I’ve scanned most of the topics related to expense bookings but I still cannot find an answer to my question. I have the following situation:
I’ve paid 30 euro (inc. vat) for food & representation. According to the law, only 73.5% is deductible (inc. vat).
Thus the company paid 30 euro of which 73.5% flows through the P&L as expense. The remainder should be recorderded under an account like “non deductible expenses”. My question: how can I record non deductible expenses in manager? To be clear, the remainder should not be recorder as a private expense.
With deductible I mean that you can record costs as expenses in the P&L, hence they are deductible from your profits.
With non-deductible I mean: (100%-73.5%) * 30 euro is not deductible from my profits. I do not know how to record these non-deductibles. Is my explanation clear?
I have a similar situation. I just keep everything on the same account and do the calculation at the end of the year by hand. I don’t think there is a way Manager to do that automatically.
@Robbert_Manager, your question highlights the difference between financial accounting and tax accounting. The full €30 expense is a real expense of the company and should normally be recorded. The fact that for income tax purposes it may only be deductible at 73.5% is irrelevant to that. There are several ways this can be handled:
Post the full amount to the expense account. At tax filing time, make a simple calculation as @novica suggests and enter the reduced amount on your tax form.
Use tax software (or a tax preparer) that automatically makes the above calculation and enter the full amount. (This is very common. In fact, if you lodge taxes online with your authority, they may expect the full amount and perform the calculation themselves—so check about that.)
Split the expense upon entry into two lines as @Joe91 has suggested. Post one line to the deductible account and the other to the non-deductible. Note that this still results in complete financial accounting by recording the full expense.
When finished, be happy your country allows you to deduct 73.5%. In many countries, only 50% of such an expense would be deductible.
Thank you for your suggestion (and to the others thank you as well).
I’ve created a seperate line item for non-deductibles. Easy (and logical) solution
Just be sure, when it comes time to file income taxes, that you and/or your tax preparer correctly understand which figure is being requested during the input process. You would hate entering the reduced amount only to discover it is further reduced somewhere in the filing process. This concern will apply regardless of whether you input expenses directly to the government, calculate net income on your own, or use an external tax preparation software program.
