Dynamics Community Forum Thread Details

Hi,

I’m working in D365 Finance and looking for a way to defer both cost and VAT over several periods, for example in the case of prepaid rent covering a quarter.

In Sweden, VAT may only be deducted in the period to which the cost actually relates (e.g. rent for Jan–Mar must have VAT split across those three months).

The default functionality in D365 allows me to accrue the cost using an accrual scheme, but VAT is posted entirely in the invoice period.

Is there any built-in or recommended way to also defer the VAT together with the cost, to comply with Swedish VAT reporting rules?

I would appreciate any guidance, ideas, or workarounds (custom or standard).

Thanks in advance!

Categories:

Dynamics 365 Finance

In standard Dynamics 365 Finance, VAT is recognized at the time of posting the vendor invoice, not when the related expense is accrued over future periods. This behavior does not align with Swedish VAT requirements, where VAT must be deferred and recognized in line with the cost (e.g., monthly rent accruals for a quarterly prepayment).
Since there is no out-of-the-box functionality in D365 Finance to automatically defer VAT along with expense deferrals, a custom solution or process workaround is required. Below is a structured solution approach:

✅ Recommended Solution: Custom VAT Deferral Mechanism

1. Use Accrual Schemes for Cost Deferral

You’re already using this. Continue applying accrual schemes to spread the cost (e.g., prepaid rent) across applicable periods.

2. Block VAT Deduction at Invoice Posting

Prevent the VAT from being deducted upfront:

Set the VAT code to “non-deductible” temporarily on the vendor invoice posting.
This can be handled by creating a custom VAT code or setting that prevents VAT deduction until it's reclassified.

Alternatively, you can modify the posting profile or create a separate ledger account where this "blocked" VAT amount is temporarily held.

3. Custom Journal Process for Monthly VAT Recognition

Create a recurring general journal process to:

Reverse the temporarily blocked VAT amount monthly.
Post deductible VAT entries in line with the cost accrual schedule.

Journal Template:

Date	Debit (Account)	Credit (Account)	Description
2025-01-31	VAT Input Deductible	VAT Input Blocked	Month 1 VAT recognition
2025-02-28	VAT Input Deductible	VAT Input Blocked	Month 2 VAT recognition
2025-03-31	VAT Input Deductible	VAT Input Blocked	Month 3 VAT recognition

Use recurring journals or a custom batch job to automate this monthly VAT deferral.

4. Custom Validation or Workflow (Optional)

Consider adding a workflow or validation rule on AP invoice posting to:

Automatically assign the "blocked VAT" code for relevant transaction types (e.g., prepaid rent).
Alert users to follow the deferral process.

⚙️ Alternative: ISV Solutions or Customization

If VAT deferral is a frequent and compliance-critical process, consider:

Customizing the invoice posting logic to integrate VAT with the accrual engine (complex but scalable).
Using an ISV add-on tailored for Nordic or Swedish VAT requirements. Some localization partners offer industry-specific compliance solutions.

Summary

Requirement	Standard D365	Custom Needed
Cost deferral	✅
VAT deferral with cost	❌	✅
Swedish VAT compliance	❌	✅

To fully comply with Swedish VAT law, a custom VAT deferral mechanism—either via recurring journals or customization—is necessary. This ensures VAT is recognized in the same periods as the accrued cost.
Let me know if you'd like a sample journal setup or help with designing a custom posting profile or workflow.

Community site session details

Deferring VAT with cost accrual in D365 Finance – Swedish compliance

✅ Recommended Solution: Custom VAT Deferral Mechanism

1. Use Accrual Schemes for Cost Deferral

2. Block VAT Deduction at Invoice Posting

3. Custom Journal Process for Monthly VAT Recognition

4. Custom Validation or Workflow (Optional)

⚙️ Alternative: ISV Solutions or Customization

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Community site session details

Deferring VAT with cost accrual in D365 Finance – Swedish compliance

✅ Recommended Solution: Custom VAT Deferral Mechanism

1. Use Accrual Schemes for Cost Deferral

2. Block VAT Deduction at Invoice Posting

3. Custom Journal Process for Monthly VAT Recognition

4. Custom Validation or Workflow (Optional)

⚙️ Alternative: ISV Solutions or Customization

Summary

Helpful resources

News and Announcements

Quick Links

Responsible AI policies

Neeraj Kumar – Community Spotlight

Congratulations to the November Top 10 Community Leaders!

Subscribe to this forum!

Select categories

Leaderboard > Finance | Project Operations, Human Resources, AX, GP, SL

Featured topics

Product updates