred tax code.

    The system generates an accounting document to record the receivable. For example, assume that you have sold EUR 100,000 of goods to Leon Industries. The system posts the following document using the deferred tax code B2:

    ( )

  2. The customer pays the invoice, and the clerk records the payment as follows:

    ( )

  3. The accounts clerk transfers the deferred VAT to the normal VAT accounts.

    The system generates an accounting document that clears the tax from the deferred VAT account and transfers it to the target tax account (the normal output VAT account):

    ( )

    The new VAT item has a target tax code, V1.