DISCLAIMER
The team at Link My Books are happy to provide users with technical assistance in applying tax rules to their Link My Books setup. We are not Tax Advisors and so our advice and suggestions on the application of tax rules cannot be construed as tax advice. We highly recommend that users seek advice from qualified accountants for their tax compliance.
Non UK VAT expenses
This article is written from the perspective of a UK based business.
In this article we will use Germany as an example.
So you’ve purchased an item in Germany to be delivered to a German address; item is bought for €119 euros (including 19% German VAT rate). Item is classed as stock and will be sold within the EU market under the PAN EU scheme.
Your EU VAT provider such as hellotax, Avalara or Taxually etc. should have included the expense on your German VAT return. But when you come to accounting for the VAT reclaimed (the €19) from this purchase, how do you do it?
To account for this transaction in QuickBooks or Xero in order for it to reflect accurately in your year end accounting it shouldn't be marked as UK VAT as it is German VAT.
Here’s what we would suggest;
1. Create an account called German Purchase VAT. It would be a Current Liability account type which would show on the balance sheet.
2. Account for the purchase as €100 - Stock, €19 - German Purchase VAT, both with No VAT tax rates.
3. When you reclaim the €19 German VAT, account for that in the German Purchase VAT account with No VAT as the tax rate.
For further guidance on PAN EU Vat, see the How to deal with PAN EU VAT in Xero or QuickBooks with Link My Books
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