Reduction of VAT 2020

The reduction in value added tax (VAT) is a measure to mitigate the economic consequences of the coronavirus crisis, which has taken many by surprise. Many companies have been caught on the wrong foot. They now have to adjust and convert their accounting programmes or ERP systems such as SAP Business One to this measure for six months. It is not yet entirely clear which interventions will make the temporary VAT reduction in 2020 necessary.

Reduction in value added tax - easy?

From 01.07.2020 to 31.12.2020, value added tax (VAT) will be reduced. The rates will go down from 19 to 16 per cent or from 7 to 5 per cent for the reduced VAT rate, only to be raised again from 1 January 2021. What sounds like a simple back and forth is driving some of those responsible for the financial accounting The fact is that there is a lot of potential to make mistakes when applying the VAT reduction. This is because there is a lot of potential to make mistakes when applying the VAT reduction.

Versino Financial Suite for SAP Business One Finance

Which sentence is used when

When you perform is not necessarily always the same as when you do it Performance is invoiced. However, the actual time at which the service is provided is relevant for the correct time of taxation. The correct point in time for taxation is deemed to be

in the case of goods, the time at which delivery begins
or if the recipient of the service obtains the power of disposal over the service/goods (if they are not moved)
For other services, the completion of the service is decisive
that there may be a partial service that can be delimited as such and for which a corresponding agreement exists and for the billing of which a corresponding agreement exists

This alone gives rise to scenarios in which invoices that still have to be converted to 19% after the changeover of VAT to 16%. The reverse case can also occur; there will be invoices in 2021 that are issued with 16% VAT.

Standing invoices and standing orders deserve special attention. However, the treatment of deposits and final invoices. This and much more will need to be clarified with the tax consultant in case of doubt.

Topics of the system change to reduce VAT

Not only the change in the price lists is coming into focus with the changeover to VAT. If necessary, companies should check the following with their tax advisor:

Which new accounts are required?
become new tax code needed?
Which business transactions are relevant for tax purposes?
Are there any processes that are affected by the VAT changeover, even though they started before the change?
Are there interfaces to systems via which the tax is also exchanged?
Are there reports, Excel lists, forms or programs where a tax rate has been hard-coded?
Are there systems in the company that do not consistently obtain their information from centralised data storage (e.g. web shops)?
How will reverse charge and intra-community acquisitions treated?
What special cases exist in the company?

Increased effort for several areas

Lowering the value added tax not only increases the workload due to the temporary changeover of systems in financial accounting. Of course, we must not forget that from next month, every incoming invoice must also be checked for correctly declared VAT.

Solution for SAP Business One

We are working flat out on a solution that will help SAP Business One users to temporarily reduce VAT.

[email-subscribers-form id="2″]

SAP B1 blog