VAT/TAX on supplier Invoices

[Former Member]

Hi,

This is a really technical question but when an invoice is received from a supplier in a foreign country with local vat/tax which is not recoverable for the purchasing country(i.e us as we are not vat registered in that country e.g china) how do you book the invoice into SAP so that VAT and costs are correctly reflected as per the supplier invoice but the VAT is expensed to the same P&L account as the cost of item purchased (i.e it is an actual cost to the company as non-recoverable).

For example, we purchase £100 worth of business cards e in china+local vat = £120. The accounting entries should be as follow

DR Office expenses £120

CR: Payables £120

The supplier invoice should show £100 as cost and £20 as vat in sap.

Jay

[marlene_katzschner · Accepted solution]

Hello Jay,

if you enter the invoice with the tax code, then the tax gets posted to "Deductable Input Tax - other countries", which is displayed in the balance sheet.

If you like to enter the costs to the P&L instead, you can either enter the gross values and select "001 - Purchase out of scope" -> No Tax is displayed at all!

Or you enter the invoice with the tax and decide by end of month if you repost the tax to the product with a posting. (Use for this posting Tax Management -> Manual Tax Entries).

But there is no automatic handling here for the decision: Tax Declaration or VAT Refund or Posting to P&L.

Best regards

Marlene

[lokesh2]

Hi Jaydeep,

In supplier invoicing work center, we have something called as 'New Customes Duty Invoice' for booking Import VAT..but whatever you enter there is taken as 100 % VAT.

Can you try this if it works for you.

Thanks

Lokesh Sharma

[Former Member]

Hi,

Customs duty invoice is not what I am after.

In the real world - you raise a purchase order e.g £100 net for a foreign supplier. Sometimes you are registered for vat/tax purposes in that country to recover VAT and sometimes you are not. In the instance where you are not - VAT is a real cost for the business i.e is reflected as a cost in the P&L as the VAT on purchases cannot be recovered.

Therefore, the VAT on the invoice needs to be booked into P&L and not VAT accounts. The same principle applies when raising a purchase order.

Jay