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About differential taxation (Germany)

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Differential taxation is an attribute relating to turnover taxation, wherein the base amount upon which VAT is to be levied, is the difference of the sale and purchase price of the item.

Turnover taxes are imposed at more than one level of production and distribution without relief for the taxes already paid at previous stages, i.e., the taxable value at each stage includes the amounts taxed at the previous stage, as well as the taxes already paid. Differential tax is the additional tax which is paid by the seller.


  • Applicable only to items with unique serial numbers.
  • A particular sales order cannot have multiple items with differential tax and standard VAT tax calculation.
  • Merged invoices, i.e., invoices for sales orders with standard VAT amount as well as sales orders with differential tax amount, are not allowed.

In order to apply differential tax calculation for an item, the following mandatory data must be set up:

  • Valid VAT handling codes for the DEVAHC1, DEVAHC2 and DEVAHC3 functions must be defined in the Function control file.
  • The Differential tax flag for the item on the Additional information panel in the Item file must be set to YES.
  • The item of the invoice that is to be eventually differentially taxed, should be serial number controlled, i.e., the concerned item must exist in the Serial number tracking maintenance.
  • The EU reporting flag in Work with companies must be set to YES.
  • The commercial country (‘from’ country, ‘to’ country) must be a European Union member.
  • The differential basic amount must be seized for the assigned serial number.