VAT status

VAT status is a key control data item for VAT processing in Procountor. The selected VAT status specifies the type of VAT processing related to the receipt or entry.

For example, various different VAT statuses that guide data into the correct sections of the periodic tax return are related to EU trade. The default VAT status for domestic transactions is "Domestic".

VAT status is mandatory at the receipt header level and optional for entries. If a VAT status has been selected for an entry, it will override the VAT status selected at the header level. If a VAT status is empty for an entry, an entry uses the receipt header level VAT status. 

The process of VAT processing in Procountor can be found here. 

It is possible to automatize VAT processing by using VAT default settings in the management section and setting VAT defaults for business partners and products. By using VAT defaults in management section a company can determine which VAT percentages and statuses are used in Procountor. We recommend to use VAT defaults behind business partners ad products as well. This will automatize VAT processing even more and bring the set defaults to the sales and purchase invoices. 

When both business partner and product has set VAT defaults, the product that had the VAT default will get the products VAT default and the rest of the used products which did not have a set VAT default will get the business partners VAT default. If business partner and product VAT defaults are not set an invoice will get its VAT status based on Procountors own VAT defaults. 

 

 

Used VAT statuses

The default VAT status of accounting pages is "Domestic". Default VAT statuses can be specified for business partners. If the VAT status is other than "Domestic", VAT must not be entered for accounting entries on the accounting page; VAT should be 0%.

 

VAT statuses of sales invoices

The tax due is calculated from journals and the bank statement in addition to sales invoices and reference payments, if the VAT type has been set as Sales on the journal’s and bank statement’s accounting page, and a sales VAT status has been selected on the page.

Adjustments to reference payments reduce the sales tax if the customer has paid less than the due amount. VAT from cash sales is registered as payable tax when the sale is entered as a sales transaction. If a credit loss entry has been made on the sales invoice, this will reduce the amount of due tax regardless of the ledger account on which it has been entered.

More information on entering sales as credit loss.

The default VAT status of accounting pages is Domestic. Default VAT statuses can be specified for business partners. VAT statuses ensure that the information required by regulations are entered on the tax return from all purchase invoices. If the VAT status is other than Domestic, VAT is not entered for accounting entries on the accounting page; VAT should be 0% in these cases.

The following VAT statuses can be used for sales invoices, sales orders and reference payments:

Domestic

The default setting of Domestic is used for all domestic customers regardless of their legal status. Products sold to private EU citizens outside the EU are taxed under Finnish laws, so their VAT status must be Domestic on the sales invoice. The status of goods sold to companies operating in the EU is also Domestic if the customer’s VAT number has not been entered under the business ID of the customer on the sales invoice.

EU, community sales (product) and EU, community sales (service)

These VAT statuses are used for EU community sales. Processing as community sales requires the product or service to be sold to a company within the EU, whose VAT number has been entered under the customer’s business ID on the sales invoice. This data item will also include the sale on the VAT summary notification. The VAT number must be requested from the customer, and the validity of a known number can be checked with the Finnish Tax Administration, but the VAT numbers of companies cannot be requested from it.

0% VAT turnover (previously named EU, non-community sales)

This VAT status is used for those non-domestic transactions (in EU or outside EU) that need to be reported as sales with a VAT rate of zero, in field 309.

EU, tripartite trade

This VAT status is used in connection with the second sale in tripartite trade. Such transactions are not business transactions, but must nevertheless be entered due to VAT regulations. The transaction has a tax rate of zero. Both the Per and an ledger accounts must be entered as the same on the accounting page to keep the transaction from affecting profit. The information of such transactions is included in the VAT summary notification.

Outside of the EU

Use this VAT status to mark sales to outside the EU that will not be reported on the periodic tax return.

Other tax free sales

Use this VAT status to mark VAT-free sales if the purchases related to them are non-deductible. This VAT status used to be reported in field 310 of the periodic tax return, but the field was removed on 1 January 2011, and this information is no longer reported on the periodic tax return. 

