ManualDoc:T174

The fields to fill in to properly setup a tax rate are:

• "Valid From Date", which is the date when a tax rate becomes valid.
  For instance an existing tax rate increases its rate, in this case:
  • it is recommended to create a new tax rate configured with the new requirements, rather than changing the original tax rate which can be still in use if required.
    That way there will be two tax rates which are exactly the same for a given organization but the rate (%) and the valid from date.
• "Tax Category", as every tax rate must be linked to a given tax category as the way of grouping similar tax rates.
• "Rate", which is the % or rate of the tax
• "Sales/Purchase Type" as the way to distinguish between sales and purchase taxes.
  The tax type is another variable which Openbravo takes into account while retrieving the correct tax rate in either sales and purchase transactions and
  it is also a very valuable variable to take into account while reporting taxes as there are tax reports which require to submit purchase and sales tax information separately.
  There is an additional option which is "Both", this option allows that the same tax rate is used for both purchase and sales transactions.
• "Country/Region" and "Destination Country/Region".
  Tax such as VAT and US Sales Tax takes into account from where/to where a transaction takes place in order to get it subject to the tax or not.
  These two fields allow to enter that information by taking into account if the tax is a "purchase" or a "sales" tax type, therefore
  when issuing a sales invoice from F&B US Inc (USA Country and New York Region) to a customer also located in Destination Country USA and Destination Region New York,
  only the sales tax rates created within that specified Tax Zone would applied.
• "Summary Level", a tax rate can be defined as summary which means it will have some tax rates underneath.
  Summary tax rates are also set as "Parent Tax Rate" therefore its child tax rates can be linked to it.
  For instance, a sales invoice is issued to a business partner under a specific VAT regime which includes an additional tax rate besides the VAT rate.
  For this scenario it is required to create three tax rates the parent one as summary and two more ones for the VAT rate and for the other rate, both of them linked to the parent.
  "It is important to remark that when issuing the sales invoice for that business partner the tax rate shown/selected is the summary or parent one."
• "Base Amount", which is the tax base amount to take into account in the tax amount calculation. The options available are:
  • Line Net Amount
  • Line Net Amount + Tax Amount
  • Alternate Tax Base Amount
  • Alternate Tax Base Amount + Tax Amount
• "Document Tax Amount Calculation" which is the way how the tax amount is going to be calculated per each tax rate (or %). The options available are:
  • "Document based amount by rate", this option implies that the tax amount is going to be calculated as tax amount = (tax base amounts sum at the same rate * tax rate)
  • "Line base amount by rate", this option implies that the tax amount is going to be calculated by line as tax amount = (tax base amount line 1 * tax rate) + (tax base amount line 2 * tax rate) + ....+ (tax base amount line n + tax rate).

Under "More Information" section there are also few relevant fields:

• "Parent Tax Rate", tax rates belonging to a summary tax rate should be linked to them in this field therefore the tax rate tree is properly structured.
• "Business Partner Tax Category", a tax rate can be linked to an specific business partner tax category therefore it will only apply to the business partners belonging to that category.
• "Withholding", a tax rate can be set as "Withholding" therefore it is properly manage as a separated tax type in the fiscal reports.
  • Withholding tax rates are "negative" tax rates.
• Tax Exempt. A tax rate can be set as exempt therefore it is the one automatically showed in the order/invoice lines created for a given Customer set as tax exempt as well.
• Cash VAT. This kind of tax rates are used to support the Cash VAT regime, which allows companies to settle the VAT amount when they have collected/paid the invoices instead of in the invoice creation. When using cash VAT tax rates, the Tax Due and Tax Credit Transitory accounts must be declared into the Accounting tab.
• tax rates can also be setup as "Not Taxable". A not taxable tax rate can be linked to transactions subject to tax which become not taxable under a given situation. There are fiscal reports which require information about both type of taxes, exempt and not taxable.
• specific tax rates can be setup as "Deductible" (for those Organizations for which tax deduction is NOT allowed) and besides
• and specific tax rates can be setup as "Not Deductible" (for those Organizations for which tax deduction is allowed).

The way Deductible and Not Deductible tax rates behave in terms of accounting is explained below:

• Purchase invoice which includes a 100% deductible tax amount.
  The VAT amount needs to be posted to the ledger in a Tax Credit account, therefore purchase invoice posting looks like:

Account	Debit	Credit	Comments
Product Expense	Line Net Amount		One per invoice line
Tax Credit	Tax Amount		One per tax line
Vendor Liability		Total Gross Amount	One per invoice

• Purchase invoice which includes NOT deductible tax amount.
  The VAT amount can not be posted to the ledger in a Tax Credit account as it means an expense, therefore purchase invoice posting looks like:

Account	Debit	Credit	Comments
Product Expense	Line Net Amount + Tax Amount		One per invoice line and tax rate
Vendor Liability		Total Gross Amount	One per invoice

Tax rates examples:

• simple tax rate I
  • "Purchase VAT Tax Rate at 18%" belonging to the tax category "Normal VAT for Products", Country/Region set to Spain and Destination Country/Region set to Spain.
• simple tax rate II
  • "Sales VAT Tax Rate at 18%" belonging to the tax category "Normal VAT for Products", Country/Region set to Spain and Destination Country/Region set to Spain.
• simple tax rate III
  • "Service Sales VAT Tax Rate at 18%" belonging to the tax category "Normal VAT for Services", Country/Region set to Spain and Destination Country/Region set to Spain.
• simple tax rate IV
  • "Service Purchase VAT Tax Rate at 18%" belonging to the tax category "Normal VAT for Services", Country/Region set to Spain and Destination Country/Region set to Spain.
• simple tax rate V
  • "Exempt Exports at 0.00%" beloging to the tax category "Normal VAT for Products", Country/Region set to Spain and Destination Country/Region set to USA.
  • "Imports at 18.00%" beloging to the tax category "Normal VAT for Products", Country/Region set to USA and Destination Country/Region set to Spain. Visit How to Scenarios "Import VAT management".
• simple tax rate VI
  • "US Sales Tax New York" beloging to the tax category "US Sales Tax" and to the business partner tax category "Non exempt Business Partners".

• summary tax rate I
  • "Service Sales VAT Tax Rate at 18.00% + Withholding (-15.00%)" belonging to the tax category "Normal VAT for Services" and to the business partner tax category "Business Partners subjet to VAT and Income Tax".
    This one must be setup as Summary type having two tax rates underneath which must belong to the same tax category and business partner tax category:
    • "Service Sales VAT Tax Rate at 18.00% + Withholding (-15.00%) (VAT 18%)", rate = 18,00
    • "Service Sales VAT Tax Rate at 18.00% + Withholding (-15.00%)" (W -15%)", rate = -15,00
• summary tax rate II
  • "US Sales Tax California (6.25%+1.00%)" beloging to the tax category "US Sales Tax" and to the business partner tax category "Non exempt Business Partners".
    This one must be setup as Summary type having two summary tax rates underneath which must belong to the same categories.
    Those two summary ones also have few tax rates more underneath:
    • US Sales Tax California State (6.25%)
      • General Fund 5.00%
      • Fiscal Recovery Fun 0.25%
      • Local Revenue Fund 0.50%
      • Local Public Safety Fund 0.50%
    • US Sales Tax California Local Tax (1.00%)
      • Local County 0.25%
      • Local City County 0.75%