How to calculate and adjust the VAT deduction pro rata

What is it for?

A company that carries out operations both with and without the right to deduct VAT (a mixed taxpayer) can only deduct part of the VAT on its purchases. fiscaldoo stores that percentage per year, applies it to supplier invoices and, at the end of the year, calculates the difference between the provisional and the definitive percentage and posts it as an adjustment.

Pending validation by a certified accountant: rules of VAT Code (CIVA) art. 23 used in this article (provisional percentage based on the previous year, definitive percentage calculated at year-end, adjustment only after the year ends, and rounding).

When to use it?

• The company has exempt operations without the right to deduct and taxable operations, and only deducts part of the VAT on purchases.
• The year has started and you need to record the provisional percentage.
• The year has closed and you need to calculate the definitive percentage and adjust the VAT already deducted.

If the company deducts all the VAT, or if only one expense has limited deduction (for example fuel), do not use pro rata: limited deduction is handled by its own deduction rules (see How fiscaldoo calculates deductible VAT).

Where to find it?

• Accounting › Configure › General › Settings, in the VAT (PT) block (Mixed VAT taxpayer setting), with the Administrator profile.
• The year's record opens from the Open the VAT deduction percentage (pro rata) button, in that same setting.
• Without developer mode, the Fiscal officer can also reach the record through Accounting › Declare › VAT › What is there to do with the VAT?, where VAT deduction pro rata is (seen on the Certified accountant's panel; the Accountant does not see it). The item under Accounting › Configure › VAT and withholding is still only in developer mode.

Before you start

• Administrator profile to tick Mixed VAT taxpayer (Settings). The pro rata record and the Annual regularisation button belong to the Certified Accountant / Fiscal Manager or Fiscal officer profile.
• Check that you are in the right company: the setting is per company. With several companies, switch company first (in the demo, the administrator opens in “Empresa Teste Portugal”).
• Have to hand the annual amount of operations with the right to deduct and that of all operations of the activity.
• Check that the fiscal year you will be working in is not locked. A locked fiscal year prevents posting in it: if the adjustment for a year already locked needs an entry dated in that year, ask the Fiscal officer to reopen the fiscal year (Fiscal administration) before posting it.
• The example in this article is “Empresa Teste Filial”, in the 2025 fiscal year, which is not locked.

How to use it

1. In Settings, in the VAT (PT) block, tick Mixed VAT taxpayer and click Save, before saving the year's record: without this, saving the record is refused (see “Common problems”).
2. Click Open the VAT deduction percentage (pro rata) and then New. The record opens with the current year's Fiscal Year (in the example, enter 2025) and the Method “Deduction percentage (CIVA art. 23 no. 1 b)”. The Actual use allocation (CIVA art. 23 no. 2) option is not described in this article.
3. Enter the Provisional percentage (%), for example 80, and save. Estimated (start or substantial change of activity) is ticked: untick it if the percentage comes from the previous year (in the example, unticked).
4. From then on, the year's supplier invoices use the record's percentage to split the VAT into deductible and non-deductible. In the example, the supplier invoice of 15/06/2025, for €1,000.00 plus €230.00 of VAT (23 %), posted to 6228 Outros, gets €184.00 of deductible VAT (80 %) and €46.00 of non-deductible VAT.
5. At the end of the year, click Propose from the operations. With the year's sales posted, the record shows the Proposed numerator, the Proposed denominator and the Proposed percentage (%), and the proposal rounds the quotient up; the Documents of the numerator and Documents of the denominator buttons open the lines that go into each amount, so you can check them. At “Empresa Teste Filial” there are no sales posted in 2025, so the button refuses (“There are no operations of 2025 to compute the deduction percentage”): go to the next step and enter the amounts by hand.
6. Enter in Operations with right to deduction and All operations of the economic activity the year's amounts (the proposal does not copy them): in the example, 48000 and 50000. Save and click Compute the definitive percentage. The Definitive percentage (%) becomes 96.00 (48,000.00 ÷ 50,000.00) and the state Definitive. Under VAT of the year's purchases, the record shows €230.00 of VAT on purchases, €184.00 of deductible VAT and €46.00 of non-deductible VAT.
7. From 01/01 of the following year, click Annual regularisation (before that the button refuses, see “Important notes”). The window shows the Provisional percentage (80.00), the Definitive percentage (96.00), the Regularisation (€36.80) and the Journal (“Miscellaneous Operations”). Choose the Expense account that receives the adjustment, for example 6228 (the same expense as the purchases), and click Post the regularisation.

