In EU countries/regions, every sales and purchase transaction is subject to VAT calculations.
You can calculate and display VAT amounts in sales and purchase documents differently depending on the type of customer or vendor that you are dealing with. You can also override the VAT amount calculated by the program to match the VAT amount calculated by your vendor on a given transaction.
When you select an item in the No. field in a sales document, the program also fills in the Unit Price field. The unit price is calculated and transferred from either the Item Card or from the item prices allowed for the item and customer. The program only calculates the Line Amount when you enter a quantity for the line.
In cases where you are selling to retail consumers, you may want your sales document prices to be displayed including VAT both on screen and when printed. To do this, insert a check mark in the Prices Including VAT field in the document header.
If the field is not checked, the program will fill in the Unit Price and Line Amount field excluding VAT and the field names will reflect this.
If the Prices Including VAT field is checked, the Unit Price and Line Amount field will be updated to include VAT and the field names will also reflect this.
You can set up the default setting of the Prices Including VAT for all sales documents for a customer in the Prices Including VAT field on the Customer Card.
You can also set up item prices to include or exclude VAT. Normally, item prices contained in the Item Card will be the price excluding VAT. The program uses the information from the Price Includes VAT field on the Item Card to determine the unit price amount for sales documents.
The following table provides an overview of how the program calculates the unit price amounts for a sales document when you have not set up prices in the Sales Prices window:
Price Includes VAT field on Item Card |
Prices Including VAT field in Sales Header |
Action Performed |
No check mark |
No check mark |
The Unit Price on the Item Card is copied to Unit Price Excl. VAT field on the sales lines. |
No check mark |
Check mark |
The program calculates the VAT amount per unit and adds to the Unit Price on the Item Card. This total Unit Price is then entered in the Unit Price Incl. VAT field on the sales lines. |
Check mark |
No check mark |
The program calculates the VAT amount included in the Unit Price on the Item Card using the VAT% related to the VAT Bus. Posting Gr. (Price) and the VAT Prod. Posting Group combination. The Unit Price on the Item Card, reduced by the VAT amount, is then entered in the Unit Price Excl. VAT field in the sales lines. |
Check mark |
Check mark |
The Unit Price on the Item Card is copied to Unit Price Incl. VAT field on the sales lines. |
The program automatically calculates the VAT using the customer's VAT Bus. Posting Group and the item's VAT Prod. Posting Group. However, you can also manually enter the VAT amounts, if the amount calculated by the program is slightly different to that calculated by your customer or vendor, for example, due to rounding. To manually enter VAT in sales documents you must:
In the General Ledger Setup window, specify a Max. VAT Difference Allowed between the amount calculated by the program and the manual amount.
In the Sales & Receivables Setup window, place a check mark in the Allow Vat Difference field.
Open the Sales Order window and browse to your sales order.
Press F9 to display the Sales Order Statistics window.
Click the Invoicing tab.
The total VAT amount for the invoice, grouped by VAT identifier, is displayed in the lines. You can manually adjust the amount in the VAT Amount field on the lines for each VAT identifier. When you modify the VAT Amount field, the program checks to ensure that you have not changed the VAT by more than the amount you have specified as the maximum difference allowed.
If the amount is outside the range of the Max. VAT Difference Allowed, a warning will be displayed stating the maximum allowed difference. You will be unable to proceed until the amount is adjusted to within the acceptable parameters. Click OK and enter another VAT Amount that is within the allowed range.
If the VAT difference is equal to or lower than the maximum allowed, the VAT will be divided proportionally among the document lines that have the same VAT identifier.
You can also adjust the VAT amounts calculated by the program in general, sales, and purchase journals. It may be necessary to do this when you enter a vendor invoice in your journal and there is a difference between the program's calculated VAT amount and the VAT amount on the vendor's invoice you have received.
Before you can manually enter VAT on a general journal, you must:
In the General Ledger Setup window, specify a Max. VAT Difference Allowed between the amount calculated by the program and the manual amount.
Place a check mark in the Allow VAT Difference field for the relevant journal in the General Journal Templates window.
Before you can manually enter VAT on sales and purchase journals, you must:
Check the Allow VAT Difference field in the Sales & Receivables Setup and Purchases & Payables Setup windows, respectively.
Once you have completed the setup described above, you can adjust the VAT Amount field on the general journal line, or the Bal. VAT Amount field on the sales or purchase journal line, to equal the invoice VAT amount. The program will check that the difference is not greater than the specified maximum.
If the difference is greater, a warning will be displayed stating the maximum allowed difference and you will be unable to proceed until the amount is adjusted accordingly. Click OK and enter another amount that is within the allowed range.
If the VAT difference is equal to or lower than the maximum allowed, the program will show the difference in the VAT Difference field.
Import VAT recording presents a situation where you may need to post a document where the entire amount must be treated as VAT. This is necessary, for example, if you receive a VAT invoice from the tax authorities for imported goods.
To record the import VAT, you must set up a new G/L VAT account, a VAT Product Posting Group, and a corresponding line in the VAT Posting Setup for this purpose.
To post the Import VAT invoice in our example, you can use a journal or a purchase invoice.
It is possible to make corrections to posted VAT entries. This allows you to change the total sales or purchase VAT amounts without changing the VAT base. The feature may be used, for example, if you receive an invoice from a vendor who has calculated VAT incorrectly.
The program contains some special tables to manage the tasks necessary for settling VAT and reporting to the customs and tax authorities. You can use these tables to have the program:
Calculate the VAT due for a period
Prepare and print the VAT statement
The program creates an entry in the VAT Entries window for each posted transaction that involves VAT. These entries are used to calculate the VAT that must be settled for a given period.
You use a VAT statement to specify the basis for calculating the VAT payable to the tax authorities. In the VAT Statement window, you define the VAT statement based on the accounts in the Chart of Accounts window or based on entries in the VAT Entries window. The advantage of using the VAT entries option is that you can close these entries by posting the VAT Settlement. It is easier to locate VAT correction entries in previous accounting periods, where the VAT statement has been done, by working with VAT entries.
The VAT statement is normally defined when you initially set up the company in the program. It is recommended that you set up the statement with the format that is required by the tax authorities. After the statement has been defined, it can be previewed and printed.
Periodically, you must remit the net VAT to the tax authorities. After you have approved the VAT statement, you can run the Calc. and Post VAT Settlement batch job to close the open VAT entries and transfer purchase and sales VAT amounts to the VAT settlement account. You can use this batch job as often as you want if you need to settle VAT frequently.
As soon as the VAT entries have been posted and their status is closed, they cannot be opened again. However, you can still create VAT reports from these closed entries.
Entering VAT-liable Amounts without VAT in General Journals
Setting Up and Recording Intrastat