There are very few exceptions where I have had to leave VAT on for purchase orders for EU VAT setups. There are however several reasons why it is best practise to turn it off, including those listed below;
- As you recover your VAT, VAT on purchases is immaterial to the actual purchase price of the goods as you will claim it back (for the majority of purchases). This can have issues with sign off limits and budgets if tax is included
- When creating a purchase order for an item that is not in your inventory, you can never truly know whether that item is standard, reduced or exempt from VAT until the invoice arrives
- VAT and any other type of transactional tax is always recalculated based on the AP invoice and not from the purchase order.
- The supplier could be non registered for VAT and so none in due
- Offset tax cannot be calculated on Purchase Orders so you will in fact only see the positive tax amount and not the negative offset amount that can cause issues
- No accounting is passed to the GL from purchasing with regards to the VAT calculated
- If the purchase order VAT amount is different to the Supplier VAT amount then there can be matching issues with the invoice that comes in.
- Legal Entity information is not added to a PO so any logic linked to the legal entity or legal entity establishment can not be used.
I would only consider Tax on Purchase orders if there are strict budgetary requirements or if tax is not recoverable, you need to pull in the Purchase orders for cash flow purposes or you do not recover VAT.
You can always turn the tax back on if you need it!