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During our April webinar "Open bidding with features: building from scratch and reviewing technical and legal changes", we received a question from one of the listeners: "Can the customer enter zero in the VAT field?". Such questions are often asked by our support service managers, so since the topic is relevant, we decided to clarify it in the article. Mariana Stashenko and Kateryna Chernenko, SmartTender specialists in working with state customers, talk about this in detail.

About the Technical Possibility of Specifying Zero VAT on SmartTender.biz

For example, let's take the case of our client – the National Antarctic Science Center. At one time, when publishing a contract with a supplier in the public procurement system, they could not display zero VAT, although this supplier is a VAT payer, with a rate of 0%.

*According to Art. 195 of the Tax Code of Ukraine, some transactions are taxed at a zero rate.

The customer turned to us with a corresponding request, on the basis of which we made a technical refinement of the site's functionality. So now, when entering information on the contract, the customer has the technical possibility to put in the field "Amount without VAT" a value equal to the field "Amount with an active VAT indicator".

It is also possible to change the VAT mark in the system when adding an additional agreement, for example, if the supplier's taxation system changes during the term of the contract, and part of the total amount under the contract is paid with VAT, and part without VAT. To do this, when entering an additional agreement into the system, when choosing the reason for the changes, select the item "Price change due to changes in tax rates and fees" and adjust the main agreement in accordance with the changes specified in the additional agreement. Also, this feature is available for adjustment during the performance of the contract and upon termination of the contract.

Let's consider another case: the customer signed a contract with a non-resident supplier in foreign currency. The contract states a 0% VAT rate. Previously, it was technically not possible to enter such data in the system. Therefore, the solutions were as follows:

- it was possible to specify equal amounts, but without an active VAT indicator;
- or activate the VAT indicator and indicate the amount without VAT by 0.01 monetary unit less than the amount with VAT.

But, taking into account that this is a currency, and the exchange rate is significant, this led to a significant discrepancy between the actual contract amounts and those specified in the system.

Now, when entering information under the contract to display 0% VAT in the fields, the customer can proceed as follows: enter a value in the "Amount without VAT" field that is equal to the value of the "Amount" field with an active VAT indicator. That is, the amounts in both fields must be the same in this case.

Examples of the Customer's Actions Depending on the Amount of the VAT Rate in the Contract

Depending on the situation, you will need to fill in the contract information as follows:

1. If a non-VAT payer is identified as the winner in the announced procurement, everything is simple here: at the stage of publishing the contract, enter equal amounts in the "Amount" and "Amount without VAT" fields, do not put the VAT symbol, the check box is empty.

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2. If the winner of the announced procurement is a VAT payer with a rate of 0%: at the stage of publishing the contract, enter equal amounts in the "Amount" and "Amount without VAT" fields, but the VAT symbol must be inserted, the check box must be filled.

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3. If a VAT payer with a rate of more than 0% and up to 20% is identified as the winner in the announced procurement: at the stage of publishing the contract, the "Amount" field will be filled in automatically, in the "Amount without VAT" field, you must enter the value yourself, and in the check box put a VAT mark. If the amount without VAT is not specified in the contract itself or you have doubts about its correctness, you can easily calculate it yourself.

How to Calculate the Amount Without VAT?

The logic here is as follows. The amount excluding VAT is your tax base, i.e. 100%. VAT is charged on it. If the rate is 20%, then, accordingly, the VAT amount will be 120%, or a factor of 1.2. Based on this, the amount without VAT is calculated as follows:

1. If the VAT rate is 20%:

Amount without VAT = Amount with VAT: 1.2

For example, the VAT amount is UAH 100.00. Then the amount without VAT = 100 : 1.2 = UAH 83,333. In this case, the amount without VAT must be rounded down, i.e. to UAH 83.33. Note that the system is governed by generally accepted mathematical rules of rounding.

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2. If the VAT rate is 7%:

Amount without VAT = Amount with VAT : 1.07

For example, the VAT amount is UAH 100.00. Then the amount without VAT = 100 : 1.07 = UAH 93,457. In this case, the amount without VAT must be rounded up, i.e. up to UAH 93.46, as the system is governed by generally accepted mathematical rules of rounding.

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What Happens if the Difference Between the Amounts Is More than 20%

Please note that in the SmartTender.biz functionality, in the "Amount without VAT" field, it is possible to enter amounts typical for any tax rate from 0% to 20% (in this interval, the system does not check the correctness of the calculation of the specified amounts, since it is not known which tax rate is used). But if the difference between the "Amount with VAT" and "Amount without VAT" is more than 20%, the system will issue a warning and will not allow you to save the data without proper adjustment. It is justified by the fact that, according to the Tax Code, the maximum VAT rate is 20% and cannot be higher.

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Have a Question?

We hope this material will help you understand how to enter amounts without VAT at any VAT rates when entering information under a contract or additional agreement. Calculate them carefully, pay attention to system prompts and work with pleasure on our site!

If you have additional questions, we are always happy to help and advise you on the telephone line, which is open from Monday to Friday from 08:30 to 18:30.

Our phones:

- +38 044 337 86 64
- +38 044 364 50 45
- 0 800 75 10 10 (calls within Ukraine are free)