If your company is on a pro-rata basis, in the last tax return of the year you will have to make some adjustments…
One of these adjustments concerns the amount of VAT deducted during the year. If you have been applying the general apportionment, but the VAT deductible under this exceeds by more than 10% that which you would have deducted under the special apportionment, your company is obliged to apply the special apportionment in the same year.
The general deductible proportion is designed to make it easy for businesses to calculate deductible VAT. However, the law does not allow it to be used in cases where the business would benefit too much from its application (in comparison with the special deductible proportion regime). For this reason, a maximum limit of 10% is established in its favour; if it is exceeded, it is compulsory to pay tax under the special pro-rata regime.
Therefore, the adjustment to be made in the last VAT return of the year will be as follows:
- If you do not reach the 10% difference, you will have to calculate the deductible VAT according to the definitive pro-rata for the year and make the corresponding adjustment (remember that during the year you will have been deducting VAT provisionally according to the previous year’s pro-rata).
- However, if you have to change to the special pro-rata, the adjustment will be made according to the deductible VAT resulting from the new calculation method.
Our professionals will calculate the definitive percentage of VAT that your company can deduct.