VAT Payable with Reverse Charge

1

Hello

Here is the scenario

  1. Irish entity buys digital goods from German entity - input VAT occurs, which is 23% in Ireland (reverse charge)
  2. Irish entity sells digital goods to the end user, let’s say, in Estonia - output VAT occurs, which is 20% in Estonia

In this case vat payable will be Output Tax – Input Tax: 20%-23% = -3%

Does that means that Irish entity will have to pay this 3%?

OR when doing reverse charge it should just zero it out?

2

You will have to map your input and output VAT in separate account heads and set one in your Sales Invoice and other in your Purchase Invoice

You can put both the heads in the same group in your chart of accounts to know what is the difference that needs to be paid.

See this for more details: https://erpnext.org/docs/user/manual/en/setting-up/setting-up-taxes

3

Thank you for clarification!