In short
Proportional deduction is used when only part of the input VAT is deductible. This is common for companies engaged in both taxable and exempt activities. In such cases, you must add a separate VAT code with the correct deduction percentage in the VAT settings.
Step by step: Set up proportional deduction
1. Go to VAT settings
Go to Reconciliation under Settings & Admin in the menu on the left.
Select the VAT settings tab.
Here you will see any unmapped VAT codes.
2. Add item
Click “+ Add Item” above the VAT Settings table.
3. Fill in information about the VAT code
When adding a new VAT code with proportional deduction, you must complete the following fields:
VAT code: The name of the new VAT code you want to create.
SAF-T code: The SAF-T code this VAT code should be reported as.
Description: An internal description of what the code is used for (optional, but recommended).
Incoming percentage: VAT rate for input tax (e.g. 25 or 0).
Outgoing percentage: VAT rate for output tax (often 0 for proportional deduction).
Account: The general ledger account the VAT amount should be posted to.
Reverse account: Only used for reverse charge – leave empty if not applicable.
Pro Rata Percentage: The percentage to be deducted, e.g. 80 for 80%.
Pro Rata Reverse Percentage: Only used for reverse charge setup.
Reverse charge calculation?: Check this box if the code is for reverse charge.
Effective start date: The date the deduction rate applies from. Leave blank for “from the beginning”.
Effective end date: The date the deduction rate ends. Leave blank for indefinite.
Hidden?: Check this box to deactivate the code so it is not available for new postings. Previous use is not affected.
4. Save the code
When all fields are completed, click Add to save the code.
The code is now available in the VAT settings and will be used in the calculation of the deduction percentage in the VAT module.
💡 You can add several codes with different rates if the deduction percentage varies between cost types. It is also possible to edit or hide existing codes if needed.