The elements that have led to the identification of the categories are two and are the promotion and favoring of all those operations of a social nature or useful for the balance of taxation (since they are already subject to other taxes).
Loss of neutrality
VAT in general is a tax characterized by the so-called “neutrality”. In fact, entrepreneurs, economic operators and professionals in general are all forced to pay VAT and then collect it at the time of sale. In fact, the one who really pays the VAT is the final customer, or the consumer. Ideally, therefore, the VAT remains neutral. It goes without saying that the subjects whose commercial operations are exempt from VAT are not concerned by this characteristic. In fact, not paying the tax at the time of purchase, they cannot deduct it at the time of sale.
VAT exemption and pro-rata deductibility
The loss of neutrality is true only if all the transactions or services of the subject are exempt from VAT. However, there are professionals or companies that combine tax-exempt operations and others that give the right to deduction. For this case there is a mechanism for calculating the deductible sum, called: pro-rata. Use making the estimate tax return you will find the tax calculator quite useful.
The pro-rata is a calculation used to establish the percentage of deduction on the taxable amount. The calculation is made on the entire tax, thus making it unnecessary to distinguish between exempt and taxable operations.
In the event that the person in question carries out two different activities, one of which exempt for VAT purposes and one taxable, only the latter has the right of deduction, the activities cannot be combined.
The determination of the deductibility percentage is based on two fundamental principles:
- Be calculated according to the criteria provided for by the tax laws on the percentage of deduction.
- Be applied to the total value of the tax paid relating to all purchases of goods and services.
- Calculating the pro-rata is not a particularly complex operation. However, the difficulty lies in the correct compilation of the various fields, for which you can directly refer to the documentpublished by the Revenue Agency for the compilation of the VAT return for.
The extended scheme for determining the deductibility percentage is as follows:
Wanting to schematize, the scheme for calculating the pro-rata can be reported as follows:
- OI + OA / OI + OA + OE
With legend:
OI = taxable transactions; OA = operations not subject to VAT, but valid for the purpose of deduction; OE = VAT exempt operations.
The pro-rata and therefore the VAT deduction must be clearly calculated on an annual basis, from the current year to the next. In this way the reference used during the current year is that of the percentage of the previous year. The possibility of an adjustment in the annual return clearly derives from this, once the definitive deduction percentage has been established, taking into consideration all the operations carried out in that year.
