How to account for supplies and how they affect VAT
Posted: Wed Dec 18, 2024 7:23 am
When accounting for certain invoices, accountants may find that invoices issued by their suppliers or creditors include provisions. Learn how to account for provisions with a practical example.
We explain what supplies are and how they affect VAT.
If you need to issue an invoice with supplies, we will also explain how to do it.
How to account for your consultancy invoice when it includes payments from the commercial register?
Practical example of accounting for supplies
Accounting for supplies denmark email list can be a sporadic thing for companies, so it can generate some doubts that should be clarified.
Supplies are neither income nor expense and should not be included in the VAT tax base .
When invoices are issued for supplies, the invoices or documents that make up these supplies must be sent to the recipient of the invoice. For example, an architect who pays for a building permit on behalf of his client must send him proof of payment of this fee.
Download your FREE copy of the “Basic Kit for Keeping Your Accounting Up to Date”
1) What are supplies?
Supplies are a delegated payment or an amount paid on behalf of another company , which will be the one that must record the expense or invoice that will be in its name when it is received.
A supply is a way of recording an activity that is carried out on behalf of another company, in which the role of intermediary is played.
Some examples of supplies may be payments of fees, shipping, insurance, but they may also be invoices , such as those from the commercial registry, which the consultancy pays on behalf of its clients.
2) Is VAT charged on supplies included in an invoice?
Supplies should not appear in the taxable base of the invoice , so they are without VAT.
In art. 78. Three. 3º Law 37/1992, it is specified that the sums paid in the name and on behalf of the client by virtue of an express mandate of the same, will not be included in the taxable base of VAT .
This same article establishes that the taxpayer will be obliged to justify the effective amount of these expenses.
Therefore, when a payment is made on behalf of a client, it will be invoiced as supplies and proof of payment or invoice will be provided in their name.
In the event that the supply is an invoice , our client will be the one who can record the invoice in his/her name and deduct the expense and VAT from it.
In the case of fees or other expenses without an invoice , the client will be able to record them with the supporting documents that we provide and, if they are deductible expenses, they will be able to deduct them in their tax returns.
Let's see how to record an invoice with payments from the recipient. For greater clarity, we will use a practical example.
3) How to record your consultancy invoice when it includes payments from the commercial register?
One example of payments that are usually made every year is that of those companies whose consultancy firm manages the deposit of their annual accounts . The invoice from the commercial register is issued in the name of the company whose accounts are deposited, but it may be that the consultancy firm advances the payment and then invoices its client the amount paid in the form of payments.
The invoice issued by the consultancy firm will reflect the VAT on the service provided by the consultancy firm. But not the VAT on the amount of the invoice from the commercial register, which appears on the invoice as a supplement for the net amount paid to the register.
The amount of the supply, according to the ICAC in its resolution of December 19, 1994, can be accounted for using accounts of subgroup 55 of the General Accounting Plan. Another way of accounting for them can be using account 410 of creditors in the commercial register. This will allow us to settle account 410 when we account for the invoice in the commercial register.
When the company receives the invoice from the commercial register , it will record it with its corresponding VAT and withholding and the creditor account of the commercial register will be settled with the debit balance recorded in the same account when recording the payment.
We explain what supplies are and how they affect VAT.
If you need to issue an invoice with supplies, we will also explain how to do it.
How to account for your consultancy invoice when it includes payments from the commercial register?
Practical example of accounting for supplies
Accounting for supplies denmark email list can be a sporadic thing for companies, so it can generate some doubts that should be clarified.
Supplies are neither income nor expense and should not be included in the VAT tax base .
When invoices are issued for supplies, the invoices or documents that make up these supplies must be sent to the recipient of the invoice. For example, an architect who pays for a building permit on behalf of his client must send him proof of payment of this fee.
Download your FREE copy of the “Basic Kit for Keeping Your Accounting Up to Date”
1) What are supplies?
Supplies are a delegated payment or an amount paid on behalf of another company , which will be the one that must record the expense or invoice that will be in its name when it is received.
A supply is a way of recording an activity that is carried out on behalf of another company, in which the role of intermediary is played.
Some examples of supplies may be payments of fees, shipping, insurance, but they may also be invoices , such as those from the commercial registry, which the consultancy pays on behalf of its clients.
2) Is VAT charged on supplies included in an invoice?
Supplies should not appear in the taxable base of the invoice , so they are without VAT.
In art. 78. Three. 3º Law 37/1992, it is specified that the sums paid in the name and on behalf of the client by virtue of an express mandate of the same, will not be included in the taxable base of VAT .
This same article establishes that the taxpayer will be obliged to justify the effective amount of these expenses.
Therefore, when a payment is made on behalf of a client, it will be invoiced as supplies and proof of payment or invoice will be provided in their name.
In the event that the supply is an invoice , our client will be the one who can record the invoice in his/her name and deduct the expense and VAT from it.
In the case of fees or other expenses without an invoice , the client will be able to record them with the supporting documents that we provide and, if they are deductible expenses, they will be able to deduct them in their tax returns.
Let's see how to record an invoice with payments from the recipient. For greater clarity, we will use a practical example.
3) How to record your consultancy invoice when it includes payments from the commercial register?
One example of payments that are usually made every year is that of those companies whose consultancy firm manages the deposit of their annual accounts . The invoice from the commercial register is issued in the name of the company whose accounts are deposited, but it may be that the consultancy firm advances the payment and then invoices its client the amount paid in the form of payments.
The invoice issued by the consultancy firm will reflect the VAT on the service provided by the consultancy firm. But not the VAT on the amount of the invoice from the commercial register, which appears on the invoice as a supplement for the net amount paid to the register.
The amount of the supply, according to the ICAC in its resolution of December 19, 1994, can be accounted for using accounts of subgroup 55 of the General Accounting Plan. Another way of accounting for them can be using account 410 of creditors in the commercial register. This will allow us to settle account 410 when we account for the invoice in the commercial register.
When the company receives the invoice from the commercial register , it will record it with its corresponding VAT and withholding and the creditor account of the commercial register will be settled with the debit balance recorded in the same account when recording the payment.