VAT Codes: Applying and Adjusting Modified VAT Rates

Apply Modified VAT

Access Posting Settings

To configure modified VAT:

Navigate to:

Administration > Settings > Postings

Locate the Internal Account dropdown menu
Select the relevant internal account
Apply the required VAT modification

✅ The selected internal account can now use customized VAT handling.

Configure Modified VAT Options

To define which VAT rules should be available:

Navigate to:

Administration > Chart of Accounts

Open the Modified VAT tab
Create or update the VAT configurations that should be available

These settings should correspond to the accounts that require special VAT treatment.

✅ Modified VAT rules are now available for use in Expense.

Track Non-Deductible or Surplus VAT

If part of the VAT amount should not be deducted:

Configure a separate account for surplus or non-deductible VAT
Map the remaining VAT amount to the designated account

This allows:

📊 Accurate VAT reporting
✅ Proper accounting treatment
💰 Clear tracking of non-deductible VAT amounts

Adjust VAT Percentage for Internal Accounts

If specific cost centers or internal accounts require a different VAT deduction percentage, this can be configured directly.

Access Internal Accounts

Navigate to:

Administration > Internal Accounts

Select the relevant internal account type

For example:

Cost Center
Project
Department

Modify VAT Percentage

Open:

Account Codes

Select the desired account code or cost center
Adjust the VAT deduction percentage

Examples:

100% deductible VAT
50% deductible VAT
0% deductible VAT

Save the changes

✅ The selected account will now use the configured VAT deduction rate.

Common Use Cases for Modified VAT

Partially Deductible Expenses

Some expense types only allow a percentage of VAT to be claimed.

Examples include:

🍽️ Representation expenses
🚗 Vehicle-related costs
📞 Mixed private and business use expenses

Industry-Specific Requirements

Certain industries may have special VAT deduction rules that require modified VAT accounting.

Internal Cost Allocation

Different cost centers or projects may use different VAT treatments based on accounting requirements.

✅ Expense allows VAT handling to be tailored to these situations.

Benefits of Using Modified VAT

✅ Improved VAT Accuracy

Apply the correct VAT treatment to every transaction.

📊 Better Financial Reporting

Separate deductible and non-deductible VAT clearly.

💰 Easier Tax Compliance

Reduce the risk of incorrect VAT claims.

⚙️ Flexible Configuration

Customize VAT handling by account, cost center, or internal account.

💡 Best Practice Tips

✅ Review VAT settings with your finance team before implementation
📊 Verify VAT percentages for all internal accounts
💰 Create dedicated accounts for non-deductible VAT
🔍 Test VAT exports before month-end processing
📄 Document any special VAT configurations for future reference

Frequently Asked Questions (FAQ)

What is Modified VAT?

Modified VAT allows you to apply custom VAT deduction percentages instead of using the standard VAT treatment.

Where do I configure Modified VAT?

Navigate to:

Administration > Chart of Accounts > Modified VAT

Can different cost centers use different VAT percentages?

Yes. VAT percentages can be configured separately for individual account codes and internal accounts.

What happens to non-deductible VAT?

It can be allocated to a dedicated account for accurate accounting and reporting.

Is Modified VAT useful for representation expenses?

Yes. Modified VAT is commonly used for representation and other expense types with limited VAT deductibility.

Summary

✅ Configure Modified VAT via Administration > Chart of Accounts
📊 Apply VAT adjustments to specific internal accounts
💰 Track deductible and non-deductible VAT separately
⚙️ Adjust VAT percentages for cost centers and account codes
📄 Improve VAT compliance and reporting accuracy
🚀 Gain greater flexibility and control over VAT handling in Expense