About VAT and its variations

Taxes of the general VAT type are paid at each stage of the production of goods or at each stage in the distribution process, and the taxes are calculated on the value added to the goods at each stage.

Your organisation adds VAT amounts to the sales prices of goods and collects the VAT from the customers; this VAT amount is called output VAT.

On the other hand, your organisation pays the supplier the VAT amounts on all related supplies and services; this VAT amount is called input VAT. The VAT amount that your organisation should pay to the tax agency is calculated as the difference between the output amount and the input amount.

You create a VAT of the general type in the VAT (TX205000) window. While creating a VAT, you have to specify a rate to be used for the input VAT and a rate to be used for the output VAT.

The rates can be the same or different.

When the system calculates a general value-added tax for a supplier ledger document, it records the document amounts (including the VAT amount) to the appropriate general ledger accounts as shown in the following table:

Account	Debit	Credit
Supplier ledger account	00.00	Amount + VAT amount
Specified expense account	Amount	00.00
VAT claimable account	VAT amount	00.00

When the system calculates a general value-added tax for a customer ledger document, it records the document amounts (including the VAT amount) to the appropriate general ledger accounts as shown in the following table:

Account	Debit	Credit
Supplier ledger account	Amount + VAT amount	00.00
Specified asset/income account	00.00	Amount
VAT payable account	00.00	VAT amount

You can configure the following modifications of a value-added tax in the VAT (TX205000) window:

• Deductible VAT:
  In some countries, certain VAT-registered companies are allowed to deduct some part of the VAT paid to a supplier on purchases from their own VAT liability to the government.
  This type of VAT is called the deductible VAT. The deducted amount is claimed from the agency, while the non-deductible VAT amount is recorded as expenses.

  A deductible VAT is applied when a company purchases goods or services to be used for business processes rather than for further sale. Suppose that a hotel purchases cleaning supplies and towels for its business. The invoice amount it pays to the supplier includes a 25% VAT. It is allowed to deduct 40% of the VAT amount paid on this purchase from the VAT amount paid to the tax authority.
  This amount will be claimed from the tax agency. The non-deductible part of the VAT amount will be recorded as expenses.

  To partially deduct the VAT amount, you need to configure a VAT of the deductible type.
  To configure the Deductible VAT, in the VAT (TX205000) window, you should select the VAT tax type and the Deductible VAT check box.

  After that, the appropriate fields required for configuring a deductible VAT appear in the window.

  You should specify the deductible rate in the Deductible VAT rate column, so that in a document, the VAT amount calculated based on this rate (that is, the part of the VAT amount to be paid to the supplier) can be claimed from the tax agency. Non-deductible VAT amounts should be recorded as expenses.

  In Visma.net ERP, you can set the system to record them in one of the following ways:

  • To the dedicated general ledger account, which you specify in the VAT expense account field (and the VAT expense subaccount field , if applicable) on the General ledger accounts tab of the VAT (TX205000) window.
    To make the VAT expense account field (and the VAT expense subaccount field , if applicable) available for editing, you need to select the Use VAT expense account check box (located above these fields).
    With this way of configuring the tax, on release of a taxable supplier ledger document, the system will create the following general ledger transactions.

  Account	Debit	Credit
  VAT claimable account	Deductible VAT amount	0.00
  VAT expense account	Non-deductible VAT amount	0.00
  Supplier ledger	0.00	Amount + VAT amount
  Expense account	Amount	0.00

  • To the expense account specified in the supplier ledger document detail line.

  In that case, you need to leave the Use VAT expense account check box cleared on the General ledger accounts tab of the VAT (TX205000) window.

  • With this way of configuring the tax, on release of a taxable supplier ledger document, the system will create the following general ledger transactions.

    Account	Debit	Credit
    VAT claimable account	Deductible VAT amount	0.00
    VAT expense account	0.00	Amount + VAT amount
    Supplier ledger	Amount	0.00
    Expense account	Non-deductible VAT amount	0.00

  If the Expense reclassification functionality is enabled in the Enable/disable functionalities (CS100000) window, then the non-deductible VAT amount will be posted first to the specified reclassification account during the pre-release process. Then, upon release, the amount will be posted to the appropriate expense account.

