Reverse charge sales tax in Germany

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Posted on by Natalia Aquarius

Hi , First i want to ask question in this thread https://community.dynamics.com/ax/f/microsoft-dynamics-ax-forum/258944/reverse-charge-sales-tax but then I decided to create new thread for this question.

When Germany company buys goods from other EU country company, there are no sales tax transactions,that decrease the Germany company vat debt. is it correct?
we have" use tax" check box enabled for all codes for group Ap-EU. ( Account payable EU)
So we have get the following transactions when Germany company buys goods from other EU country company
1. Main account "Use tax Expenses "( "Use tax Expenses " from ledger posting group) 190
2. Main account " use tax Payable" ( " use tax Payable" from ledger posting group) -190 (as percent from sales tax code from base amount)
3. Main account " Finished Goods Inventory "
4. "Main account AP" -1000
Are they correct transactions? they do not decrease the Germany company vat debt,what it should pay to tax authorities?

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Ludwig Reinhard Microsoft Employee on at

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RE: Reverse charge sales tax in Germany

[quote user="Anna Aquarius"]When Germany company buys goods from other EU country company, there are no sales tax transactions,that decrease the Germany company vat debt. is it correct?[/quote]
That is correct provided that you have all documentation and VAT registration numbers recorded and in place. If this is not complete - let's say a foreign VAT number from the vendor in Italy/France... is missing - then the transaction is actually not tax free. Yet, in almost all circumstances companies ensure that those prerequisites are fulfilled.
[quote user="Anna Aquarius"]Are they correct transactions? they do not decrease the Germany company vat debt,what it should pay to tax authorities? [/quote]
The first transaction is not correct. For No 1 and No 2 we use balance sheet accounts. That is because of the following:

When you purchase goods from another EU country you generally have to pay VAT. Therefore, you have the posting No 2 where you record a VAT liability. Yet, once you are able to prove that all documentation and VAT numbers are in place you are allowed to deduct the VAT and treat it tax free. Therefore, we need another balance sheet posting on a tax 'receivable' account for No 1. As the amounts No 1 and No2 offset each other, there is basically no tax.

Even though, we need to make the debit and credit posting because of reporting and audit reasons.

If I am not wrong then the tax configuration in the MS Contoso DEMF company is correct and in line with the German tax rules. Just try to get a hold on such a system and create some test postings.

Best regards,

Ludwig

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Natalia Aquarius 79 on at

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RE: Reverse charge sales tax in Germany

Thanks a lot for your answer.

1. I think i have correct setting and transactions for the case when Vat registered company in Germany buys from other Eu country Vat registered company. or something is incorrect?

Vend invoice journal

sales tax croup

sales tax code

ledger posting

General ledger posting of vendor invoice

2. for the case when Vat registered company in Germany buys from other Eu country not Vat registered company :

I should use other sales code in groups Ap-EU, FULL which will have other ledger posting with other accounts for Use tax expenses, use tax payable?

Because in this case this vat increases Germany company vat debt to tax authorities, and Germany company should pay it. is it correct?

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Natalia Aquarius 79 on at

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RE: Reverse charge sales tax in Germany

Hi Ludwig,

Could you clarify your answer?
you wrote
"When you purchase goods from another EU country you generally have to pay VAT. Therefore, you have the posting No 2 where you record a VAT liability. Yet, once you are able to prove that all documentation and VAT numbers are in place you are allowed to deduct the VAT and treat it tax free. Therefore, we need another balance sheet posting on a tax 'receivable' account for No 1. As the amounts No 1 and No2 offset each other, there is basically no tax.

Even though, we need to make the debit and credit posting because of reporting and audit reasons."

So it is incorrect transaction when Germany vat registered company buys goofs from another EU country vat registred company?

1. Main account "Use tax Expenses "( "Use tax Expenses " from ledger posting group) 190
2. Main account " use tax Payable" ( " use tax Payable" from ledger posting group) -190 (as percent from sales tax code from base amount)

it is posting according standard setting for AP-EU in Demf with turn on "Use Tax ".

Thanks in advance

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