by Patrizia Benelli

Opportunities of deferred Tax exigibility, i.e. cash accounting, but not only ...

The Cash TAX regime, called  also “cash-accounting”, has been introduced from European Directive no. 2010/45/UE, that modified the main VAT Directive no. 2006/112/EU.

The goal is to help small and medium-sized companies that encounter difficulties in paying VAT to competent authority before receiving payment from their customers. Member States has been allowed to introduce an optional cash accounting scheme in order to authorize companies to pay VAT not on the basis of invoices issued/received during the period, but according to the payment of the same.

In Italy the European Directive came into force in December 2012 and covers companies with a turnover not exceeding EUR 2 million, that can join this scheme by applying it to both active and passive operations.

It is clear that the opportunity granted by the European Union is very interesting and probably other Member States shall take it, considering the unfavorable international economic situation that affects first of all small and medium sized companies.

Perhaps not everyone knows… how to manage the deferred Tax exigibility.

Issued and received invoices are posted and listed in Tax Journal as not exigible.  Tax settlement also includes these documents, but in the calculation of VAT to be paid such not exigible amounts are excluded.  When an invoice is collected/paid, partially or totally, the related VAT becomes exigible and it will be included in the calculation of VAT to be paid in Tax settlement. As a consequence, adopting the cash tax regime VAT to be paid is no more calculated only as a difference between VAT on sales and VAT on purchases, but it has always to consider also exigible and not exigible amounts.

All this may seem complex, but with Mago.net the process is easy and automatic.

In Mago.net documents with deferred tax exigibility are marked as suspended tax documents and they are posted using special accounting templates. Exigibility of such documents is automatically generated by operations on payment schedules (clearing, bills of exchange, payment orders). General Tax Journal Summaries highlight exigible and not exigible amounts both of sales and purchases documents.  Finally, special reports list such suspended documents in order to check amounts included in Tax settlement.

For further information about this topic you can ask to you reseller referral or visit our on-line Microarea Help & Information Center.

di Patrizia Benelli

ERP Financial Project & Product Manager

Right at the beginning, the system was used for transactions between European countries only. Currently it has been extended to special national operations.

Starting from 1993, along with the creation of the European market and the knocking down of the fiscal frontiers, purchases made within the European Union are usually subject to taxation in the country of destination. In this case, the tax is owed by the recipient according to the reverse charge system.

Recently, the European Union has given way to a testing phase allowing each member to apply the reverse charge system also in special sectors of  their National transactions, this in order to tackle evasion. For example, up until 2013 in Italy, Germany  and Austria, reverse charge will be applied on transactions regarding mobile phones and integrated circuit devices. 

Furthermore, the European Union, in  the Green Paper on the future of VAT (published one year ago), opened a debate on the VAT system with the aim of simplifying such system, evaluating as well the possibility to force all countries to apply in any case the reverse charge system on national operations.

From an administration point of view, the question is: what to do when we receive an invoice subject to reverse charge?  Theoretically the invoice should be posted twice, both as received invoice and as issued invoice, in order to post the tax on purchases as well as the tax on sales. 

Perhaps not everyone knows that… Mago.net has always allowed to post the reverse charge in a single journal entry, by using special accounting templates that post the document also in Sale Tax Journal.

In order to acquire further knowledge, please contact your reseller referral and in addition if you are a M.L.U. subscriber you can follow the course NON EXISTING PAGEMago.net – Received Documents.