...
Non-deductible VAT options
You can use proportional VAT to calculate VAT when you have both deductible and non-deductible VAT. Non-deductible VAT is included in purchase documents only. Depending on your settings, you can use fully or partly non-deductible VAT or a combination with different deductible percentages per line. You can use it configured as Normal VAT, Full VAT, and Reverse Charge VAT with or without deferrals. Before posting the purchase document, you can adjust the VAT amounts if VAT rounding in the external system and Business Central differ.
...
Workflow for VAT Amounts rounding
Set up non-deductible VAT
...
Select the icon, enter VAT Setup, and then select the related link.
...
Select the Enable Non-Deductible VAT checkbox.
...
Select the icon, enter VAT Posting Setup, and then select the related link.
On the VAT Posting Setup page, set the fields as described in the following table.
Field | Description |
|---|---|
Allow Non-Deductible VAT | Specify whether the non-deductible VAT is considered for the current combination of a VAT business posting group and a VAT product posting group. |
Non-Deductible VAT % | Specify the percentage of the transaction amount that VAT isn't applied to. |
Non- Deductible Purchase VAT Account | Specify the account that's associated with the VAT amount that isn't deducted because of the type of goods or services that are purchased. |
...
| Info |
|---|
Note To have general ledger (G/L) entries that use the dedicated account instead of the sales/purchase account, you can either leave the Non-Deductible Purchase VAT Account field blank or set the G/L Account field. |
...
Source https://learn.microsoft.com/en-us/dynamics365/business-central/finance-setup-nondeductible-vat
Reporting non-deductible VAT
After posting, the VAT Entry table shows separate details for deductible and non-deductible amounts and bases. When it’s time to report VAT amounts to your authorities, the Amount Type column in the VAT Statements view offers options for non-deductible and full amount or base. The Day Book VAT Entry report features new columns as well. Other reports will be updated in later releases based on our customers’ feedback.