VAT recalculation
When a customer makes payment in a foreign currency, VAT must be recalculated using the exchange rate at the time of the invoice payment.
A company creates an invoice in a foreign currency for the purchase of taxable goods and taxable services by a foreign customer. This invoice includes VAT. When the customer makes the payment at a later date, VAT is recalculated based on the original sales amount, and adjusted for the new currency rates.
The following steps show how to create a report for unrealized VAT amounts:
- Set up an option to allow recalculation of VAT upon receipt of payment.
- Recalculate VAT upon receipt of payment.
- Adjust journal entries for realization of VAT taxes payable to recognize exchange differences.
- Create a VAT statement that shows the unrealized VAT amounts.