Understanding the Process to Offset VAT for Capital Goods

Generally, VAT credit is available on inputs after goods are received and the sales transaction is complete. However, when you purchase capital goods, the entire VAT amount paid is not recoverable when the transaction is complete. Instead, it is available over a period of time.

You use the Set Off of Capital Goods program (R75I211) to recover VAT for capital goods over a period of time. The Set Off of Capital Goods program was modified to use the retention percentage and deferred periods that you set up in the Retention Percentage program (P75I220). Additionally, the Set Off of Capital Goods program enables you to accelerate the VAT recovery on transferred goods if you enter the required information in the Stock Transfer Entry program (P75I213A) before you run the Set Off of Capital Goods program.

After you offset capital goods, you can run the Calculation of VAT Payables for Capital Goods program to obtain a list of the records for which VAT offset was processed.