No VAT handling

Entrepreneurs that invoice services not liable to VAT (e.g. massage services or the membership fees of associations) on sales invoices, but are nevertheless registered in the VAT register for their other business activities, set the status of such invoices as No VAT handling. The information will not be reported on the periodic tax return.

Construction reverse VAT 25,5%

This VAT status is used to report the sale of construction services and scrap metal falling under the construction industry’s reverse VAT liability.

 

VAT statuses of purchase invoices and journals

The deductible tax is calculated from purchase invoices, travel invoices, bills of charges, journal receipts and payment transaction adjustments (bank statements, purchase invoice adjustments). Journals cannot influence the amount of tax due, unless the VAT type used is Sales. If entries such as credit losses will be entered on the journal, they will increase the amount of deductible tax by default. The end result is the same with regard to VAT due. However, the VAT type Sales selection on the journal’s and bank statement’s accounting page can be used to enter transactions such as taxable cash sales or sales without reference numbers from the bank statement.

The VAT statuses of EU community purchases will determine the tax due for these purchases on the monthly notification. For example, the service calculates 25,5% tax from a purchase invoice marked with the status "EU 25,5%", and this is entered on the tax return under EU product purchases. In such cases, it is important to check that the correct VAT deduction right has been assigned to the purchase invoice (the default value is 100%). No VAT is entered in the actual accounting entry (the percentage is 0, since Procountor automatically calculates the VAT for the notification according to the status). For example, if tax-free spare parts have been purchased from another EU Member State for a company car, the purchase is not deductible. In such cases, the deduction right must be manually set to zero. Procountor also calculates the amount of deductible tax from EU purchases. Normally, the tax due and deductible tax are therefore equal in amount.

The default VAT status of accounting pages is Domestic. Default VAT statuses can be specified for business partners. VAT statuses ensure that the information required by regulations are entered on the tax return from all purchase invoices. If the VAT status is other than Domestic, VAT is not entered for accounting entries on the accounting page; VAT should be 0% in these cases.

The following VAT statuses can be used on purchase invoices, purchase orders, travel invoices, bills of charges, journals and bank statements:

 

Domestic

The VAT status of domestic suppliers is Domestic. The default status of Domestic does not need to be changed even if the supplier is not liable to pay VAT if the entered purchase invoices and payments do not include VAT (e.g. advance tax paid as purchase invoices).

EU 25,5/14/10/0% (product/service)

These VAT statuses are used for community purchases made from EU Member States, so that the percentage of the status corresponds to the product’s/service’s VAT rate in Finland. For example, the VAT status EU 14% (product) should be selected for foodstuffs purchased as a community purchase.

EU 0% (service) information is not included on the periodic tax return.

• If some other VAT deduction right percentage is than 100% is used with this VAT status, an adjustment to account 2930 and to the expense account has to be made. More information about the adjustment is available here.

 

Reversed tax liability 25,5/14/10%

These VAT statuses are used for international service transactions. The amount of VAT is reported both in domestic sales information and as deductible tax.

• If some other VAT deduction right percentage is than 100% is used with this VAT status, an adjustment to account 2930 and to the expense account has to be made. More information about the adjustment is available here.

 

EU, non-community purchase

A purchase made from an EU Member State that does not incur tax liability in Finland. Purchases made within the EU during business trips, for example, which are entered in the accounts are entered as non-community purchases. VAT on such purchases has been levied by the country of purchase and is entered as an expense along with the actual price of the product. The tax is not deductible in Finnish value-added taxation, but a separate return application can be filed with the tax authorities of the country in question.

 

Import 25,5/14/10/0%

These VAT statuses are used with purchases from outside of EU in a way that the percentage of the status is in line with the VAT percentage of the commodity in question in Finland. When VAT statuses of imported goods are used, the information will be included in the tax return fields 304 Import tax outside EU and 310 Product import outside EU.

• If some other VAT deduction right percentage is than 100% is used with this VAT status, an adjustment to account 2930 and to the expense account has to be made. More information about the adjustment is available here.

