Working with Value Added Tax (VAT)

Path: Business functionality > Finance > Working with Value Added Tax (VAT) · tier official · system finance · narrative reviewed (checked by Opus)

Overview

This section covers the full VAT workflow in Business Central. It starts with VAT setup (rates, posting groups, registration numbers, clauses, VAT statements, nondeductible and unrealized VAT), which is the base for how VAT is calculated, posted to G/L accounts and reported.

Key points

• Set up VAT subtopic covers VAT rates, posting groups, registration numbers, clauses, VAT statements, nondeductible VAT and unrealized VAT.
• Working with VAT on sales and purchases covers calculation and display, VAT date functionality, prices including VAT, manual VAT adjustment, VAT difference tolerance and certificates of supply (version 23.1 noted).
• The VAT Rate Change tool converts VAT and general product posting groups on master data, journals and orders, can update unit prices, offers test conversion and logging, and has limits for some document types.
• Multiple VAT registration numbers (2024 release wave 2) lets businesses with warehouses in several EU countries apply the right VAT registration and posting groups to sales documents, including ship-to addresses and credit memos.
• Non-deductible VAT is handled on purchase invoices and orders using Non-Deductible VAT Base, Amount and % fields, with VAT adjustment before posting.
• VAT registration numbers for customers, vendors and contacts are validated through the EU VAT Reg. No. Validation Service, which uses VIES and optional validation templates.
• EU third-party purchase transactions are enabled in VAT setup and can be filtered in VAT statements and VIES declarations.
• Submitting VAT reports covers the EC Sales List and VAT Return, with service connection, test mode, error validation and VAT settlement.

Subtopics

• Set up VAT (5 pages)

More Learn pages

• Built-in VAT reports in Business Central: Explore the built-in VAT reports in the standard version of Business Central.
• EU third-party purchase transactions: This article explains how to set up and use European Union (EU) third-party purchase transactions.
• How to convert service contracts: Learn how to manually convert service contracts that include VAT amounts using various alternative methods.
• How to work with VAT on sales and purchases: This article describes the various ways of working with VAT both manually and with automatic setup, to help you meet country/region specific regulations.
• Managing VAT rate changes: Learn how to use the VAT Rate Change tool to change VAT rates based on local legislation.
• Multiple VAT registration numbers: Learn about the functionality for multiple (alternative) value-added tax (VAT) registration numbers.
• Submit VAT reports to tax authorities: Learn how to prepare reports that list VAT from sales during a period, or from sales and purchases, and submit the report to a tax authority.
• Use non-deductible VAT: This article explains how to use and report non-deductible VAT.
• Validate VAT Registration Numbers: Let Business Central validate VAT registration numbers for your contacts, customers, and vendors, based on EU VIES VAT Number Validation service.
• Value Added Tax management overview: Learn how to manage Value Added Tax (VAT) with the listed information and resources.

Videos, posts and code changes

Linked by a Haiku matcher with a grounding quote from the item’s summary (link/topics.ts); machine-generated.

