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How to manage VAT settlement and payment

Contents

Objective

There are several taxes which affects companies running business, taxes such as corporation tax, income tax, value added tax, etc.

Value Added Tax or VAT tax is a tax which must be settled regularly with the tax Authority.

The way to do that is:

Customer Receivable $11.800,00
Product Revenue $10.000,00
Tax Due (Output VAT) $1.180,00
Product Expense $5.000,XX
Tax Credit (Input VAT) $900,00
Vendor Liabilty $5.900,00


At the end of the period:
Tax Due (Output VAT) $1.180,00
Tax Credit (Input VAT) $900,00
Tax authority (VAT creditor) $280,00
and make the payment:
Tax authority (VAT creditor) $280,00
Bank $280,00
Tax Due (Output VAT) $900,00
Tax authority (VAT debtor) $280,00
Tax Credit (Input VAT) $1.180,00X
in case of compensation:
Tax Due (Output VAT) $3.600,00
Tax Credit (Input VAT) $900,00
Tax authority (VAT creditor) $2.420,00
Tax authority (VAT debtor) $280,00
in case of payment:
Bank $280,00
Tax authority (VAT debtor) $280,00
Bulbgraph.png   This How-To article shows how to manage and settle the Spanish Value Added Tax or Spanish VAT in Openbravo

Recommended articles

It’s recommended to know how Openbravo accounts VAT in Sales while posting a Sales Invoice as well as how Openbravo accounts VAT in Purchase while posting a Purchase Invoice.

Managing taxes requires a clear understanding on how Tax Category and Tax Rate are configured in Openbravo as well as how the work.

Execution steps

The Company in this example will have to setup Openbravo to get the VAT Payment process working properly.
This process will help the company to settle the VAT for a given period of time, for instance from July 1st to July 31st, and make the corresponding payment to the tax authorities.

Tax authority setup

It’s needed to create the corresponding "Tax authority" as a Business Partner in the Business Partner window.

The "Tax authority" business partner has to be created as both a "Customer" and a "Vendor" because it could happen that the company has to pay taxes to the Tax Authority or the other way around.

The way to do that is:

VAT Payment setup

The first step for the company to take is to create a G/L item to be used while making or receiving the VAT payment and get it accounted.

G/L items are created in the G/L Item window.

The company in this example needs to:

Tax Register Type setup

Next step is to create as many "Tax Register Types" as needed.

The company in this example has to create two:

The reason for doing that is because each of them will be linked to the VAT taxes (either Input VAT or Output VAT) to take account while running the process to settle the VAT.

Therefore, and once in the "Tax Register Type" window, the company needs to:

How to manage VAT settlement and payment002.png

Then:

How to manage VAT settlement and payment003.png

Tax Payment

Next step is to settle the VAT and to make a payment to the tax authorities or to receive a payment from the tax authorities.

The company in this examples needs to start this process in the Tax Payment window.

Once there, the company needs to:

After that the company needs to:

This time there are 2 transactions one per each Tax Register Type:

Above means the Company needs to make a payment to the tax authorities, tax payment already created in the Payment Out window as the flag "Generate Payment" was selected. See below.

Now, it’s time to Process the tax payment. As a result of that the corresponding journal entries are created in a G/L Journal.

HowToManageVAT004.png

It’s possible to navigate to the G/L Journal when pressing the link “Journal Entry” which can be found in the header of the Tax Payment window.

HowToManageVAT005B.png

Once the G/L Journal is posted, the company will get below posting:

Tax Due (Output VAT) €92,863.46
Tax Credit (Input VAT) €1,926.00
Tax authority (VAT creditor) €90,937.49


Finally and as already mentioned, the tax payment has been created in the Payment Out window:

HowToManageVAT006.png

Once the payment is posted, the company will get below posting:

G/L Item Credit account - Tax authority (VAT creditor) €90,937.49
Financial Account - Withdrawal account €90,937.49

It is important to remark that if the Tax Authority would have to pay to the company, the process to follow would be exactly the same but a Payment In would be created instead to reflect the payment received from the tax authorities.

Result

This completes the VAT settlement and Payment. As a result:

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This page has been accessed 8,568 times. This page was last modified on 16 November 2012, at 10:40. Content is available under Creative Commons Attribution-ShareAlike 2.5 Spain License.