Annual Recalculation of Tax Liabilities

The annual recalculation of VAT is required for those who have both taxable and non-taxable income. Such taxpayers calculate compensating VAT liabilities and then perform their adjustment, i.e., the recalculation of VAT at the end of the year.

Required Settings

Before performing the annual recalculation of tax liabilities, ensure that all necessary settings are in place. Specifically:

1. On the Adjustment Reason page, create a reason with the appropriate code and Adjustment type as Adjustment Consolidation. For more details on setting up Adjustment reasons, refer to VAT Accounting Setup.
2. On the VAT Posting Setup page, in the intersection of the VAT business group for compensating tax liabilities and VAT item groups, fill in the accounts in the G/L Account for annual VAT recalculation (Revenue) and G/L Account for annual VAT recalculation (Costs) fields.
3. On the VAT Declaration Lines Setup page, create settings for the corresponding VAT declaration Application.

Performing the Annual Recalculation

1. On the Tax Periods page, fill in the Annual VAT Allocation Ration field for all months of the reporting period.
2. To determine the utilization ratio, go to the VAT Declaration List page and open the relevant declaration. Then click on Fill Application 6 > Table 1 (calculate) > 3.1.
3. On the Application 6 tab, the VAT Allocation Ration field will display the calculated percentage, which is the ratio of the volume of taxable supplies (excluding VAT amounts) for the previous calendar year to the total volume of taxable and non-taxable supplies (excluding VAT amounts) for the same previous calendar year.
4. Enter the calculated percentage value as a whole number in the Annual VAT Allocation Ration field on the Tax Periods page for all months of the reporting period.
5. Next, run the periodic task Annual Recalc VAT Obligation.
6. Click the button, which will open the Search function, and enter Annual Recalc VAT Obligation to access the corresponding link.
7. In the report request window, specify the period for recalculation and the VAT business group for compensating tax liabilities.
8. The system will create adjustment calculations for all aggregated tax invoices with the specified VAT business group.
9. Set the Registration Confirmed flag and post all created adjustment calculations.
10. Then, go to the VAT Declarations page and click on Fill Application 6 > Table 2. The created adjustment calculations will populate the rows of the Application.
11. To export the Application to XML, click Actions > Export Application 6 to XML.

Useful Links

VAT Declaration Setup
Creating a VAT Declaration
VAT Accounting Setup
Compensating VAT Invoice