VAT ON PURCHASE INVOICES

Purchase invoice VAT (input VAT) is calculated on the purchase invoice rows according to the VAT code and, on confirmation, posted to the account taken from the VAT code or from the system settings. The purchase invoice reaches the VAT declaration (KMD) and part B of VAT return INF1 (KMD INF B) through the financial transaction.

This page covers the basics of checking purchase invoice VAT, recording it in a separate period and reporting it in part B of VAT return INF1. Details on setting up and declaring VAT can be found on the page VAT and VAT declaration.

VAT codes and accounts

• VAT codes – determine the VAT rate and posting of the purchase invoice row and the row of the VAT declaration the transaction goes to. Set up in: Settings → Finance settings → VAT codes.
• Purchase VAT – input VAT account used when the corresponding account cannot be found in the PURCHASE VAT ACCOUNT field of the VAT code. Set up in: Settings → System settings → Purchase settings.
• VAT sum splitted in purchases – determines whether and based on what criteria (object+project, rows, object) the VAT amount is distributed on the purchase invoice transaction. Set up in: Settings → System settings → Finance settings.
• Purchase VAT object – object used on the VAT row when VAT distribution is based on object+project or project and the VAT code has no object. Set up in: Settings → System settings → Finance settings.
• Reverse charge – a separate VAT code is created for purchases subject to reverse charge. It does not increase the amount of the invoice to be paid, but adds VAT rows to the purchase invoice transaction.

See also: VAT related system settings.

Supplier card

For VAT and part B of VAT return INF1 to be compiled correctly, the following fields must be filled in correctly on the supplier card (see Customer and supplier settings):

• VAT zone – determines the supplier's VAT zone and, through it, the automatic selection of the VAT code.
• Country – part B only includes invoices of suppliers whose country is EE or empty.
• Type – part B includes invoices of suppliers with the type “Company” or “State institution”. Invoices of suppliers with the type “Private” are not included in part B.
• Reg no – the supplier's registration number, which is required for submitting VAT return INF1.

The system can check on each purchase invoice row whether the entered VAT amount matches the amount calculated according to the VAT code. The check helps to find input and e-invoice import errors before the invoice is confirmed.

The level of the check is determined by the setting Settings → System settings → Purchase settings → Check VAT amount on purchase invoice lines for compliance with VAT code.

• No – no check.
• Yes – an error message is shown on saving, but the invoice can be confirmed.
• prohibits confirming – an error message is shown on saving, and the invoice cannot be confirmed until it is corrected.

For a VAT code with partial deduction, the Orig. VAT field is checked.

Example. VAT code 24% and the VAT field value differs from the calculated value.

The setting is Yes, i.e. the message is shown on every save, but the invoice can be confirmed:

Example. VAT code 24%, partial deduction of input VAT and the VAT field value differs from the calculated value.

The setting is prohibits confirming, i.e. the message is shown on every save and the invoice cannot be confirmed until it is corrected.

The setting Settings → System settings → Purchase settings → Purchase invoice VAT has a different date enables VAT to be calculated on the purchase invoice in a different time period than the purchase invoice expense.

• No (default) – VAT is recorded on the date of the purchase invoice transaction (Op. date).
• Yes – the VAT Date field is available in the GENERAL INFO section of the purchase invoice, and VAT is recorded according to it.

When to use

The expense belongs to the period in which the goods or services were received, but input VAT may only be deducted in the period in which the supplier's invoice is available. The input VAT of an invoice received later is declared in the VAT declaration (KMD) and VAT return INF1 (KMD INF) of the month in which the invoice was received. Under the cash accounting scheme, the month of payment is decisive.

Setup

• Set the setting to Yes.
• On the VAT code card, enter the VAT clearing account in the Corr. account field.

How the transaction is created

• On the Op. date, the expense is posted to the expense account and the VAT amount to the clearing account.
• On the VAT Date, VAT is transferred from the clearing account to the input VAT account.
• In the VAT declaration and in part B, the purchase invoice is reported in the period of the VAT Date.

Example. The expense is in September, but the invoice was received and is paid in October Purchase invoice:

Transaction:

The purchase invoice is reported in the October VAT declaration and the expense in September.

Which purchase invoices are included in part B

Part B is generated from purchase invoices that meet all the following conditions:

• the Op. date of the purchase invoice falls within the period of the VAT report. If the purchase invoice VAT has a different date, the VAT Date is used;
• the financial transaction of the purchase invoice contains an input VAT account that is marked in the VAT report configuration in the Extra field with option B;
• on the supplier card, Type is “Company” or “State institution” and Country is EE or empty;
• the total of the supplier's purchases in the period is equal to or greater than the limit set in the system settings.

The total is summed based on the supplier code (NB! not on the basis of the reg. code). Invoices with positive and negative totals are added separately. If any such amount exceeds the limit, all invoices of the respective supplier are presented on part B.

Part B is based on the account and date in the financial transaction of the purchase invoice, not on the original document. Do not change the date of the purchase invoice transaction without changing the Op. date of the purchase invoice, otherwise part B may not correspond to the main part of the VAT declaration.

Read more: Setup and Report generation.