How to deal with VAT calculation in the models

Since companies are obliged to transfer value added tax they collect on their products (assume 20%), we don't take into account them in the models and just calculate revenues without VAT as there is no any cash flow effect for the company except the timing of cash flows. However, usually the expenses we use in the models are with VATs and company can actually use them to reduce the amount of collected VATs that they would need to transfer to tax authorities and do netting, causing discrepancy in the financial models. How do you deal with this problem since we literally can't know which of company expenses are with VAT or not? Thanks.

 

Hi torres657, any of these threads helpful:

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