DETERMINING VAT PRO RATE. CASE STUDY AT A PAWNSHOP IN ROMANIA

Abstract

Determining VAT pro rate entails in terms of theory the calculation of the share of taxable transactions made by an entity in total transactions. Thus, the entities that use VAT mixed regimes will be able to deduct the VAT related to operations afferent to the transactions with deductibility right and without deduction right, just in the same proportion with calculated pro rata. Also, regulations and adjustments will be made using the final pro rate applied for the entire ending year in the last statement of every year. By the 25th of the first month of the financial year, any entity must declare the provisional pro rate for the coming year to the tax administration body, which is equal to that determined for the ended year. The method used for capturing the main practical tax and accounting problems inherent to determine the VAT pro rate is the case study made at a pawn shop in Romania over the year 2016. Thus, given the multiplicity of operations carried out by pawnshops (pawnshop with gold and silver goods, pawnshop with electronics, selling goods unclaimed at the expiration of the pawn contracts, melting gold and silver and sale in the form of ingots or bars etc.), in this article there will be discussed the main problems which may occur in practice on the VAT pro rata, using the example of an entity of this kind in Romania for 2016.

Keywords

• pro rata
• VAT
• pawnshop
• mixed regime
• deduction
• reverse charge
• VAT return