How should I treat a related customer or vendor from a VAT perspective? This is very frequently a dilemma which we are faced and which unfortunately there's a lot of misconception surrounding it.
Step-by-step guide
A related party does not trigger a different VAT treatment and the standard VAT Business posting group should be applied.
However we must pay attention to the Posting Group ie:
- Customer Posting Group
- Vendor Posting Group
In line to IFRS we must clearly distinguish the transaction and balances which are attributed to related parties and this is best achieved by having a specific classification within the Vendor Posting and Customer Posting Group. No other changes are expected.
It's to be noted that the setup for Intercompany is not being taken into consideration here, as it necessitates a number of setups as does not fall within the scope of the query.
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