Outside the EU

Purchases made from outside the EU. Note! If such a purchase incurs a VAT liability during customs clearance, this must be entered according to the instructions. This information is not reported.

No VAT reg.

If the supplier on the purchase invoice being entered is a Finnish corporation/private person not registered in the VAT register, the invoice does not include VAT. Companies must register if their annual turnover exceeds a small-scale operation limit. This information is not reported on the periodic tax return.

Construction reverse VAT 25,5 %

This VAT status is used to report the purchase of construction services and scrap metal falling under the construction industry’s reverse VAT liability. The information of deductible purchases subject to the construction industry’s reverse VAT liability is also reported as deductible tax.

• If some other VAT deduction right percentage is than 100% is used with this VAT status, an adjustment to account 2930 and to the expense account has to be made. More information about the adjustment is available here.

No VAT handling

VAT status of an invoice or a single entry is set to No VAT handling when the purchase in question is not an transaction that should be included at all in the tax return of self-assessed taxes. Therefore, when this VAT status is chosen, no information is transferred to the tax return of self-assessed taxes.

 

Periodic tax return VAT information search

The following table lists the receipt types, VAT percentages and VAT statuses that are included in the calculation of each VAT data item reported on the periodic tax return, as well as the manner in which the reported information is calculated on the basis of the information in the entries.

For example, the field "301 Tax on domestic sales, tax rate 25,5%" is used to report:

• The amount of VAT incurred from entries including sales VAT with rate of 25,5% and VAT status of "Domestic", multiplied by minus one (the sign would be wrong otherwise), and
• The book value of entries including purchase VAT with a VAT status of "Reversed tax liability 25,5 %", multiplied by 25,5%.

 

VAT statuses of purchases with partial VAT deduction right percentage

When Purchase is chosen in the VAT type column of an entry row on a receipt, a VAT deduction percentage can be chosen for the row in the VAT deduction % column. This selection is used to determine the amount of deductible VAT of the row in question. By default, the VAT deduction right percentage is 100, but the default percentage can be changed in VAT defaults view. If some other VAT deduction right percentage (for example, 50%) is added to this view, the given percentage will be visible as a selection in the drop down menu of VAT deduction % column of an accounting entry row.Different VAT statuses of purchases function in slightly different ways compared to each other when a partial VAT deduction percentage is used (in this connection, a partial percentage means any other percentage than the default 100% that is in the settings). The logic of the following examples applies both to situations in which the VAT deduction right percentage is set as zero and to situations in which the percentage is set to, for example, 20, 50 or 70.

 

Domestic status

When Domestic has been chosen as the VAT status for an entry row that is visible in a VAT summary and in a Tax return for self-assessed taxes, and the VAT deduction right percentage of this row is 50%, and the receipt is examined on its’ accounting page,

• the Accounting value column of the entry row includes the whole sum excluding tax
• and the VAT column includes the whole amount of VAT.

This means that even when the VAT deduction right percentage of 50% has been chosen for the row in question, the non-deductible amount of VAT (50%) in the expense account is not seen through the receipt itself. However, if this particular accounting entry is looked through, for example, Accounts and Transactions report, the expense account entry sum in question includes

• both the sum excluding tax
• and the non-deductible amount (50%) of the total VAT.

Therefore, it can be seen that the non-deductible amount (50%) of VAT is included in the original expense account of the accounting entry row in question.

The VAT summary includes the other half (50%) of the total VAT amount of this receipt. The VAT amount is entered to the account 2930. Furthermore, the amount of 50% VAT is included as the deductible and refundable tax. This entry forms an accounting entry row to the accounting page of the Tax return for self-assessed taxes with an amount of 50% of the VAT to the account 2930 (so that the corresponding entry on the VAT summary is cleared) and to the account 2935 (that is cleared later in the future when the returnable amount of VAT is entered to the same account from e.g. bank statement).

 

VAT statuses that need adjustments

If a partial deduction percentage (e.g. 50%) of the previous example is used with the following VAT statuses, the non-deductible amount of VAT has to be added manually to the expense account when creating a Tax return for self-assessed taxes: