This article contains instructions for specifying the required settings regarding the processing of construction industry's reversed tax liability in Procountor.
Enabling VAT status Construction reverse VAT 24%
- In Management > Accounting info > VAT defaults, VAT status Construction reverse VAT 24% can be seleted for both sales and purchases.
- Once the VAT status has been enabled in VAT defaults, it can be selected as receipt or entry level VAT status on the receipts’ Accounting view.
- In Business partner register, the VAT status can be set as the default status to be used on a business partner. Default VAT status is set on the business partner’s Default accounts view.
Creating an invoice
In a situation where reversed tax liability is applied to the sale of construction services, the seller provides the buyer with an invoice containing the normal invoice information. However, the tax rate or amount of tax are not specified on the invoice.
- Additionally, the invoice must include the buyer’s VAT number (business ID for Finnish buyers) and a clause stating that the buyer is liable for the tax.
- Either the grounds for the buyer’s tax liability, or a reference to Section 8c of the Value Added Tax Act or to Article 199 of Council Directive 2006/112/EC is added to the invoice.
- The clause can be added as a default information to a business partner in business partner register’s Basic info view’s Additional default information, sales invoice field, from which it will be automatically fetched to invoices created for that business partner.
- If all of the company's sales are subjet to construction service' reverse VAT, the clause can be added as a general default to Usage settings' Additional default information, sales invoice field.
Fields on the tax return for self-assessed taxes
On the tax return for self-assessed taxes, there are separate fields for sales and purchases subject to construction services’ reverse VAT:
- The seller reports sales subject to construction services’ reversed VAT in field 319
- The buyer reports purchases subject to construction services’ reversed VAT in field 320.
- The buyer calculates the amount of tax payable based on tax rate 24% and reports it in field 318. For the part that is deductible, the buyer calculates the amount of tax decuctible based on tax rate 24% and reports them as tax deductible in field 307.
Further details on the fields of the tax return affected by the construction industry’s reverse tax liability are available here.
Handling of a purchase invoice with reverse construction VAT and partial deduction right
If a purchase invoice that is subject to construction industry’s reversed VAT has been received to Procountor, but the construction company doesn’t have deduction right and the VAT amount needs to be entered as an expense to same month as the purchase invoice, these kinds of situations can be handled for example as described below:
Invoice sum is EUR 10.000,00. The invoice has the following entries by default:
- Expense account D EUR 10.000,00, VAT status: Construction reverse VAT 24%, VAT deduction %: 0%
- Accounts payable C EUR 10.000,00, VAT status: No VAT handling, VAT deduction %: 0%
Since the VAT of the invoice has to be posted as non-deductible expense, the following entries are added to the invoice. The first one of these entry rows is used to adjust the automatically created entry to account 2930 on Tax return of self-assessed taxes:
- Account 2930 C EUR 2.400,00, VAT status: No VAT handling, VAT deduction %: 0%
- Expense account D EUR 2.400,00, VAT status: No VAT handling, VAT deduction %: 0%
On Tax return for self-assessed taxes, the sum fetched into field 320 will be EUR 10.000,00 and the sum fetched into fields 308 & 318 will be EUR 2.400,00. More detailed information about the necessary VAT adjustments as described above can be found from this manual article. Also, the transaction entered manually on account 2930 needs to be taken into consideration separately in Balance sheet itemisation.