Understanding Invoices for Free Goods

Invoices for free goods have a zero value. In Italy, invoices for free goods must be entered into the system for fiscal and VAT reporting purposes.

When you enter invoices for free goods into the system, the first pay item represents the taxable amount with the relevant tax rate. You enter this pay item with a tax explanation code of V (VAT). The second pay item represents the gross amount (negative). To calculate the gross amount, add the first pay item taxable amount and the VAT amount. Enter the second pay item with a tax explanation code of E (exempt) with a tax rate of zero.

This table provides an example of an invoice for free goods:

Pay Item	Gross Amount	Taxable Amount	Tax Amount	Tax Rate Code	Tax Explanation Code
001		1000	200	IT20	V
002	–1200			IT00	E

The total invoice value is zero, and the invoice can be posted to update the Taxes table (F0018). The G/L distribution debits the Cost of Goods Sold account and credits a specific expense account for free goods.

To close the invoice, record a cash receipt through the Standard Receipt Entry program (P03B102).