• Reverse VAT:
  A reverse VAT is a type of value-added tax used in some countries of the European Union.
  The reverse VAT has been implemented as a simplification measure for companies that supply goods or services to other EU countries.
  

  With this tax applied, these companies avoid the need to register in the countries to which they supply the goods or services.
  Thus, if a supplier normally must report the VAT due on their supplies to the tax authorities, so when this type of VAT applies, the liability of reporting VAT is reversed and goes to the customer.

  The customer in this case acts as both the supplier and the customer. He or she credits a tax payable account in the needed output VAT amount on purchases from abroad, and at the same time debits a required account with the amount of input VAT to be paid under the standard tax rules.

  Thus, to satisfy the legal requirements related to the reverse-charged VAT, you configure this type of VAT by creating two VAT codes of the following types:

  • A reverse VAT:
    For this tax, you select the Reverse VAT check box and specify a reporting group of the Output type.
    This tax should be paid to the agency.
  • A general-type VAT:
    For this tax, you specify a reporting group of the Input type, and specify the same rate as the reverse VAT has.
    This tax can be claimed from the tax agency (if it is allowed).

  The system calculates these taxes on the same invoices so that the VAT amounts will be rolled back and will not update the document total.

  You must consider the legal requirements of your country in order to decide how you must report a reverse VAT and configure the VAT report that meets these requirements.

• Statistical VAT:
  Generally, a statistical VAT is reported but not paid. It may be required that you report the taxable amounts to the country in the VAT zone from which you imported the goods.
  For taxes of this type, the rate is zero and the system calculates the taxable amounts only.
  The VAT amounts do not update the document amounts.

  To configure the statistical VAT, you should select VAT tax type and the Statistical VAT check box.

  When you create a VAT of the statistical type, you have to specify rates of zero for the input tax and output tax.

• Exempt VAT:
  An exempt VAT is applied for certain goods and services (such as medical care, educational services, and postal services).
  f the services provided by your organisation are not subject to VAT, your organisation does not collect the tax on the sales.
  As a rule, the taxes charged by suppliers for related supplies are not claimable by your organisation.
  However, in most cases, your organisation should report the amounts of sales that are exempt from VAT.

  When you create a VAT of the exempt type, you have to specify zero rates for the input VAT and output VAT, so that VAT amounts will not be calculated in the documents, but taxable amounts will be accumulated in the VAT report.

• Pending VAT:
A pending VAT (sometimes called a suspended VAT) is applied to those documents whose VAT amounts should be recognised later than the document has been released.
Once a document subject to the pending VAT is released, the system records its VAT amount to an intermediate account (such as the Pending VAT payable account or the Pending VAT claimable account), where the VAT amount is kept until you initiate the process of recognising the taxes.
Suspended VAT information is not included into the VAT report until the taxes are recognised.

• By the recognition process, the system moves VAT amounts from the pending account to the actual VAT payable or VAT claimable account, and includes VAT information in the VAT report prepared for the corresponding period.
  
  

  You configure and maintain this type of VAT as follows:
  1. Create a tax of the VAT type with the Pending VAT check box selected.
  2. Set up VAT calculation across the system for that tax.
  3. Create a document to which the pending VAT is applied. See that the VAT amount calculated in this document is not included in the VAT report.

You can configure VAT of the Pending type and the Reverse type at the same time.

While configuring that type of the tax, you need to select the Pending VAT check box and the Reverse VAT check box in the VAT (TX205000) window.

You can control how the VAT taxable amount will be displayed in the top part of the document (in the VAT taxable total field) when more than one value-added tax is applied to the document.

In multi-line documents (those that contain multiple sales or purchase transactions), different taxes can be applied to each line of the document. The system calculates the VAT taxable amount for each line according to the settings of the applicable tax.

Each taxable amount can be added by the system to the VAT taxable total field, if the Include in taxable total check box is selected in the VAT (TX205000) window for the corresponding tax.

If all calculated taxable amounts are added to that field, the accumulated amount will not make any sense. Thus, if multiple taxes should be applied to your multi-line documents, we recommend that you clear the Include in taxable total check box in the settings of the corresponding taxes, so the VAT taxable total field will be empty.

Those manipulations do not affect the calculation of VAT amounts.