Expected result

The product opens the adjustment entry, MISC/2025/00001, Posted, in the “Miscellaneous Operations” journal, dated 31/12/2025 and with the text “Pro rata regularisation 2025 (CIVA art. 23.º): 80.0 % → 96.0 %”. On the pro rata record, the Regularisation entry points to it and the Regularisation amount is €36.80:

Account	Debit	Credit
2434 IVA - Regularizações	€36.80
6228 Outros		€36.80

Check with the example's figures: purchase FTF/2025/00001 (€1,000.00 + €230.00 of VAT) was posted at 80 %, with €184.00 of deductible VAT. With the definitive percentage of 96 %, the deductible VAT becomes €220.80 (€230.00 × 96 %), €36.80 more, which the adjustment moves from expense 6228 to VAT to deduct. On the record, VAT of the purchases €230.00, Deductible VAT €184.00 and Non-deductible VAT €46.00 are those at the provisional percentage, before the adjustment.

In the invoice's own entry, the deductible VAT (€184.00) goes to 2432 IVA - Dedutível, the €46.00 of non-deductible VAT goes to expense 6228 Outros with the text “non-deductible VAT (CIVA art. 23.º)”, and 2211 Fornecedores gerais is credited €1,230.00.

The screenshot shows 2027, a year that has not yet ended: for the current year the refusal has the same text until the end of the year (31/12).

Important notes

The definitive percentage also applies to new invoices

With the record in Definitive, the year's subsequent invoices already use the definitive percentage. If you enter 0 in Definitive percentage (%), the state stays Definitive and new invoices deduct 0 % of the VAT; the record now shows the warning “The definitive percentage is 0 %.” and the text “The purchase invoices of this fiscal year deduct none of the VAT: the whole VAT is a cost (CIVA art. 23.º)”. Check the amount before saving.

The adjustment is a posted entry

The adjustment can only be posted after the year has ended (CIVA art. 23(6)): before that the button refuses with “The pro rata of 2027 cannot be regularised yet” (the year in the screenshot) and, until then, invoices keep the provisional percentage. Afterwards, the entry is Posted and dated 31/12 of the year. Anyone who needs to undo it uses a reversal. Check the deductible VAT amount in the VAT settlement for the last period.

Common problems

Saving the year's record is refused: “is not flagged as a mixed VAT taxpayer”

• Symptom: Validation Error window with “Company "Empresa Demonstração, Lda" is not flagged as a mixed VAT taxpayer — the deduction percentage (CIVA art. 23) only applies to taxpayers that carry out both operations with and without the right to deduction. Tick "Mixed VAT taxpayer" on the company first.”
• Cause: the setting is off in the company you are in (or in another one).
• What to do: in Settings, tick Mixed VAT taxpayer in the right company and save again.

“Fill in the annual amount of all operations”

• Symptom: when you click Compute the definitive percentage, “Fill in the annual amount of all operations (greater than zero) to compute the definitive percentage.”
• Cause: Operations with right to deduction or All operations of the economic activity is at €0.00.
• What to do: enter both amounts for the year (Propose from the operations shows what the ledger has) and calculate again.

“Choose the expense account”

• Symptom: in Post the regularisation, “Choose the expense account that receives the VAT adjustment.”
• Cause: the window's Expense account is empty.
• What to do: choose the account and click again.