Value-Added Taxes: Partially Deductible VAT

In some countries, certain VAT-registered companies are allowed to deduct a part of the tax paid to a vendor on purchases from their own VAT liability to the government. This type of VAT is called a partially deductible VAT. The deducted amount is claimed from the agency, while the non-deductible tax amount is recorded as expenses.

To partially deduct the tax amount, you need to configure a VAT of the partially deductible type. To configure the Partially Deductible VAT, on the Taxes (TX205000) form, you select the VAT tax type and the Partially Deductible VAT check box. After that, the appropriate boxes required for configuring a partially deductible VAT appear on the form. You specify the deductible rate in the Deductible Tax Rate column, so that in a document, the tax amount to be paid to a vendor is calculated based on the tax rate, and then this amount is multiplied by the deductible tax rate to get the amount that can be claimed from the tax agency.