Anda di halaman 1dari 2

Oracle AGIS Should we always create a VAT invoice for

intercompany recharges?
One of the main reasons why the Oracle AGIS module was created was to ensure that the correct
VAT was charged on intercompany transactions when an intercompany journal was created.
However, many sites that I work on will still recharged or allocated costs from one legal entity to
another as a direct journal with no VAT considerations. Is this correct or should every intercompany
recharge where it is form one legal entity to another be subject to VAT. I am not a VAT expert, so
would like to through this out there to see what the correct action should be.
As an example, take a situation where Company A is registered for VAT but company B is not. Over
the course of the month, company A incurs the costs of several services that is recovers the VAT on
fully. But then at the end of the month it recharges a proportion of these costs to company B. If AGIS
is used to recharge these costs but no AR or AP transaction is created and so no VAT is calculated,
then has VAT fraud been committed as VAT that would have otherwise been absorbed as an
expense for company B has actually been fully recovered by company B!
What is the correct way should a VAT invoice always be charged between two legal entities? Are
there cases when VAT is not required, are there certain expenses such as interest and insurance
that do not need to have a VAT invoice raised or should a VAT invoice still be raised with a VAT
Exemption made clear? What if the two legal entities shared the same VAT number as part of having
one VAT number of the Group?

Where both the supplier and recipient are located in the UK, in the majority of circumstances charges between
two legal entities will be within the scope of UK VAT and must be reported on the VAT returns of both
entities. The only time that intercompany transactions can be ignored for VAT purposes is if both parties are in
a VAT group (and therefore share the same VAT number)

1. Anonymous

06/03/2013 AT 3:22 PM REPLY

Hi, this is a challenging topic but indeed the main principle is to look at an intercompany transaction in the
same way you would as with a third party. Insurance and certain financial transactions that are exempt or
outside scope of VAT do usually not require an invoice at all (but often it doesn't hurt if there is one,
which helps automation), an intercompany payment obviously doesn'

1. Do not overlook whether there is a supply by the recharging entity at all and if so what type
(and thus liability) of supply it is. There can be (at least) 3 different scenarios to consider. 1)
that the transaction is simply a recharge by the company incurring the cost of an individual
expense which has been incurred by it either as principal or undisclosed agent/commissionaire
for the party
2. Anonymous

13/03/2013 AT 9:50 AM REPLY

Hi Andrew, you asked whether charges between two entities with the same VAT number (i.e. same VAT
group) are vatable and the answer is no.<br />To your other question &quot;should VAT always be charged
between legal entities&quot; Assuming these entities are NOT in the same VAT group then the VAT liability
is dependent on whether there is actually a supply. Not all recharges are supplies for VAT