Purchase of Goods and Expense Registration for a Self-Employed VAT Payer

Pats.lv users and self-employed individuals often approach us with practical questions. We’re sharing an answer to one of them – it may be useful for you too, to ensure correct expense reporting in your business activity journal!

Question from a self-employed person:

I want to buy a phone for business purposes for EUR 800. The seller’s website allows you to select a price excluding VAT. As a self-employed person with VAT payer status, can I purchase the phone at the price without VAT? Can I buy it on installment or do I have to pay the full amount upfront?

What to do?

If you are a VAT payer, then according to the Value Added Tax Law, a self-employed person has the right to purchase this phone using the reverse charge VAT procedure. What does that mean? If the payment is made via non-cash transaction, the supplier issues an invoice with 0% VAT. Note – this does not apply to cash payments!

Expense registration and installment purchase

A self-employed person is free to choose whether to purchase the item on installment with partial payments or pay the full amount at once. If you pay the full amount upfront, the transaction is registered with the total value. Since the value is under EUR 1000, the expense can be immediately recorded as a business expense. If the invoice is issued using the reverse VAT procedure, then in the Pats.lv system this transaction can be registered with the description “Receipt of goods, materials – Low-value assets up to EUR 1000”. The VAT rate must be set to 0%, and the transaction type to R4.

If the item is purchased on installment, the full transaction amount should be entered initially, according to the supporting document, but the payment method should be marked as “None”. Then, monthly payments should be added as partial payments.

If the value of the purchased device exceeds EUR 1000, it is considered a fixed asset, and its cost must be written off gradually through depreciation. When registering the expense, mark it as “Fixed asset purchase” and set VAT to 0%. Based on this expense, a fixed asset card must be created in Pats.lv, from which depreciation will be calculated.

If a fixed asset is purchased on installment, there are two ways to register it:

1. First, create a fixed asset card indicating the full value of the asset. Monthly payments are registered as expenses with the description “Fixed asset purchase”.
2. First, register the transaction as “Fixed asset purchase” with the full amount. Then, create a fixed asset card from this transaction. Set the payment method to “None”. After that, add monthly payments to this transaction.

Note! If the phone is used for both business and personal purposes, a legally prescribed proportion must be applied to the transaction amount. In such cases, you can register up to 70% of the item’s cost as an expense. If the item is a fixed asset, the proportion must be applied when creating the fixed asset card, to ensure accurate depreciation calculations.

There are many types of expenses that can be deducted, and it’s easy to overlook some of them. Where can you find guidance?

• help.pats.lv – we’ve compiled frequently asked questions
• Expense analytics in your Pats.lv profile – choose a Pro or Premium subscription, and the system will offer suggestions for expense deductions.