Annals of „Constantin Brâncuşi” University of Târgu Jiu, Economy Series, Issue 1/2017 „ACADEMICA BRÂNCUŞI” PUBLISHER, ISSN 2344 – 3685/ISSN-L 1844 - 7007 DETERMINING VAT PRO RATE. CASE STUDY AT A PAWNSHOP IN ROMANIA NICOLAE ECOBICI ASSOC. PROF. PHD CONSTANTIN BRANCUSI UNIVERSITY OF TARGU JIU e-mail: nycu2004ro@yahoo.com Abstract Determining VAT pro rate entails in terms of theory the calculation of the share of taxable transactions made by an entity in total transactions. Thus, the entities that use VAT mixed regimes will be able to deduct the VAT related to operations afferent to the transactions with deductibility right and without deduction right, just in the same proportion with calculated pro rata. Also, regulations and adjustments will be made using the final pro rate applied for the entire ending year in the last statement of every year. By the 25 th of the first month of the financial year, any entity must declare the provisional pro rate for the coming year to the tax administration body, which is equal to that determined for the ended year. The method used for capturing the main practical tax and accounting problems inherent to determine the VAT pro rate is the case study made at a pawn shop in Romania over the year 2016. Thus, given the multiplicity of operations carried out by pawnshops (pawnshop with gold and silver goods, pawnshop with electronics, selling goods unclaimed at the expiration of the pawn contracts, melting gold and silver and sale in the form of ingots or bars etc.), in this article there will be discussed the main problems which may occur in practice on the VAT pro rata, using the example of an entity of this kind in Romania for 2016. Keywords: pro rata, VAT, pawnshop, mixed regime, deduction, reverse charge, VAT return JEL Classification: M41,H25 1. Introduction Determining the correct VAT pro rate is an obligation with profound implications for all entities registered for VAT purposes. Its level directly influences the value added tax permitted to be deducted by the VAT return (monthly or quarterly), and implicitly the fee owed to the state or to be recovered from this [5]. There is a direct and close relationship between the deduction degree of outputs (exempt income without deductibility right and income with deductibility right) and the deduction degree of VAT related to inputs. Thus, if the entity does not perform exempt transactions with no right to deduct , the pro rate VAT is 100%, enabling full deduction of value added tax related to the the inputs. Therefore, when the inputs (purchases, services, works) are exclusively intended to carry out operations with the right to deduct, the VAT afferent to inputs is integrally deducted. Conversely, when inputs are exclusively intended for operations without the right to deduct, the VAT affferent to inputs is not deducted (integrally). If the entity performs both exempt transactions without the deduction right and transactions with the right to deduct, VAT deduction afferent to inputs will be made in proportion with the value of the pro rate amount [1], the entities being classified as entities which apply the mixed regime. 2. Determining VAT pro rate Determining VAT pro rate entails, in terms of theory, the calculation of the share of taxable transactions related to all outputs made by an entity (1). VAT pro rate = *100 = (1) = Thus, entities that use mixed VAT regimes will be able to deduct input VAT related to operations with deduction right and without deduction right, just in the same proportion with the calculated pro rata. Also, regulations 91