In accounting, three journal entries are used to record VAT balances and payments at the end of the year. These entries are: the VAT settlement entry, the VAT credit entry and the VAT offsetting entry. Below you will find detailed steps to record each of them in Holded.
1. VAT settlement entry
Before entering the VAT settlement entry, it is advisable to check whether the adjustment entry with the balance of account no. 4750 has been recorded. Remember that this entry indicates the result between the balances of accounts 472 and 477.
To record the VAT settlement entry you have to:
2. VAT journal entry
The journal entry for input VAT is used when the output VAT is higher than the input VAT. In this case, you create a journal entry for VAT and associate it to the accounting account of the VAT payable account no. 4750. To do this, you have to:
3. VAT offsetting entry
In case the input VAT is higher than the output VAT, you can apply for a refund of the VAT to be offset with the Spanish Tax Administration Agency (AEAT).
Generally, the application for a VAT refund is made in the last period of the fiscal year and, regardless of when the refund is made, it is recorded in the form of a VAT offset entry.
To make a VAT offsetting entry, you have to:
From Accounting, go to the Tax section.
Copy the input VAT and output VAT amounts that you want to offset.
Go to the journal and click on New entry in the top right hand corner.
Select the accounting account number 4700 and paste the amounts in the debit and credit columns as appropriate.
Click on Save.