SII Tip For Spain #13: Pro-rata

Welcome to another SII Tip for Spain. The pro-rata (prorrata de IVA) is one of those topics that looks straightforward on paper but hides surprises when SII gets involved. In this post I'll walk you through how pro-rata and SII interact in S/4HANA Public Cloud and Private Cloud, what can go wrong if the configuration is incomplete, and, most importantly, how to fix it.

VAT pro-rata (prorrata del IVA) is defined in LIVA Article 102 and applies to businesses that make deliveries of goods or services, some of them taxable and others VAT-exempt. The typical example is leasing activities: the rental of residential properties is a VAT-exempt transaction with no right to deduct input tax, whereas the rental of commercial premises is a taxable and non-exempt transaction with the right to deduct input tax.

These companies are not allowed to deduct 100% of their input VAT. Instead, they may choose to apply a general or a special pro-rata algorithm. Further details about these algorithms are available in the Tax Agency portal (“Pro rata rule”).

In the simplest case (general), the pro-rata coefficient is the ratio [only turnovers with deductible VAT] / [ total turnover, deductible + not deductible], rounded up to the nearest whole number. This pro-rata percentage is calculated with the information of the year Y1, and will be used as provisional during Y2. At the end of Y2, a recalculation of the definitive pro-rata will take place, and the corresponding adjustments shall be reported in the corresponding VAT return (legal form 303).

For example, a company is dedicated to renting homes and business premises. The operations carried out during year Y1 were the following:

Rental of housing: 12,000 euros (input VAT is NOT deductible)
Rental of business premises: 32,000 euros (input VAT is deductible)

The “temporary” pro-rata for Y2 will be 32000€/42000€ = 72.72727% => 73%. IMPORTANT: The pro-rata percentage determination has to be carried out outside SAP.

The input VAT supported in year Y2 by expenses used in real estate (both homes and premises) is: Tax base = 6500€, input VAT = 1365€. In this case:

Deductible Input VAT = 1365€*73% = 996,45€
NON-Deductible Input VAT = 1365€*27% = 368,55€

At the end of Y2, the definitive pro-rata is calculated with the real turnovers of the year. Provided that the definitive pro-rata is 70%, the VAT deductions have to be recalculated. In this case, 1365€*70% = 955,5€. Since there is an excess of deduction of 996,45€-955,5€=40,95€, this this year-end adjustment has to be reported in the legal form 303 in Q4 (but not in SII).

In Public Cloud, the pro-rata split is applied automatically when it finds a coefficient entry in the “Define Pro Rata Coefficients” activity (SSCUI 103619) for the tax code.

In S/4HANA public Cloud Edition, the pro-rata management is described in Pro Rata VAT Processing

1) Define the tax code (FTXP / SSCUI 101016) for country ES:

MWVS → VST, 21% (deductible)
MWVZ → NVV, 0% placeholder (non-deductible)

2) Define the pro-rata coefficient in SSCUI 103619:

NOTE: If the tax code is not configured in this table and it defines the NVV Account Key, this value is ignored and the full VAT amount will be posted under the account key VST as 100% deductible (and then CuotaDeducible equals the full CuotaSoportada in SII). When creating the incoming invoice, the system warns at posting time with message RAT007 “Pro rata VAT: Coefficient not defined or out of range (0%-100%)” but does not block the document posting.

3) Assign SII attributes in SSCUI 102558

4) Define Final Pro Rata Coefficients for Year-End Adjustment (SSCUI 105523)

In S/4HANA Private Cloud Edition and in ECC systems, the pro-rata is described in SAP note 801318 – Prorata VAT Solution and in the help portal VAT Pro-Rata Adjustment. The note 801318 is a consulting solution that requires development, so you may need to contact your implementation partner.

As a high level vision of this note:

1) Tax procedure. Copy the standard Spain procedure, add a new condition(step 105, base value routine 907), assign calculation routine 935 to both MWVS (step 120) and MWVZ (step 150).

2) ABAP routines. In a high level view, the deductible/non deductible split is calculated at posting time by the ABAP calculation routine 907 and Routine 935.

3) Condition records per company code with the annual pro-rata percentage. This is important to calculate the right non-deductible amount.

4) Pro-Rata Validation Entity Values. For the routine 935 to fire, the tax code must be registered in the Pro-Rata Validation Entity values.

NOTE: if the pro-rata realated tax code is not configured properly in this step and/or the ABAP routines 907 or 935 are incorrectly implemented (e.g., wrong basis value), the deductible and non-deductible rates can fail to add up to a recognized VAT amount by the Tax agency (or be reported as 0%). The Tax Agench SII may issue the error code 1166: “Valor del campo TipoImpositivo no esta incluido en la lista de valores permitidos” (The value of TipoImpositivo is not a the valid value).

5) Assign SII attributes to the pro-rata tax code (IMG equivalent of SSCUI 102558).

6) Assign the definitive pro-rata at year-end. You can use Transaction Code S_RFIDPTDPR “Definitive Pro-Rata coefficient” to define the definitive pro-rata percentage and any other periodic (monthly) coefficients if needed:

Once the definitive pro-rata is calculated in Q4, it is necessary to adjust the excess/defect of deductions reported based on the “temporary” pro-rata coefficient during the year. These adjustments will be reported in the legal form 303 but not in the SII register books for incoming invoices.

In S/4HANA Public cloud edition, use the Schedule Tax Jobs Fiori app → Year-End Adjustment of Pro Rata VAT to calculate the adjustment postings.

In S/4PHANA private cloud edition and ECC, you can use transaction S_RFID_PTVPRADPRC00 “Pro-Rata adjustments – Calculation” to calculate the adjustment postings based on the definitive pro-rata

The resulting adjustment postings will be similar to this one:

For example an incoming invoice of 1000€ Tax base, 21% VAT, pro-rata coefficient = 50%, is expected to be posted as:

Debit	Debit	Debit
Vendor payable		1,210 €
Expense	1,000 €
Non-deductible VAT (NVV , absorbed in cost)	105 €
Input VAT (VST, deductible)	105 €

When correctly customized as described, the Financial document for this example should be similar to this one:

The XML reported to SII should be similar to the following:

Disclaimer

This blog post reflects the author's interpretation of Spanish legal requirements and SAP system behavior as of the publication date. It is intended for informational purposes only and does not constitute legal advice or consulting guide. For specific guidance, consult your legal or tax advisor and refer to official SAP documentation.

The links to external sources in this blog may be modified at any time externally by the owner without previous notice.

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