Tax Processing in Posting

Tax codes in the Charts of Accounts

The tax codes used in this application are created separately for each chart of accounts on the Tax Codes screen (Settings > Posting settings > Charts of Accounts > Tax Codes).

Basic Data

Tax Code: A code, which is entered onto a posting row. The application uses this code to retrieve the tax account for posting.
Type: Indicates the tax type.
Tax Rate
Group: Indicates the respective tax group. Only used in special cases where the posting row's group information is required by the Purchase Invoice interface.
Description: Tax Code description
Fields related to the period of validity
- Period of Validity. Date is compulsory when selecting the Start or End option. Always Valid option is selected, all other fields related to the period of validity are greyed out.
- The Date on which the period of validity of the tax code starts and ends. This date is compared to the transaction's voucher date.
- The new tax rate. With this option, the original tax code is applied in postings outside the period of validity of the tax code and its tax rate is replaced by the new tax rate.
- The Replacing Tax Code. With this option, the original tax code is replaced by the replacing tax code in postings outside the period of validity of the tax code.
  The new tax rate and the replacing tax code are optional settings; they cannot be applied simultaneously. The replacing tax code should be of the same type as the tax code being replaced.
  
  It is not compulsory to define a new tax rate or a replacing tax code. If the period of validity of the tax code has expired or it has not yet started and a new tax rate, or a replacing tax code has not been defined for the code, this tax code cannot be applied in postings.

Use as default tax code in matching This option specifies whether to use the tax code as the default code when matching purchase invoices to purchase orders in an external ordering system.
It is necessary to specify the default tax code if the application contains several tax codes for the same tax rate. In this case, the posting rows are created during matching by using the tax code that has been specified as the default code.

This option is available if the license contains the paid additional feature for purchase order matching.

Ledger accounts

Ledger Account 1: When the the tax code type is VAT or Sales Tax, tax is recorded in Ledger Account 1.
Ledger Account 2: When the tax code type is Reversed VAT or Use Tax, tax is recorded in both Ledger Account 1 and Ledger Account 2.

Partial VAT Deduction

Deduction %: 100% means that the row total is VAT deductible. A smaller percentage means that a separate posting row is created for the non-deductible portion of the total sum. Two rows, i.e. an expense row and a tax row, are created from the deductible sum.
The Replacing Tax Code 1 and The Replacing Tax Code 2: If defined, these pieces of information are converted into a tax code to the posting row during the posting process. The Replacing Tax Code 1 is transferred to the expense entry and tax entry of the tax deductible sum, and the Replacing Tax Code 2 is entered as a tax code in the posting row of the non-deductible portion of the total sum. The Replacing Tax Code 1 and the Replacing Tax Code 2 percentages can differ.

Tax Processing Settings

Tax Processing is determined by the Posting Sum setting, which is selected in Posting. While entering the posting data, it is possible to define row by row how the row specific taxes are processed, i.e., which one of the following information is entered from the invoice:

the gross total (tax is deducted from the total) in which case the option Tax included is selected in the Posting Sum field or
the net total (tax is added to the total) in which case the option Tax not included is selected in the Posting Sum field.

The Posting Sum setting is selected in the scroll down list above the posting rows while manually entering the accounts.

Based on this setting, the Not Posted Sum is shown either as a gross or as a net amount. The application will also suggest a new posting row with the amount in question, if the entire transaction has not been posted.

You can save the default rule for tax computations in the supplier information (for more information, please see Supplier Settings). When the supplier's invoice is posted and a new posting row is created, by default, the supplier's tax processing rule is entered to the Posting Sum field.

Correction of Posting

When a posting row is being changed, the original entered sum is displayed as the posting row amount (debit or credit). Additionally, the Posting Sum field shows the setting according to which the tax has originally been calculated.

Note: If, for instance, a purchase invoice cost entry was originally posted by selecting Tax included, the invoice amount that includes tax would have been used in posting. If the expense row is edited, the entry gross amount is shown as the entry total and "Tax included" as the Posting Sum setting.

Corrections of postings are carried out by selecting an incorrect row as active in posting and by correcting the respective data. When the Save button is clicked on, the application calculates the tax sum according to the selected tax code and the Posting sum setting.