• #10098 Reenable Expense Agent VAT tests (code change): “Expense Agent VAT posting tests are re-enabled”
• #10135 [Master]-Performance issue when calculating the VAT advance return / VAT statement (Base Application, German environment) - Copy (code change): “VAT advance return / VAT statement performance degradation on CRUD operations”
• #10214 [Main]Posting Error with 50% Non-Deductible VAT when “Check Source Currency Consistency” is enabled in “General Ledger Setup” page (code change): “posting purchase documents with 50% non-deductible VAT in a foreign currency”
• #10381 [Main] Inconsistent Non-Deductible VAT calculations on Purchase & Sales Invoices containing lines with Full VAT calculation type (code change): “Fixes inconsistent Non-Deductible VAT calculations on purchase and sales invoices”
• #10609 [Master]-Inconsistent Validation of Non-Deductible VAT % for Purchase Lines Sharing the Same VAT Identifier- #10607 (code change): “Fixes inconsistent validation of Non-Deductible VAT % on purchase lines”
• #10676 Fix decimal tax rates for Polish region (code change): “Fixed decimal tax rate validation in Polish region”
• #10840 Bugs/625412 Wrong posted G/L Entries and VAT Entries using Cash Basis Unrealized VAT from a partial Credit Memo if we mix VAT types and use only part of the amount in the Mexican version. (code change): “Cash-basis VAT calculations for partial credit memo applications now correctly determine settled amounts”
• #10880 [29.X]-Inconsistent Validation of Non-Deductible VAT % for Purchase Lines Sharing the Same VAT Identifier (code change): “Non-deductible VAT % validation is now applied the same way to every purchase line”
• #10960 [main] bug 648733 - Add integration event for updating original document VAT date in General Ledger Setup CZL (code change): “Integration event enables custom logic when source fields change posting date document date VAT date”
• [#11186 [Master]-]VAT Settlement G/L Entries Do Not Populate Source Currency Amount and Source VAT Currency Amount After Running Calculate and Post VAT Settlement](../../../../changes/bcapps/11186.md) (code change): “VAT settlement G/L entries, fixing missing values that appeared after the settlement process”
• #11206 [CH] When posting with FCY, VAT G/L Entry stores VAT base amount in Source Currency Amount instead of VAT amount (code change): “VAT G/L Entry stores VAT base amount in Source Currency Amount”
• #11435 Validate unauthenticated public API responses before use (code change): “Unauthenticated external API responses are now validated for size, schema, and integrity before being used in tax and financial processing”
• #11493 [29.X]-VAT Settlement G/L Entries Do Not Populate Source Currency Amount and Source VAT Currency Amount After Running Calculate and Post VAT Settlement (code change): “Calc. and Post VAT Settlement report now fills in Source Currency Amount”
• #11632 [29.X]-Source Currency Amount calculation causes discrepancies with Foreign Currency G/L Entries whit Reversal Charge VAT. (code change): “G/L entries in a foreign currency with reverse charge VAT”
• #11736 [29.x][VIES Integration] Per-environment daily request rate-limit (code change): “VAT Registration Number lookups against the EU VIES service”
• #12119 Fixing an APAC-specific issue with applying a posted sales credit memo when using unrealized VAT (GST) (code change): “An infinite loop when applying a posted sales credit memo with unrealized VAT (GST)”
• #12141 [Master]-Incorrect project ledger costs when non-deductible VAT is posted to a foreign-currency project (code change): “Fixed incorrect project ledger costs when posting non-deductible VAT to a foreign-currency project”
• #9089 Merge-ES-Excluded-from-Calculation-to-W1 (code change): “ES Excluded from Calculation functionality is merged into W1”
• #9260 Bug 637507: [master] [Report 743 VAT Reconciliation Report] Incorrect VAT Base and Amount when using Non-Deductible VAT (code change): “VAT Reconciliation Report now includes a configurable option to report either the total VAT amount”
• #9340 [main][Gen. Jnl.-Post Line]` Add var NextVATEntryNo to OnAfterGLFinishPosting in Code (code change): “OnAfterGLFinishPosting now exposes NextVATEntryNo as a var parameter”
• #9485 [main]-Multiple error messages when posting to period with VAT Return already in status Released (code change): “Posting to a period whose VAT Return is already in status Released”
• #9570 [Master]-Rounding Differences in ARAP with Deferrals and Non-Deductible VAT (code change): “Rounding Differences in ARAP with Deferrals and Non-Deductible VAT”
• #9734 [Master]-Performance issue when calculating the VAT advance return / VAT statement (Base Application, German environment) - Copy (code change): “performance issue when calculating the VAT advance return”
• Change Behaviour on VAT Prod. Posting Group - Prices Incl. VAT in v28.2 (community post): “VAT Product Posting Group changes; Prices Incl. VAT; vat; pricing”
• Dynamics 365 Business Central – How to change the VAT amount on a Purchase Invoice or Purchase Order (community post): “Adjusting VAT amounts on purchase invoices and orders when Business Central’s calculations differ”
• Introducing: Multiple VAT Numbers for Customers (2024 release wave 2) (video): “Multiple VAT Numbers for Customers (2024 release wave 2). Topics: multiple vat numbers; customers; vat registration”
• What’s New: VAT Date in Business Central (2023 release wave 2) (video): “VAT Date in Business Central; VAT Date field; VAT setup”
• How to Set Up Sales Tax in Business Central (2025) (video): “sales tax setup; tax groups; tax area codes; tax calculation”

Business Central pages and reports

The pages, reports and queries this hub’s Learn pages name (ms.search.form, API reference), joined to the code by exact object id (data/index/docs-objects.json); a page shows the table it runs on.

