About Setting Up VAT

Artículo
09/25/2015

VAT is a transaction tax that is paid by the end user, which can be a consumer or a business. You set up VAT to specify the VAT percentage to calculate for the following scenarios:

Who you sell to.
Who you buy from.
What you sell.
What you buy.

When you set up VAT, you have to perform the following general steps:

Set up VAT business posting groups.
Enter VAT posting setup combinations.
Set up VAT product posting groups.
Assign VAT posting groups.
Use reverse charge VAT for trade between EU countries/regions.
Understand VAT rounding for documents.

Note

The principles for setting up both business and product VAT posting groups are like the principles for setting up general posting groups. For more information, see Set Up Posting Groups.

Setting up VAT Business Posting Groups

You create VAT business posting group codes to represent customers and vendors.

VAT business posting group codes define how VAT is calculated and posted according to the type of customer or vendor that is involved in the transaction. For example, the VAT business posting group can describe where the customer or vendor is located.

Use codes that are easy to remember and that describe the business group, such as EU, Non-EU, or Domestic. The code must be unique. You cannot have the same code more than once in a table. You can set up as many codes as you need.

For more information, see How to: Set Up VAT Business Posting Groups.

Setting up VAT Product Posting Groups

You create VAT product posting group codes for items and resources.

VAT product posting group codes determine how to calculate and post VAT according to the type of item that is being purchased or the type of item or resource that is being sold.

Use codes that are easy to remember and describe the product posting group, such as No-VAT for miscellaneous without VAT, VAT10 for miscellaneous with 10 percent VAT, and VAT25 for miscellaneous with 25 percent VAT.

For more information, see How to: Create a VAT Combination Setup and How to: Set Up VAT Product Posting Groups.

Entering VAT Posting Setup Combinations

You set up the combinations of VAT business posting groups and VAT product posting groups in the VAT Posting Setup window.

For each combination, you can specify the VAT percent, VAT calculation type, and general ledger account numbers for posting VAT that is related to sales and purchases and reverse charge VAT. You can also specify whether VAT is recalculated when a payment discount is applied or received.

You can enter as many combinations as you need. If you want to group VAT posting setup combinations with similar attributes, then you can define a VAT Identifier value for each group and then assign the identifier to the group members.

For more information, see How to: Set Up Combinations of VAT Business Posting Groups and VAT Product Posting Groups, How to: Create a VAT Combination Setup, and VAT calculation type.

Assigning VAT Posting Groups

Once you have set up VAT posting groups, you assign them to general ledger accounts, customers and vendors, and items and resources.

Instead of manually assigning these groups to accounts, you can set up default VAT business posting groups on general business posting groups and default VAT product posting groups on general product posting groups. The relevant code is then automatically inserted as the VAT business or product posting group when you assign the relevant business or product posting group to a customer, vendor, item, or resource.

For more information, see the following topics:

Using Reverse Charge VAT for Trade Between EU Countries/Regions

Companies in the EU must use reverse charge VAT when trading with other companies in the EU. The rule applies to purchases from EU countries/regions and sales to EU countries/regions.

Note

This rule applies when trading with companies that are registered as VAT liable in another EU country/region. If you do business directly with consumers in other EU countries/regions, then you should contact your tax authority for applicable VAT rules.

Purchases from EU Countries/Regions

When you post a purchase from a vendor in another EU country/region, VAT must be calculated using the rate that is applicable in your own country/region. On the VAT statement, the VAT amount is added to the domestic sales VAT and to the domestic purchase VAT. This means the calculated VAT does not affect the payable VAT.

You must report the value of purchases, which is the base amount that was used to calculate purchase VAT, from EU countries/regions separately on your VAT statement.

To correctly calculate VAT on purchases from EU countries/regions, you should:

Set up VAT Bus. Posting Group and VAT Prod. Posting Group combinations with Reverse Charge VAT in the VAT Calculation Type field. You must also enter the general ledger account to which reverse charge VAT is posted in the Reverse Chrg. VAT Account field.
Assign the VAT business posting groups in the VAT Bus. Posting Group field on the vendor card of each EU vendor. You should also enter the vendor's VAT registration number in the VAT Registration No. field on the Foreign Trade FastTab.

When you post a purchase from a vendor in another EU country/region, the VAT amount is calculated, the purchase VAT account is debited, and the reverse charge VAT account is credited. A VAT entry that contains the VAT base amount, which is the purchase price before VAT, is created, and the amount is specified as a reverse charge VAT amount.

Sales to EU Countries/Regions

VAT is not calculated on sales to VAT-liable companies in other EU countries/regions. You must report the value of these sales to EU countries/regions separately on your VAT statement.

To correctly calculate VAT on sales to EU countries/regions, you should:

Set up a line for sales with the same information for purchases. If you have already set up lines in the VAT Posting Setup window for purchases from EU countries/regions, then you can also use these lines for sales.
Assign the VAT business posting groups in the VAT Bus. Posting Group field on the Invoicing FastTab of the customer card of each EU customer. You should also enter the customer's VAT registration number in the VAT Registration No. field on the Foreign Trade FastTab.

When you post a sale to a customer in another EU country/region, the VAT amount is calculated, and a VAT entry is created by using the information about the reverse charge VAT and the VAT base, which is the amount that is used to calculate the VAT amount. No entries are posted to the VAT accounts in the general ledger.

Understanding VAT Rounding for Documents

Amounts in documents that are not yet posted are rounded and displayed to correspond with the final rounding of amounts that are actually posted. VAT is calculated for a complete document, which means that VAT that is calculated in the document is based on the sum of all lines with the same VAT identifier in the document.

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