About VAT settings

When you create a VAT rate in the system, you have to specify the settings that the system uses to calculate the VAT amount and the taxable amount (that is, the tax base) in the documents.
You configure a VAT by using the VAT (TX205000) window.

Depending on the type of the VAT, you can specify different settings.
Most of these settings and their use are described in detail below.

Different taxes may require different methods of calculation.
You can select the appropriate option in the Calculate on field in the VAT (TX205000) window.
The following options are available:

  • Extract from item amount:
    The VAT is already included in the item price.
    The system extracts the VAT amount from the item amount according to the VAT rate that you specify.
  • Item amount:
    The VAT amount is calculated on a per-item basis; that is, the VAT is applied to each line in the document.
  • Document amount:
    The VAT amount is calculated on a per-document basis.
    That is, the document total amount is used for VAT calculation.
  • Item + VAT amount:
    The VAT amount is calculated by using as the tax base the sum of the item amounts and the VAT amount.
  • Document + VAT amount:
    The VAT amount is calculated by using as the tax base the sum of the document amount and the VAT amount.

Consider an example in which the different VAT calculation methods are used.
Imagine that the document contains 100 items, each priced at €10, and the VAT rate is 8.25%:

  • With the per-document method, the tax base (total amount of the document) would be 100 items x €.10= €.1000.
    Then the VAT amount would be €1000 x .0825 = €82.5.
  • With the per-item method, the VAT amount per item would be €10 x .0825 = €0.825, which rounds to €0.83.
    Then the total VAT amount would be €0.83 x 100 items = €83.

As you can see, using different methods of VAT calculation for the same documents may cause discrepancies in the document totals due to rounding.
Thus, you need to choose the calculation method that best suits your needs.

In the Cash discount field in the VAT (TX205000) window, you can specify the method of calculating the taxable amount if a cash discount is applied to the document.
You can select one of the following options:

A cash discount can be applied to a document only within the cash discount period.
The end date of the cash discount period is specified in the Cash discount date field in the invoice (or the similar document).
This date is defined by the system according to the specified payment terms.
  • Reduces taxable amount:
    The system deducts the discount amount from the document amount before VAT calculation.
    Thus, the VAT amount is calculated based on the discounted taxable amount.
    For example: Assume that the price of the one purchased item is 100€, the VAT rate is 10%, and the cash discount is 20%.
    In this case, the taxable amount is decreased by the discount amount and is equal to €100 (price) - €20 (discount) = €80.
    Thus, the VAT amount is €8. The document amount is equal to the product price plus the discounted VAT amount: €100 (price) + 8€ (VAT amount) = €108.
  • Does not affect taxable amount (selected by default):
    The discount amount doesn’t affect the taxable amount. That is, the base for VAT calculation is the same as the base for discount calculation.
    As in the previous example, consider a price of €100, a discount of 20%, and a VAT of 10%.
    Because the taxable amount is not affected by the discount, it is €100.
    The VAT amount is €10. Thus, the document amount is €110.
  • Reduces taxable amount on early payment.
    The system recalculates the taxable amount in the document if the full payment has been received within the cash discount period.
    The documents that have been fully paid within the cash discount period are listed in the Generate VAT on cash discount (AR504500) window.
    In this window, you can generate credit notes that will be automatically applied to the corresponding documents upon release.

If the rate of a particular VAT is going to be changed in the future, you can specify in the VAT (TX205000) window the new VAT rate and the date from which it will be effective.
To do that, you should add a new row to the table on the VAT schedule tab and specify its settings.

For each row of the table on the VAT schedule tab of the VAT (TX205000) window, you can define the minimum and maximum taxable amount for each VAT in the corresponding columns.

  • If a minimum amount is specified in the Min. taxable amount column, the VAT rate of 0 will be applied to amounts less than the specified minimum.
  • If a maximum amount is specified in the Max. taxable amount column, the VAT rate of 0 will be applied to amounts greater than the specified maximum.

In all other cases, VAT is calculated by using the specified rate.

If you plan to use the built-in VAT reporting functionality in Visma.net ERP, you should select the reporting group that you have created for the tax agency specified in the Tax agency ID field in the VAT (TX205000) window

If you do not plan to use the built-in VAT reporting functionality, specify one of the predefined reporting groups (input or output) in the Reporting group column on the VAT schedule tab of this window.