• Page 7 “Customer Price Groups” · on Table 6 “Customer Price Group”
• Page 50 “Purchase Order” · on Table 38 “Purchase Header”
• Page 51 “Purchase Invoice” · on Table 38 “Purchase Header”
• Page 52 “Purchase Credit Memo” · on Table 38 “Purchase Header”
• Page 118 “General Ledger Setup” · on Table 98 “General Ledger Setup”
• Page 130 “Posted Sales Shipment” · on Table 110 “Sales Shipment Header”
• Page 142 “Posted Sales Shipments” · on Table 110 “Sales Shipment Header”
• Page 161 “Purchase Statistics” · on Table 38 “Purchase Header”
• Page 187 “VAT Setup” · on Table 189 “VAT Setup”
• Page 212 “Alt. Cust. VAT Reg.” · captioned “Alternative Customer VAT Registration” · on Table 213 “Alt. Cust. VAT Reg.”
• Page 249 “VAT Registration Log” · on Table 249 “VAT Registration Log”
• Page 301 “Ship-to Address List” · on Table 222 “Ship-to Address”
• Page 315 “VAT Entries” · on Table 254 “VAT Entry”
• Page 317 “VAT Statement” · captioned “VAT Statements” · on Table 256 “VAT Statement Line”
• Page 321 “ECSL Report” · captioned “EC Sales List Report” · on Table 740 “VAT Report Header”
• Page 322 “ECSL Report Subform” · captioned “Lines” · on Table 362 “ECSL VAT Report Line”
• Page 323 “EC Sales List Reports” · on Table 740 “VAT Report Header”
• Page 403 “Purchase Order Statistics” · on Table 38 “Purchase Header”
• Page 459 “Sales & Receivables Setup” · on Table 311 “Sales & Receivables Setup”
• Page 460 “Purchases & Payables Setup” · on Table 312 “Purchases & Payables Setup”
• Page 472 “VAT Posting Setup” · on Table 325 “VAT Posting Setup”
• Page 474 “VAT Statement Preview” · on Table 257 “VAT Statement Name”
• Page 475 “VAT Statement Preview Line” · captioned “Lines” · on Table 256 “VAT Statement Line”
• Page 525 “Posted Sales Shipment Lines” · on Table 111 “Sales Shipment Line”
• Page 550 “VAT Rate Change Setup” · on Table 550 “VAT Rate Change Setup”
• Page 575 “VAT Registration No. Formats” · on Table 381 “VAT Registration No. Format”
• Page 737 “VAT Return Period List” · captioned “VAT Return Periods” · on Table 737 “VAT Return Period”
• Page 739 “VAT Report Log” · on Table 747 “VAT Report Archive”
• Page 740 “VAT Report” · captioned “VAT Return” · on Table 740 “VAT Report Header”
• Page 741 “VAT Report Subform” · captioned “Lines” · on Table 741 “VAT Report Line”
• Page 742 “VAT Report Statement Subform” · on Table 742 “VAT Statement Report Line”
• Page 743 “VAT Report Setup” · on Table 743 “VAT Report Setup”
• Page 744 “VAT Report List” · captioned “VAT Returns” · on Table 740 “VAT Report Header”
• Page 745 “VAT Report Error Log” · on Table 745 “VAT Report Error Log”
• Page 746 “VAT Reports Configuration” · on Table 746 “VAT Reports Configuration”
• Page 747 “VAT Clauses” · on Table 560 “VAT Clause”
• Page 748 “VAT Clause Translations” · on Table 561 “VAT Clause Translation”
• Page 1279 “Service Connections” · on Table 1400 “Service Connection”
• Page 6640 “Purchase Return Order” · on Table 38 “Purchase Header”
• Page 9401 “VAT Amount Lines” · on Table 290 “VAT Amount Line”
• Report 11 “G/L - VAT Reconciliation”
• Report 12 “VAT Statement”
• Report 13 “VAT Register”
• Report 19 “VAT- VIES Declaration Tax Auth”
• Report 20 “Calc. and Post VAT Settlement” · captioned “Calculate and Post VAT Settlement”
• Report 31 “VAT Exceptions”
• Report 32 “VAT Registration No. Check” · captioned “Batch VAT Registration No. Check”
• Report 743 “VAT Reconciliation Report”
• Report 2500 “Day Book VAT Entry”
• Page 10 “Countries/Regions” · on Table 9 “Country/Region” · via Set up VAT
• Page 312 “Gen. Business Posting Groups” · on Table 250 “Gen. Business Posting Group” · via Set up VAT
• Page 313 “Gen. Product Posting Groups” · captioned “General Product Posting Groups” · on Table 251 “Gen. Product Posting Group” · via Set up VAT
• Page 318 “VAT Statement Templates” · on Table 255 “VAT Statement Template” · via Set up VAT
• Page 320 “VAT Statement Names” · on Table 257 “VAT Statement Name” · via Set up VAT
• Page 391 “Extended Text List” · on Table 279 “Extended Text Header” · via Set up VAT
• Page 470 “VAT Business Posting Groups” · on Table 323 “VAT Business Posting Group” · via Set up VAT
• Page 471 “VAT Product Posting Groups” · on Table 324 “VAT Product Posting Group” · via Set up VAT
• Page 473 “VAT Posting Setup Card” · on Table 325 “VAT Posting Setup” · via Set up VAT
• Page 734 “VAT Clauses by Doc. Type” · captioned “VAT Clauses by Document Type” · on Table 562 “VAT Clause by Doc. Type” · via Set up VAT
• Page 1877 “VAT Setup Wizard” · captioned “VAT Setup” · via Set up VAT

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