VAT Adjustment: What Information Makes It Traceable

01

What makes a VAT adjustment traceable

A VAT adjustment becomes traceable when the amount to be corrected is expressed in the national currency of the Member State, using the conversion mechanism provided by the directive, and remains linked, through a reliable audit trail, to the invoice and the original transaction.

The periodic VAT return must include all the data needed to determine the tax due and the deductions to be made, so that the adjustment is also visible in the totals declared to the Member State.

02

The framework of the VAT directive

Directive 2006/112/EC governs the common VAT system in the European Union; this information is general and not legal or tax advice.

Member States set a tax period of one, two, or three months, with the possibility of a different duration provided it does not exceed one year, and the return must be filed within a period not exceeding two months after the end of the period.

03

A practical path to making an adjustment traceable

Steps

1. Identify the original invoice and the supply of goods or services transaction to which the adjustment relates.
2. Express the VAT amount to be corrected in the national currency, applying the conversion mechanism of Article 91.
3. Document the adjustment with management controls that create a reliable audit trail between the invoice and the transaction.
4. Report the updated data in the periodic VAT return, including tax due and deductions.
5. Archive a copy of the corrected invoice together with the original, keeping it available to the competent authorities.

04

A hypothetical case

Hypothetical example: a company issues an invoice in a foreign currency and later discovers an error in the applied rate. To make the adjustment traceable, it recalculates the VAT amount to be corrected in national currency using the required conversion rate, links the new invoice to the original transaction through an internal reference, and archives both documents together, ready for any request from the authorities.

05

Information elements to verify

• VAT identification number and full address of the supplier and the recipient involved in the transaction.
• Date of the original supply of goods or services, if different from the invoice issue date.
• Taxable amount, applied rate, and correct VAT amount for each rate or exemption.
• VAT amount to be corrected expressed in national currency with the applied conversion rate.
• A reference linking the corrected invoice to the original invoice and transaction, for the audit trail.

06

Operational choices a company can configure

• A company can configure a dedicated field to record the VAT amount to be corrected in national currency, separate from the original amount in foreign currency.
• It is possible to assign a review role that checks the link between the corrected invoice and the original invoice before archiving.
• One can request from the software provider a log that tracks the date, amount, and reason for each adjustment, to build the audit trail.
• Adjustments can be linked to the data reported in the periodic return, so that the totals remain consistent with the archived invoices.

07

Frequently asked questions

• The invoicing currency can be any currency, but the VAT amount to be corrected must always be expressed in national currency.
• The audit trail can be based on internal management controls, not necessarily on a specific system.
• For batches of electronic invoices sent to the same recipient, the common indications may be mentioned only once if accessible for each invoice.

08

Next step

Check that your archiving process keeps both the original and the corrected invoice, with quick access for the competent authorities in case of a request.