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VAT on Margin Scheme

Hi Experts,

I need to understand VAT configuration on margin scheme. How to determine VAT on profit margin for example:

Purchase Price: 1000

Selling Price: 1500

Profit: 500

VAT: 5% on Profit margin.

Now this seems to be very straight forward but issue is there could be multiple scenarios on that for example selling price is less than the purchase price this means margin will go -ve due to which VAT is not applicable similar the case with "zero" margin. I don't see too much on SAP forums if someone has gone through this process please help me to understand this.

Regards,

TK

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3 Answers

  • Posted on Oct 15, 2019 at 08:06 AM
    for example selling price is less than the purchase price

    My first question would be why you want to sell at below cost?

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  • Posted on Oct 15, 2019 at 10:19 AM

    I would recommend discussing the requirement further with the business (please make sure to involve the Finance and Controlling department, probably also the Legal department). They should know how exactly they wish to handle such cases. In most countries selling below purchase price is allowed only in very specific cases and there may be special treatment of such transactions from tax perspective.

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  • Posted on Oct 16, 2019 at 05:31 PM

    Thanks Lakshmipathi & Veselina

    There could be due to special discount given to customers.

    Another scenario is there is one material code which is when sold VAT(5%) should be calculated on profit margin, but next time the same material is sold then VAT(5%) will be on net value. (This difference is created at the time of purchase.) How can we differentiate both the cases. Do we have to create separate pricing procedure for both the cases? or is there any SAP standard procedure of handling this situation.

    Regards,

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    • OK, here is a hint: imagine that you have 5 apples (which look identical) that you bought from 3 different stores.

      If you want to give 2 apples to your kids how will you know from where you bought each of these 2 apples?

      By the way maybe you forgot the case where you can sell the same product but part of it you need to have with VAT on margin and the rest with VAT on net value. :)

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